UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the Quarterly Period Ended June 30, 2004 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||
Commission File Number 001-31950
MoneyGram International, Inc.
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Delaware
(State or other jurisdiction of incorporation or organization) 1550 Utica Avenue South, Minneapolis, Minnesota (Address of principal executive offices) |
16-1690064
(I.R.S. Employer Identification No.) 55416 (Zip Code) |
(952) 591-3000
Not applicable
Indicate by check mark 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 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 o No þ *
| * | The Registrant has not been subject to filing requirements for 90 days. |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 30, 2004, 88,556,077 shares of Common Stock, $0.01 par value, were outstanding.
TABLE OF CONTENTS
1
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 30 | December 31 | ||||||||
| 2004 | 2003 | ||||||||
|
|
|
||||||||
| (In thousands except | |||||||||
| share data) | |||||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
|
Cash and cash equivalents
|
$ | — | $ | 33,832 | |||||
|
Cash and cash equivalents (substantially
restricted) (Note 2)
|
1,028,814 | 1,025,026 | |||||||
|
Receivables, net (substantially restricted)
|
910,226 | 755,734 | |||||||
|
Investments (substantially restricted)
(Note 4)
|
6,369,762 | 6,013,757 | |||||||
|
Property and equipment (Note 7)
|
91,254 | 95,207 | |||||||
|
Intangible assets (Note 8)
|
18,757 | 18,818 | |||||||
|
Goodwill (Note 8)
|
395,526 | 395,526 | |||||||
|
Assets of discontinued operations (Note 3)
|
— | 641,724 | |||||||
|
Other assets
|
156,148 | 242,530 | |||||||
|
|
|
||||||||
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Total assets
|
$ | 8,970,487 | $ | 9,222,154 | |||||
|
|
|
||||||||
| LIABILITIES | |||||||||
|
Payment service obligations (Note 2)
|
$ | 7,862,106 | $ | 7,421,481 | |||||
|
Debt (Note 9)
|
150,000 | 201,351 | |||||||
|
Derivative financial instruments (Note 5)
|
82,996 | 174,588 | |||||||
|
Pension and other postretirement benefits
(Note 14)
|
104,003 | 101,039 | |||||||
|
Preferred stock subject to mandatory redemption
(Note 10)
|
— | 6,733 | |||||||
|
Accounts payable and other liabilities
(Note 16)
|
272,801 | 115,922 | |||||||
|
Liabilities of discontinued operations
(Note 3)
|
— | 332,257 | |||||||
|
|
|
||||||||
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Total liabilities
|
8,471,906 | 8,353,371 | |||||||
|
COMMITMENTS AND CONTINGENCIES (Note 16)
|
|||||||||
| STOCKHOLDERS’ EQUITY | |||||||||
|
Common shares, $.01 par value:
250,000,000 shares authorized, 88,556,077 issued and
outstanding
|
886 | 149,610 | |||||||
|
Additional paid-in capital
|
80,069 | 218,783 | |||||||
|
Retained income
|
461,903 | 863,944 | |||||||
|
Unearned employee benefits and other
|
(32,410 | ) | (35,442 | ) | |||||
|
Accumulated other comprehensive loss
(Note 12)
|
(11,867 | ) | (35,208 | ) | |||||
|
Treasury stock
|
— | (292,904 | ) | ||||||
|
|
|
||||||||
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Total stockholders’ equity
|
498,581 | 868,783 | |||||||
|
|
|
||||||||
|
Total liabilities and stockholders’ equity
|
$ | 8,970,487 | $ | 9,222,154 | |||||
|
|
|
||||||||
See Notes to Consolidated Financial Statements
2
MONEYGRAM INTERNATIONAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
(In thousands except share and per share data)
(Unaudited)
$
122,084
$
102,828
$
235,706
$
199,891
77,580
82,017
154,234
168,655
156
2,876
1,201
(9,199
)
199,820
187,721
391,141
359,347
43,925
34,987
84,428
66,934
53,706
60,802
103,451
119,728
97,631
95,789
187,879
186,662
102,189
91,932
203,262
172,685
33,644
26,533
66,389
54,599
27,447
25,296
55,687
50,682
7,396
6,626
14,619
13,149
8,119
6,962
15,715
13,335
1,905
2,765
3,127
5,995
20,661
—
20,661
—
99,172
68,182
176,198
137,760
3,017
23,750
27,064
34,925
3,587
3,293
8,420
2,078
(570
)
20,457
18,644
32,847
(497
)
20,411
21,282
30,052
$
(1,067
)
$
40,868
$
39,926
$
62,899
$
(0.01
)
$
0.24
$
0.21
$
0.38
—
0.23
0.25
0.34
$
(0.01
)
$
0.47
$
0.46
$
0.72
86,929
86,224
86,819
86,116
$
(0.01
)
$
0.24
$
0.21
$
0.38
—
0.23
0.25
0.34
$
(0.01
)
$
0.47
$
0.46
$
0.72
86,929
86,508
87,306
86,418
See Notes to Consolidated Financial Statements
3
MONEYGRAM INTERNATIONAL, INC. AND
SUBSIDIARIES
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
(In thousands)
(Unaudited)
$
(1,067
)
$
40,868
$
39,926
$
62,899
—
—
—
30,222
(76,249
)
16,966
(42,235
)
13,874
(321
)
(1,754
)
(3,300
)
(4,476
)
(76,570
)
15,212
(45,535
)
39,620
52,985
(14,739
)
31,753
(30,993
)
19,463
21,548
37,702
42,949
72,448
6,809
69,455
11,956
(172
)
919
(580
)
655
(4,294
)
22,940
23,340
52,231
$
(5,361
)
$
63,808
$
63,266
$
115,130
See Notes to Consolidated Financial Statements.
4
MONEYGRAM INTERNATIONAL, INC. AND
SUBSIDIARIES
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
(In thousands)
(Unaudited)
$
(1,067
)
$
40,868
$
39,926
$
62,899
497
(20,411
)
(21,282
)
(30,052
)
7,396
6,626
14,619
13,148
683
6,611
20,813
(4,384
)
(8,982
)
(8,297
)
(11,965
)
(838
)
(2,877
)
(7,812
)
(7,719
)
20,661
20,661
6,938
14,054
14,617
20,423
(3,769
)
456
(1,378
)
1,317
(70
)
919
(478
)
654
200
88
704
94
9,436
1,052
(10,763
)
4,492
(7,468
)
(2,232
)
5,848
(1,717
)
29,282
(11,307
)
13,050
9,488
19,519
(170,846
)
(4,409
)
298,019
(148,019
)
(204,281
)
(150,921
)
(683,487
)
181,376
787,470
440,625
936,272
81,091
441,904
338,271
623,191
790,884
1,087,721
1,477,694
1,943,612
—
—
—
283,690
(835,858
)
(1,424,367
)
(1,820,908
)
(2,639,873
)
(6,978
)
(6,006
)
(13,069
)
(11,231
)
—
—
—
(105,080
)
—
15,247
—
(304
)
(960
)
(1,596
)
(51,952
)
(342,956
)
(341,996
)
(530,478
)
(206,858
)
(94,244
)
(205,182
)
(100,528
)
150,000
—
150,000
—
173,000
—
173,000
—
—
556
457
1,440
(23,895
)
—
(23,895
)
—
—
(976
)
—
(976
)
(7,822
)
(8,039
)
(15,629
)
(16,078
)
84,425
(102,703
)
78,751
(116,142
)
(113,564
)
(5,444
)
(108,858
)
2,444
—
(9,199
)
(33,832
)
(20,985
)
—
27,339
33,832
39,125
$
—
$
18,140
$
—
$
18,140
See Notes to Consolidated Financial Statements
5
MONEYGRAM INTERNATIONAL, INC. AND
SUBSIDIARIES
Accumulated
Unearned
Other
Employee
Comprehensive
Common
Common
Additional
Retained
Benefits
(Loss)
Stock in
Stock
Capital
Income
and Other
Income
Treasury
Total
(In thousands)
(Unaudited)
$
149,610
$
218,783
$
863,944
$
(35,442
)
$
(35,208
)
$
(292,904
)
$
868,783
—
—
40,993
—
—
—
40,993
—
—
(7,807
)
—
—
—
(7,807
)
—
(4,635
)
—
2,815
—
5,474
3,654
—
—
—
—
—
—
—
—
—
—
—
(408
)
—
(408
)
—
—
—
—
31,035
—
31,035
—
—
—
—
(2,992
)
—
(2,992
)
—
—
48
—
—
—
48
149,610
214,148
897,178
(32,627
)
(7,573
)
(287,430
)
933,306
—
—
(1,067
)
—
—
—
(1,067
)
—
—
(7,822
)
—
—
—
(7,822
)
—
4,972
—
217
—
(345
)
4,844
—
—
—
—
(172
)
—
(172
)
—
—
—
—
(76,570
)
—
(76,570
)
—
—
—
—
72,448
—
72,448
170
170
(148,724
)
(139,051
)
(426,556
)
—
—
287,775
(426,556
)
$
886
$
80,069
$
461,903
$
(32,410
)
$
(11,867
)
$
—
$
498,581
See Notes to Consolidated Financial Statements
6
MONEYGRAM INTERNATIONAL, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
MoneyGram International, Inc. offers products and
services including global money transfer, urgent bill payment
services, issuance and processing of money orders, processing of
official checks and share drafts, controlled dispursement
processing, and routine bill payment service. These products and
services are offered to consumers and businesses through a
network of agents and financial institution customers.
On December 18, 2003, MoneyGram
International, Inc. was incorporated in the state of Delaware as
a subsidiary of Viad Corp (“Viad”) to effect the spin
off of Viad’s payment services business operated by
Travelers Express Company, Inc. (“Travelers”) to its
shareholders. References to “MoneyGram,” the
“Company,” “we,” “us” and
“our” are to MoneyGram International, Inc. and its
subsidiaries and consolidated entities. On June 30, 2004
(the” Distribution Date”), Travelers was merged with a
subsidiary of MoneyGram and Viad then distributed
88.6 million shares of MoneyGram common stock in a tax-free
distribution (the “Distribution”). Shareholders of
Viad received one share of MoneyGram common stock for every
share of Viad common stock owned on the record date,
June 24, 2004. Due to the relative significance of
MoneyGram to Viad, MoneyGram is the divesting entity and treated
as the “accounting successor” to Viad for financial
reporting purposes in accordance with Emerging Issues Task Force
(“EITF”) Issue No. 02-11,
Accounting for
Reverse Spinoffs.
See Note 3 regarding the spin-off
transaction and resulting discontinued operations of Viad.
Basis of Presentation —
The consolidated financial statements
of MoneyGram are prepared in conformity with accounting
principles generally accepted in the United States of America
(“GAAP”). The consolidated balance sheets are
unclassified due to the short-term nature of its settlement
obligations, contrasted with the ability to invest cash awaiting
settlement in long-term investment securities.
Principles of Consolidation —
The consolidated financial statements
include the accounts of MoneyGram International, Inc. and its
subsidiaries. All material intercompany profits, transactions,
and account balances have been eliminated in consolidation.
Consolidation of Special Purpose
Entities —
We participate in
various trust arrangements (special purpose entities) related to
official check processing agreements with financial institutions
and structured investments within the investment portfolio.
These special purpose entities are included in our consolidated
financial statements. Working in cooperation with certain
financial institutions, we have established separate
consolidated entities (special-purpose entities) and processes
that provide these financial institutions with additional
assurance of our ability to clear their official checks. These
processes include maintenance of specified ratios of segregated
investments to outstanding payment instruments, typically
1 to 1. In some cases, alternative credit support has
been purchased that provides backstop funding as additional
security for payment of instruments. However, we remain liable
to satisfy the obligations, both contractually and by operation
of the Uniform Commercial Code, as issuer and drawer of the
official checks. Accordingly, the obligations have been recorded
in the Consolidated Balance Sheets under “Payment service
obligations.” Under certain limited circumstances, clients
have the right to either demand liquidation of the segregated
assets to replace us as the administrator of the special-purpose
entity. Such limited circumstances consist of material (and in
most cases continued) failure of MoneyGram to uphold its
warranties and obligations pursuant to its underlying agreements
with the financial institution clients. While an orderly
liquidation of assets would be required, any of these actions by
a client could nonetheless diminish the value of the total
investment portfolio, decrease earnings, and result in loss of
the
7
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
client or other customers or prospects. We offer
the special-purpose entity to certain financial institution
clients as a benefit unique in the payment services industry.
Certain structured investments we own represent
beneficial interests in grantor trusts or other similar
entities. These trusts typically contain an investment grade
security, generally a U.S. Treasury strip, and an
investment in the residual interest in a collateralized debt
obligation, or in some cases, a limited partnership interest.
For certain of these trusts, we own a majority of the beneficial
interests, and therefore, consolidate those trusts by recording
and accounting for the assets of the trust separately in our
consolidated financial statements.
Management
Estimates
— The preparation
of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
Reclassifications
—
Certain reclassifications have been made to prior periods
financial statements to conform to the current presentation.
Cash and Cash Equivalents, Receivables, and
Investments
— We generate
funds from the sale of money orders, official checks (including
cashier’s checks, teller checks, and agent checks), and
other payment instruments (classified as “Payment service
obligations” in the Consolidated Balance Sheets), the
proceeds of which are invested in cash and cash equivalents and
investments until the time needed to satisfy the liability to
pay the face amount of such payment service obligations upon
presentment.
8
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
9
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Derivative Financial
Instruments
—
We recognize derivative instruments as
either assets or liabilities on the Consolidated Balance Sheets
and measure those instruments at fair value. The accounting for
changes in the fair value depends on the intended use of the
derivative and the resulting designation.
For a derivative instrument designated as a fair
value hedge, we recognize the gain or loss in earnings in the
period of change together with the offsetting loss or gain on
the hedged item attributed to the risk being hedged. For a
derivative instrument designated as a cash flow hedge, we
initially report the effective portion of the derivative’s
gain or loss as a component of other comprehensive gain or loss
and subsequently reclassify it into earnings when the hedged
exposure affects earnings. The ineffective portion of the gain
or loss is reported in earnings immediately.
For a derivative instrument that does not
qualify, or is not designated, as a hedge, the change in fair
value is recognized in “Transaction and operations
support” in the Consolidated Statements of Income.
The effective portion of the change in fair value
of derivatives that qualify as cash flow hedges under
SFAS No. 133,
Accounting for Derivative Instruments
and Hedging Activities,
is recorded in other comprehensive
income. Amounts receivable or payable under the derivative
agreements are reclassified from other comprehensive income to
net income as an adjustment to the expense of the related
transaction. These amounts are included in the Consolidated
Statements of Income under “Investment commissions
expense.”
We use derivative instruments to manage exposures
to foreign currency risk. The objective in holding derivatives
is to minimize the volatility of earnings and cash flow
associated with changes in foreign currency. We purchase
currency options and designate these currency options as cash
flow hedges of foreign currency forecasted transactions related
to certain operating revenues. We enter into foreign currency
forwards to hedge forecasted foreign currency money transfer
transactions and designate these derivatives as cash flow
hedges. We also enter into foreign exchange forward contracts to
minimize the short-term impact of currency fluctuations. The
foreign exchange forward contracts are not designated as
accounting hedges, and all changes in fair value are recognized
in earnings in the period of change.
Fair Value of Financial
Instruments
— The estimated
fair value of financial instruments has been determined using
available market information and the valuation methodologies.
However, considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly,
these estimates may not be indicative of the amounts we could
realize in a current market exchange. The use of different
market assumptions or valuation methodologies may have a
material effect on the estimated fair value amounts.
Allowance for Losses on Agent
Receivables
— We provide an
allowance for potential losses from receivables from agents. We
continually evaluate receivables from agents and financial
institutions for collectibility and possible write-off by
examining the facts and circumstances surrounding each customer
where a loss is deemed possible.
Property and
Equipment
— Property and
equipment includes office equipment, software and hardware, and
leasehold improvements, which are stated at cost, net of
accumulated depreciation. Property and equipment is depreciated
using a straight-line method over estimated useful lives ranging
from two to ten years for all assets except leasehold
improvements, which are amortized using the straight-line method
over the lesser of the lease term or useful life of the asset.
We capitalize certain software development costs in accordance
with Statement of Position No. 98-1,
Accounting for the
Costs of Computer Software Developed or Obtained for Internal
Use.
(See Note 7)
Intangible Assets and
Goodwill
— Goodwill and
certain intangible assets with indefinite lives are not
amortized but instead are subject to periodic impairment
testing. We performed an annual assessment of these assets
during the fourth quarter 2003 and determined that there was no
impairment. The fair value
10
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
was estimated using the expected present value of
future cash flows. Intangible assets with finite lives are
amortized over their respective useful lives (See Note 8).
Payments on Long-Term
Contracts
— We make
incentive payments to certain agents and financial institution
customers as an incentive to enter into long-term contracts. The
payments are generally required to be refunded pro rata in the
event of nonperformance or cancellation by the customer and are
capitalized and amortized over the life of the related agent or
financial institution contracts as management is satisfied that
such costs are recoverable through future operations, minimums,
penalties, or refunds in case of early termination. We review
the carrying values of these incentive payments whenever events
or changes in circumstances indicate that the carrying amounts
may not be recoverable in accordance with the provisions of
SFAS No. 144,
Accounting for the Impairment and
Disposal of Long-Lived Assets.
Income Taxes —
Income taxes were determined on a
separate return basis as if MoneyGram had not been eligible to
be included in the consolidated income tax return of Viad and
its affiliates. Deferred income taxes result from temporary
differences between the financial reporting basis of assets and
liabilities and their respective tax-reporting basis. Future tax
benefits are recognized to the extent that realization of such
benefits is more likely than not (See Note 11).
Foreign Currency Translation —
The Euro is the functional currency of
MoneyGram International Limited (“MIL”), a
wholly-owned subsidiary of MoneyGram. Assets and liabilities for
MIL are translated into U.S. dollars based on the exchange
rate in effect at the balance sheet date. Income statement
accounts are translated at the average exchange rate during the
period covered. Translation adjustments arising from the use of
differing exchange rates from period to period are included in
the Consolidated Balance Sheets as a separate component of
stockholders’ equity under the caption “Accumulated
other comprehensive loss.”
Revenue Recognition —
We derive revenue primarily through
service fees charged to consumers and through investments. A
description of these revenues and recognition policies are as
follows:
11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Fee Commissions
Expense
— We pay fee
commissions to third-party agents for money transfer services.
In a money transfer transaction, both the agent initiating the
transaction and the agent disbursing the funds receive a
commission. The commission amount is generally based on a
percentage of the fee charged to the customer. Fee commissions
also include the amortization of the capitalized incentive
payments to agents. We generally do not pay commissions to
agents on the sale of money orders.
Investment Commissions
Expense
— Investment
commissions expense includes amounts paid to financial
institution customers based upon average outstanding balances
generated by the sale of official checks, costs associated with
swaps, and the sale of receivables program. Commissions paid to
financial institution customers generally are variable based on
short-term interest rates; however, a portion of the commission
expense has been fixed through the use of interest rate swap
agreements.
Stock Based
Compensation
— Prior to the
Distribution, certain of our employees participated in Viad
employee incentive plans and received awards consisting of stock
options, restricted stock or other deferred compensation that
are described more fully in Note 15. We accounted for these
stock option grants under the intrinsic value method in
accordance with Accounting Principles Board Opinion
(“APB”) No. 25 (“APB 25”),
Accounting for Stock Issued to Employees
. Accordingly, no
compensation expense has been recognized for our stock-based
compensation plans other than for performance-based and
restricted stock awards, which gave rise to compensation expense
aggregating $0.9 million and $0.4 million during the
three months ending June 30, 2004 and 2003 respectively,
and $0.5 and $0.6 million during the six months ending
June 30, 2004 and 2003, respectively. Assuming that we had
recognized compensation cost for stock options and
performance-based stock awards in accordance with the fair value
method of accounting defined in SFAS No. 123,
Accounting for Stock-Based Compensation
net income and
diluted and basic income per share would be as presented in the
following table. Compensation cost calculated under
SFAS No. 123 is recognized ratably over the vesting
period and is net of estimated forfeitures and tax benefits.
For purposes of applying SFAS No. 123,
the estimated fair value of stock options granted during 2004
and 2003 was $4.82 and $3.80 per share, respectively. The
fair value of each stock option grant was
12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
estimated on the date of grant using the
Black-Scholes single option pricing model with the following
assumptions:
Income per
share
— Basic income per
common share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the
period. Since our common stock was not issued until
June 30, 2004, the weighted average number of common shares
outstanding for each period is the number of Viad shares
outstanding. Diluted income per common share is calculated by
adjusting weighted average outstanding shares, assuming
conversion of all potentially dilutive stock options.
Recent Accounting Pronouncements —
In May 2004, the FASB issued Financial
Accounting Standards Board (“FASB”) Staff Position
(“FSP”) FAS 106-2 on the accounting for the
effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the “Act”), which was
enacted into law on December 8, 2003. The Act introduces a
Medicare prescription drug benefit, as well as a federal subsidy
to sponsors of retiree health care plans that provide a benefit
that is at least substantially equivalent to the Medicare
benefit. The FASB had previously issued FSP FAS 106-1 which
permitted the one-time election to defer recognition of the
effects of the Act until further authoritative guidance was
issued. With FSP FAS 106-2, which superceded FSP
FAS 106-1, the election to defer recognition expired and
specific guidance was provided in accounting for the subsidy,
whether a previous election had been made to either defer or not
defer the effects of the Act. The FSP is effective for the first
reporting period beginning after June 15, 2004, which for
the Company will be the third quarter of 2004. The impact of the
future financial position or results of operations cannot
presently be determined.
Effective March 31, 2004, EITF Issue
No. 03-1
The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments
was issued. EITF
Issue No. 03-1 provides guidance for determining the
meaning of “other-than-temporarily impaired” and its
application to certain debt and equity securities within the
scope of SFAS No. 115 and investments accounted for under
the cost method. The guidance requires that investments which
have declined in value due to credit concerns or solely due to
changes in interest rates must be recorded as
other-than-temporarily impaired unless the Company can assert
and demonstrate its intention to hold the security for a period
of time sufficient to allow for a recovery of fair value up to
or beyond the cost of the investment which might mean maturity.
This issue also requires disclosures assessing the ability and
intent to hold investments in instances in which an investor
determines that an investment with a fair value less than cost
is not other-than-temporarily impaired. The guidance for
evaluating whether an investment is other-than-temporarily
impaired should be applied to reporting periods beginning after
June 15, 2004. As of June 30, 2004, we had total
unrealized pre-tax losses in our available-for-sale portfolio of
$52.0 million ($31.5 million after-tax), included in
“Accumulated other comprehensive loss”, which would
have been the maximum loss required to be recognized if we did
not have the intent and ability to hold these securities until
recovery. This unrealized loss is measured as of a point in time
and could fluctuate significantly as interest rates change.
MoneyGram is considered the divesting entity and
treated as the “accounting successor” to Viad for
financial reporting purposes. The continuing business of Viad is
referred to as “New Viad.” The spin off of
13
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
New Viad was accounted for pursuant to APB
Opinion No. 29,
Accounting for Nonmonetary Transactions
and was accounted for based upon the recorded amounts of the
net assets divested. We charged directly to equity as a dividend
the historical cost carrying amount of the net assets of New
Viad of $426 million. As a result, the results of
operations of New Viad (with certain adjustments) are included
in the Statements of Consolidated Income in “(Loss) income
and gain from discontinued operations” in accordance with
the provisions of SFAS No. 144. Also included in
“(Loss) income and gain from discontinued operations”
for the periods ended June 30, 2004, is a one-time charge
for spin-off related costs of $14.1 million.
The results of operations of Viad, included in
“(Loss) income and gain from discontinued operations”
include the following:
As part of the transaction, we have several
agreements with Viad for the purpose of governing the
relationship. A Separation and Distribution Agreement provides
for the principal corporate transactions required to effect the
separation of MoneyGram from Viad and the spin-off and other
matters governing the relationship between New Viad and
MoneyGram following the spin-off. The Employee Benefits
Agreement provides for the allocation of employees, employee
benefit plans and associated liabilities and related assets
between Viad and MoneyGram. The Interim Services Agreement
provides for services to be provided by Viad for MoneyGram on an
interim basis. The Tax Sharing Agreement provides for the
allocation of federal, state, and foreign tax liabilities for
all periods through the Distribution Date.
The services to be provided under the Interim
Services Agreement will generally be provided by New Viad for a
term of two years beginning on the Distribution Date. We may, at
any time after the first year anniversary of the Distribution,
request termination of the service upon 90 days advance
notice to Viad. However, certain services may not be terminated
prior to the second anniversary of the Distribution Date without
Viad’s consent.
During the first quarter of 2004, we completed
the sale of one of our subsidiaries, Game Financial Corporation
(“Game Financial”), for approximately $43 million
in cash, resulting in net cash received of $15.2 million.
Game Financial provides cash access services to casinos and
gaming establishments throughout the United States. As a result
of the sale, we recorded a gain of approximately
$18.9 million ($11.4 million after-tax) in the first
quarter of 2004. In addition, in June 2004 we recorded a gain of
$1.1 million (net of taxes) as a result of the settlement
of a lawsuit brought by Game Financial. We may record future
after-tax gains of approximately $4 million, based on
contingencies in the Sales and Purchase Agreement related to the
continued operations of Game Financial with two casinos. Game
Financial was a part of our Payment Systems segment.
In accordance with SFAS No. 144, the
results of operations of Game Financial and the gain on the
disposal of Game Financial have been reflected as components of
discontinued operations. All prior periods in the Consolidated
Statements of Income have therefore been restated. Game
Financial assets and liabilities have not been historically
restated on the Consolidated Balance Sheets.
14
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The results of operations of Game Financial,
included in “(Loss) income and gain from discontinued
operations” include the following:
Components of Game Financial included in the
Consolidated Balance Sheets at December 31, 2003 consists
of the following:
The amortized cost and market value of
investments by type are as follows:
15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
On March 31, 2003, we reclassified
securities in the portfolio with an amortized cost of
$1.2 billion from held-to-maturity to available-for-sale.
The gross unrealized gains and losses related to these
securities were $55.3 million and $5.3 million,
respectively, on the date of transfer, which were recorded in
“Accumulated other comprehensive loss”. At
June 30, 2004 and December 31, 2003 we had no
securities classified as held-to-maturity, and due to the above
reclassification, we cannot classify investments as
held-to-maturity until March 31, 2005.
The amortized cost and market value of securities
at June 30, 2004, by contractual maturity, are shown below.
Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations,
sometimes without call or prepayment penalties. Maturities of
mortgage-backed and other asset-backed securities depend on the
repayment characteristics and experience of the underlying
obligations.
At June 30, 2004 and December 31, 2003,
net unrealized gains were $59,728 (net of taxes of $38,187) and
$105,501 (net of taxes of $67,452) respectively, and are
included in the Consolidated Balance Sheets as a separate
component of stockholders’ equity under the caption
“Accumulated other comprehensive loss.”
16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Gross realized gains and losses on sales of
securities classified as available-for-sale, using the specific
identification method, and other-than-temporary impairments were
as follows:
At June 30, 2004, the investment portfolio
had the following aged unrealized losses:
At December 31, 2003, the investment
portfolio had the following aged unrealized losses:
We have determined that the unrealized losses
reflected above represent temporary impairments. Thirty two
securities and nineteen securities had unrealized losses for
more than 12 months as of June 30, 2004 and
December 31, 2003, respectively. We believe that the
unrealized losses generally are caused by liquidity discounts
and increases in the risk premiums required by market
participants rather than a fundamental weakness in the credit
quality of the issuer or underlying assets.
17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Derivative contracts are financial instruments
such as forwards, futures, swaps or option contracts and derive
their value from underlying assets, reference rates, indices or
a combination of these factors. A derivative contract generally
represents future commitments to purchase or sell financial
instruments at specified terms on a specified date or to
exchange currency or interest payment streams based on the
contract or notional amount. Derivative contracts exclude
certain cash instruments, such as mortgage-backed securities,
interest only and principal-only obligations and indexed debt
instruments that derive their values or contractually required
cash flows from the price of some other security or index.
Cash flow hedges are hedges that use derivatives
to offset the variability of expected future cash flows.
Variability can arise in floating rate assets, floating rate
liabilities or from certain types of forecasted transactions, as
well as from changes in interest rates or currency exchange
rates. We have entered into foreign currency forward derivatives
to hedge forecasted foreign currency money transfer
transactions. We designate these currency forwards as cash flow
hedges. We have also entered into swap agreements to mitigate
the effects of interest rate fluctuations on commissions paid to
financial institution customers of our Payment Services segment.
The agreements involve varying degrees of credit and market risk
in addition to amounts recognized in the financial statements.
We designate these swaps as cash flow hedges.
The swap agreements are contracts to pay fixed
and receive floating payments periodically over the lives of the
agreements without the exchange of the underlying notional
amounts. The notional amounts of such agreements are used to
measure amounts to be paid or received and do not represent the
amount of the exposure to credit loss. The amounts to be paid or
received under the swap agreements are accrued in accordance
with the terms of the agreements and market interest rates. The
counterparties are major financial institutions, which are
expected to perform fully under the terms of the agreements. We
monitor the credit ratings of the counterparties; the likelihood
of default is considered remote.
The notional amount of the swap agreements
totaled $3.5 billion and $3.1 billion at June 30,
2004 and December 31, 2003, respectively, with an average
fixed pay rate of 4.79%, and 5.0% and an average variable
receive rate of 1.3% and 0.9% at June 30, 2004 and
December 31, 2003, respectively. The variable rate portion
of the swaps is generally based on treasury bill, federal funds,
or commercial paper rates. The agreements expire as follows:
We estimate that approximately $43.2 million
net of tax, of the unrealized loss recognized in other
comprehensive income as of June 30, 2004, will be
reclassified to net income within the next 12 months. The
amount recognized in earnings due to ineffectiveness of the cash
flow hedges is not material. No cash flow hedges were terminated
during the first six months of 2004.
Fair value hedges are hedges that mitigate the
risk of change in the fair values of assets, liabilities and
certain types of firm commitments. We use fair value hedges to
manage the impact of changes in fluctuating interest rates on
certain available-for-sale securities. Interest rate swaps are
used to modify exposure to interest rate risk by converting
fixed rate assets to a floating rate. All amounts have been
18
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
included in earnings consistent with the hedged
transaction in the Consolidated Statements of Income under the
caption “Investment revenue.” Realized gains of
$2.1 million were recognized on fair value hedges
discontinued during 2003. One fair value hedge was terminated
during 2004, resulting in no gain or loss.
We use derivatives to hedge exposures for
economic reasons, including circumstances in which the hedging
relationship does not qualify for hedge accounting. We are
exposed to foreign currency exchange risk and utilize forward
contracts to hedge assets and liabilities denominated in foreign
currencies. While these contracts economically hedge foreign
currency risk, they are not designated as hedges for accounting
purposes under SFAS No. 133. Accordingly, the
contracts are recorded on the Consolidated Balance Sheets at
fair value, with the change in fair value reflected in earnings.
The effect of changes in foreign exchange rates on the
foreign-denominated receivables and payables, net of the effect
of the related forward contracts, is not significant.
We have an agreement to sell undivided percentage
ownership interests in certain receivables primarily from our
money order agents. These receivables are sold to two commercial
paper conduit trusts and represent a small percentage of the
total assets in each trust. Our rights and obligations are
limited to the receivables transferred, and are accounted for as
sales. The assets and liabilities associated with the trust,
including the sold receivables, are not recorded or consolidated
in our financial statements. The agreement expires in June 2006.
The receivables are sold to accelerate the cash flow for
investments. The balance cannot exceed $450 million. The
balance of sold receivables as of June 30, 2004, and
December 31, 2003 was $379 million and
$329 million respectively. The expense of selling the agent
receivable is included in the Consolidated Statements of Income
under the caption “Investment commissions expense.”
The agreement includes a 5% holdback provision of the purchase
price of the receivables. The average receivables sold
approximated $407 million and $433 million during the
three months ended June 30, 2004, and 2003, respectively,
and $411 million and $437 million during the six
months ended June 30, 2004 and 2003, respectively. The
expense of selling the agent receivables was $2,161 and $2,491
for the three months ended June 30, 2004 and 2003,
respectively, and $4,328 and $5,092 for the six months ended
June 30, 2004, and 2003, respectively.
Property and equipment consist of the following:
19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Included in computer hardware and software are
capitalized software development costs. At June 30, 2004
and December 31, 2003, the net capitalized costs were
$35,765 and $35,926 respectively.
A summary of intangible assets at June 30,
2004 is presented below:
A summary of intangible assets as
December 31, 2003 is presented below:
Intangible asset amortization expense for the
three months ended June 30, 2004 and June 30, 2003 was
$546 and $475, respectively. Intangible asset amortization
expense for the six months ended June 30, 2004 and
June 30, 2003 was $1,022 and $950 respectively.
20
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Estimated remaining amortization expense for
years ending December 31 is:
There were no additions to goodwill and no
impairment losses during the first six months of 2004. The
changes in the carrying amount of goodwill for the year ended
December 31, 2003 are as follows:
In connection with the spin-off, we entered into
bank credit facilities providing availability of up to
$350 million, in the form of a $250 million
4 year revolving credit facility, and a $100 million
term loan. On June 30, 2004 we borrowed $150 million
(consisting of the $100 million term loan and
$50 million under the revolving credit facility) that we
paid to Viad. The interest rate on both the term loan and the
credit facility on June 30, 2004 was initially 4.0% and
became an indexed rate of LIBOR plus 60 basis points
shortly thereafter, subject to adjustment in the event of a
change in our debt rating. The term loan is due in two equal
installments on the third and fourth anniversary of the loan.
Any advances drawn on the revolving credit facility must be
repaid by June 30, 2008. The loans are unsecured
obligations of MoneyGram, and are guaranteed on an unsecured
basis by MoneyGram’s material domestic subsidiaries. The
proceeds from any future advances may be used for general
corporate expenses and to support letters of credit.
Borrowings under the facilities are subject to
various covenants, including interest coverage ratio, leverage
ratio and consolidated total indebtedness ratio. The interest
coverage ratio of earnings before interest and taxes to interest
expense must not be less than 3.5 to 1.0. The leverage
ratio of total debt to total capitalization must be less than
0.5 to 1.0. The consolidated total indebtedness ratio of
total debt to earnings before interest, taxes, depreciation and
amortization must be less than 3.0 to 1.0. At June 30,
2004, we were in compliance with these covenants. There are
other restrictions that are customary for facilities of this
type including limits on dividends, indebtedness, stock
repurchases, asset sales, merger, acquisitions and liens.
In connection with the spin-off, Viad repurchased
substantially all of its outstanding medium-term notes and
subordinated debentures in the amount of $52.6 million. The
amounts not paid off were retained by New Viad. Viad also repaid
all of its outstanding commercial paper in the amount of
$188 million and retired its industrial revenue bonds of
$9 million.
21
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
On December 31, 2003, debt included the
historical debt of Viad excluding amounts directly allocable to
New Viad as follows:
Preferred stock consists of Viad’s preferred
stock, which Viad redeemed in connection with the spin-off. At
December 31, 2003, Viad had 442,352 authorized shares
of $4.75 preferred stock which was subject to mandatory
redemption provisions with a stated value of $100 per
share, of which 328,352 shares where issued. Of the total
shares issued, 234,983 shares were outstanding at a net
carrying value of $6.7 million, and 93,369 where held by
Viad. On July 1, 2003, Viad adopted SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity,
and
accordingly, the $4.75 preferred stock was classified as a
liability under the caption “$4.75 Preferred stock subject
to mandatory redemption” in the Consolidated Balance
Sheets. In addition, dividends of $572,000 declared subsequent
to the adoption of SFAS No. 150 have been included as
interest expense in the Consolidated Statements of Income. In
periods prior to July 1, 2003, dividends on the $4.75
preferred stock were reported as an adjustment to income to
compute income available to common shareholders.
Income taxes were determined on a separate return
basis as if MoneyGram had not been eligible to be included in
the consolidated income tax return of Viad and its affiliates.
As part of the Distribution, we entered into a Tax Sharing
Agreement with Viad which provides for, among other things, the
allocation between MoneyGram and New Viad of federal, state,
local and foreign tax liabilities and tax liabilities resulting
from the audit or other adjustment to previously filed tax
returns.
The Tax Sharing Agreement provides that through
the Distribution Date, the results of MoneyGram and its
subsidiaries’ operations are included in Viad’s
consolidated U.S. federal income tax returns. In general,
the Tax Sharing Agreement provides that MoneyGram will be liable
for all federal, state, local, and foreign tax liabilities,
including such liabilities resulting from the audit of or other
adjustment to previously filed tax returns, that are
attributable to the business of MoneyGram for periods through
the Distribution Date, and that Viad will be responsible for all
other of these taxes.
22
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Income tax expense related to continuing
operations consists of:
A reconciliation of the expected federal income
tax at statutory rates to the actual taxes provided on income
from continuing operations is:
23
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Deferred income taxes reflect temporary
differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax
laws at enacted tax rates expected to be in effect when such
differences reverse. Temporary differences, which give rise to
deferred tax assets (liabilities), are:
Components of net deferred taxes on the
Consolidated Balance Sheets include:
We have not established a valuation reserve for
the deferred tax assets since we believe it is more likely than
not that the deferred tax assets will be realized. Net deferred
taxes are included in the Consolidated Balance Sheets in
“Other assets.”
MoneyGram’s Certificate of Incorporation
provides for the issuance of up to 250,000,000 shares of
common stock with a par value of $.01 and 7,000,000 shares
of preferred stock with a par value of $.01. On the Distribution
Date, MoneyGram was recapitalized such that the number of shares
of MoneyGram common stock outstanding was equal to the number of
shares of Viad common stock outstanding at the close of business
on the record date. At June 30, 2004, no preferred stock
was issued and outstanding. Stockholder’s equity at
December 31, 2003 consisted of 200,000,000 common shares
authorized, 99,739,925 shares issued with a $1.50 par
value.
The holders of MoneyGram common stock are
entitled to one vote per share on all matters to be voted upon
by its stockholders. The holders of common stock have no
preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to
the common stock. The determination to pay dividends on common
stock will be at the discretion of the Board of Directors and
will depend on our financial condition, results of operations,
cash requirements, prospects and such other factors as the Board
of Directors may deem relevant.
24
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The components of Accumulated other comprehensive
loss include:
Basic earnings per share are calculated by
dividing net (loss) income by the weighted average number of
common shares outstanding during the period. Since our common
stock was not issued until June 30, 2004, the weighted
average number of common shares outstanding during each period
presented equals Viad’s historical weighted average number
of common shares outstanding for applicable periods.
The following table presents the calculation of
basic and diluted net (loss) income per share (in thousands,
except per share amounts):
Options to purchase 6,052,164 and
5,630,459 shares of common stock were outstanding at
June 30, 2004 and December 31, 2003, respectively, but
were not included in the computation of diluted earnings per
share because the effect would be antidilutive.
Pension
Benefits
— Prior to the
Distribution, MoneyGram was a participating employer in the Viad
Companies Retirement Income Plan (the “Plan”) of which
the plan administrator was Viad. At the time of the
Distribution, we assumed sponsorship of the Plan, which is a
noncontributory defined benefit pension plan covering all
employees who meet certain age and length-of-service
requirements. Viad retained the pension liability for a portion
of the employees in its Exhibitgroup/ Giltspur subsidiary, and
one sold business, which approximates 8% of consolidated
Viad’s benefit obligation at December 31, 2003.
25
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Effective December 31, 2003, benefits under
the Plan ceased accruing with no change in benefits earned
through this date, and a curtailment gain of $3.8 million
was recorded in “Compensation and benefits” in the
Consolidated Statement of Income. It is our policy to fund the
minimum required contribution for the year. MoneyGram’s
benefit obligation related to pension plans at December 31,
2003 was $137,478. We have contributed $0.3 million to our
funded pension plan during the first six months of 2004, and
presently anticipate contributing $1.8 million more during
the remainder of 2004.
Supplemental Executive Retirement
Plan
— In connection with
the spin-off, we assumed responsibility for all but a portion of
the Viad Supplemental Executive Retirement Plan
(“SERP”), while Viad retained the benefit obligation
related to two of its subsidiaries, which represents 13% of
consolidated Viad’s benefit obligation at December 31,
2003. We created the MoneyGram International, Inc. SERP
(“MoneyGram SERP”), a nonqualified defined benefit
pension plan which provides postretirement income to eligible
employees selected by the Board of Directors such that the SERP
will be eligible for exemption under Parts Two, Three, and Four
of Title I of the Employee Retirement Income Security Act of
1974, as amended. Our benefit obligation related to the
MoneyGram SERP at December 31, 2003 was $48,303. We have
paid $1.3 million of benefits during the first six months
of 2004, and presently anticipate paying an additional
$1.3 million during the remainder of 2004.
Net periodic pension cost for defined benefit
includes the following components:
Postretirement Benefits Other Than
Pensions
— We have unfunded
defined benefit postretirement plans that provide medical and
life insurance for eligible employees, retirees, and dependents.
The related postretirement benefit liabilities are recognized
over the period that services are provided by the employees.
Upon the Distribution, we assumed the benefit obligation for
current and former employees assigned to MoneyGram. Viad
retained the benefit obligation for postretirement benefits
other than pensions for all Viad and non-MoneyGram employees
with the exception of one executive. Our benefit obligation at
December 31, 2003 related to the postretirement benefits
other than pensions was $10,750. We anticipate paying
$0.1 million to our other postretirement benefits plan
during 2004.
Net periodic postretirement benefit cost includes
the following components
26
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
In May 2004, the FASB issued FASB Staff Position
(“FSP”) FAS 106-2 on the accounting for the
effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the “Act”), which was
enacted into law on December 8, 2003. The FASB had
previously issued FSP FAS 106-1 which permitted the
one-time election to defer recognition of the effects of the Act
until further authoritative guidance was issued. With FSP
FAS 106-2, which superceded FSP FAS 106-1, the
election to defer recognition expired and specific guidance was
provided in accounting for the subsidy, whether a previous
election had been made to either defer or not defer the effects
of the Act. The FSP is effective for the first reporting period
beginning after June 15, 2004, which for the Company will
be the third quarter of 2004. The impact of the future financial
position or results of operations cannot presently be determined.
Employee Savings
Plan
— We have an employee
savings plan that qualifies under Section 401(k) of the
Internal Revenue Code. Contributions to, and costs of, the
401(k) defined contribution plan totaled $972 and $1,279 in the
first six months of 2004, and all of 2003. At the time of the
Distribution, MoneyGram’s new savings plan assumed all
liabilities under the Viad Employees Stock Ownership Plan (the
“Viad ESOP”) for benefits of the current and former
employees assigned to MoneyGram, and the related trust received
a transfer of the corresponding account balances. MoneyGram does
not have an Employee Stock Ownership Plan.
Employee Equity
Trust
— Viad sold treasury
stock in 1992 to its employee equity trust to fund certain
existing employee compensation and benefit plans. In connection
with the spin-off, Viad transferred 1,632,964 shares of
MoneyGram stock to a MoneyGram International, Inc. employee
equity trust (the “Trust”) to be used by MoneyGram to
fund employee compensation and benefit plans. The fair market
value of the shares held by this Trust, representing unearned
employee benefits, is recorded as a deduction from common stock
and other equity and is reduced as employee benefits are funded.
For financial reporting purposes, the Trust is consolidated.
We have adopted a stock compensation plan, the
2004 MoneyGram Omnibus Incentive Plan, to provide for the
following types of awards to officers, directors, and certain
key employees: (a) incentive and nonqualified stock
options; (b) stock appreciation rights; (c) restricted
stock; and (d) performance based awards. Additionally,
non-employee directors will receive an initial grant of
nonqualified options when they become directors. Non-employee
directors receive an additional grant of nonqualified options
each year of their term.
As of the Distribution Date, each Viad option
that immediately prior to the Distribution Date was outstanding
and not exercised was adjusted to consist of two options:
(1) an option to purchase shares of Viad common stock and
(2) an option to purchase shares of MoneyGram common stock.
The exercise price of the Viad stock option was adjusted by
multiplying the exercise price of the old stock option by a
fraction, the numerator of which was the closing price of a
share of Viad common stock on the first trading day after the
Distribution Date (divided by four to reflect the post-spin Viad
reverse stock split) and the denominator of which was that price
plus the closing price for a share of MoneyGram common stock on
the first trading day after the Distribution Date. The exercise
price of each MoneyGram stock option equals the exercise price
of each old stock option times a fraction, the numerator of
which is the closing price of a share of MoneyGram common stock
on the first trading day after the Distribution Date and the
denominator of which is that price plus the closing price of a
share of Viad common stock on the first trading day after the
Distribution Date (divided by four to reflect the post-spin Viad
reverse stock split). These MoneyGram options are considered to
have been issued under the MoneyGram 2004 Omnibus Incentive Plan.
27
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
MoneyGram will take all tax deductions relating
to the exercise of stock options and the vesting of restricted
stock held by employees and former employees of MoneyGram, and
Viad will take the deductions arising from options and
restricted stock held by its employees and former employees.
Stock options granted in 2004 are exercisable one
fifth after one year, and one fifth each subsequent year until
fully vested after the fifth anniversary of the grant date, and
have a term of 7 years. Stock options granted in 2003 are
exercisable one third after one year, two thirds after two years
and the balance after three years from the date of grant, and
have a term of 10 years. Stock options granted in calendar
years 2002 and prior are exercisable 50 percent after one
year with the balance exercisable after two years from the date
of grant. All stock options granted since 1998 contain certain
forfeiture and noncompete provisions.
Restricted stock and performance-based restricted
stock awards of 254,625 shares were granted during the
first six months of 2004 at a weighted average price (based on
fair market value at the date of grant) of $17.30, and vest
three years from the date of grant. On the Distribution Date,
our Chairman of the Board was granted a restricted stock award
under our 2004 Omnibus Incentive Plan of 50,000 shares of
common stock, of which 25,000 shares vested immediately and
25,000 shares will vest on June 30, 2006. Restricted
stock and performance-based restricted stock awards of
415,700 shares were granted in 2003 at a weighted average
price (based on fair market value at the date of grant) of
$15.62. The restricted stock awards vest three years from the
date of grant. Performance-based restricted stock awards granted
in 2003 vested one third after the first year and will vest two
thirds after two years and the balance after three years from
the date of grant because incentive performance targets
established in the year of grant were achieved. Future vesting
is subject generally to continued employment with MoneyGram or
Viad. Full ownership of shares could vest on an accelerated
basis if performance targets established are met at certain
achievement levels. Holders of restricted stock and
performance-based restricted stock have the right to receive
dividends and vote the shares, but may not sell, assign,
transfer, pledge or otherwise encumber the stock.
Information with respect to MoneyGram stock
options for the periods ended is as follows:
28
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The following table summarizes information
concerning stock options outstanding and exercisable at
June 30, 2004:
We have various noncancelable operating leases
for buildings and equipment. Minimum future rental payments for
all noncancelable operating leases with an initial term of more
than one year are:
We are party to litigation matters and claims
that are in the normal course of our operations. While the
results of litigation and claims cannot be predicted with
certainty, management believes that the final outcome of such
matters will not have a material adverse effect on the
Company’s consolidated financial statements.
At June 30, 2004, we have various reverse
repurchase agreements and overdraft facilities totaling
$2.1 billion to assist in the management of investments and
the clearing of payment service obligations. Included in this
amount are agreements with one of the clearing banks totaling
$1.0 billion. At June 30, 2004, borrowed balances
included a reverse repurchase agreement for $173 million
recorded in “Accounts payable and other liabilities”
on the Consolidated Balance Sheets. At December 31, 2003,
$2.0 million was outstanding under an overdraft facility.
We have agreements with certain other
co-investors to provide funds related to investments in limited
partnership interests. As of June 30, 2004, the total
amount of unfunded commitments related to these agreements was
$13.5 million.
Our business is conducted through two reportable
segments: Global Funds Transfer and Payment Systems. The Global
Funds Transfer segment primarily provides money transfer
services through a network of global retail agents and domestic
money orders. In addition, Global Funds Transfer provides a full
line of bill payment services. The Payment Systems segment
primarily provides official check services for financial
institutions in the United States, and processes controlled
disbursements. In addition, Payment Systems sells money orders
through financial institutions in the United States. No single
customer in either segment accounted for more than 10% of
revenue during the first six months of 2004.
29
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The business segments are determined based upon
factors such as the type of customers, the nature of products
and services provided and the distribution channels used to
provide those services. Segment pre-tax operating income and
segment operating margin are used to evaluate performance and
allocate resources. “Other corporate activities”
includes corporate overhead and interest expense that is not
allocated to the segments.
We manage our investment portfolio on a
consolidated level and the specific investment securities are
not identifiable to a particular segment. However, we allocate
revenue to our segments based upon allocated average investable
balances and an allocated yield. Average investable balances are
allocated to our segments based on the average balances
generated by that segment’s sale of payment instruments.
The investment yield is generally allocated based on the total
average investment yield. Gains and losses are allocated based
upon the allocation of average investable balances. Our
derivatives portfolio is also managed on a consolidated level
and the derivative instruments are not specifically identifiable
to a particular segment. The total costs associated with our
swap portfolio are allocated to each segment based upon the
percentage of that segment’s average investable balances to
the total average investable balances.
The following table reconciles segment operating
income to the income from continuing operations before income
taxes as reported in the financial statements.
30
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The following table reconciles segment assets to
total assets reported in the financial statements.
Geographic areas.
Our foreign operations are located principally in Europe. We
define foreign revenues as revenues generated from money
transfer transactions originating in a country other than the
United States. Long lived assets are principally located in the
United States.
The table below presents the financial
information by major geographic area:
31
1.
Description of the Business and
Background
2.
Summary of Significant Accounting
Policies
Table of Contents
Cash and Cash Equivalents (substantially
restricted)
— We consider
cash on hand and all highly liquid debt instruments purchased
with original maturities of three months or less to be cash and
cash equivalents.
Receivables, net (substantially
restricted)
— We have
receivables due from financial institutions and agents for
payment instruments sold. These receivables are outstanding from
the day of the sale of the payment instrument, until the
financial institution or agent remits the funds to us. We
provide an allowance for the portion of the receivable estimated
to become uncollectible using historical charge-off and recovery
patterns, as well as current economic conditions.
We sell an undivided percentage ownership
interest in certain of these receivables, primarily receivables
from our money order agents. The sale is recorded in accordance
with Statement of Financial Accounting Standards
(“SFAS”) No. 140,
Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities
. Upon sale, we remove the sold agent receivables
from the Consolidated Balance Sheets.
Investments (substantially
restricted)
— Our
investments consist primarily of mortgage-backed securities,
other asset-backed securities, state and municipal government
obligations, and corporate debt securities. These investments
are held in custody with major financial institutions. We
classify securities as available-for-sale or held-to-maturity in
accordance with SFAS No. 115,
Accounting for
Certain Investments in Debt and Equity Securities
. During
the first quarter of 2003, we determined that we no longer had
the positive intent to hold to maturity the securities
classified as held-to-maturity due to the desire to have more
flexibility in managing the investment portfolio. Therefore, on
March 31, 2003, we reclassified securities in the portfolio
from held-to-maturity to available-for-sale. As a result of this
reclassification, we cannot hold held-to-maturity securities
until March 31, 2005. There are no securities classified as
trading securities.
Securities held for indefinite periods of time,
including those securities that may be sold to assist in the
clearing of payment service obligations or in the management of
securities, are classified as securities available-for-sale.
These securities are reported at fair value, with the net
after-tax unrealized gain or loss reported as a separate
component of stockholders’ equity.
Table of Contents
Other asset-backed securities are collateralized
by various types of loans and leases, including home equity,
corporate, manufactured housing, credit card, and airline.
Interest income on mortgage-backed and other asset-backed
securities for which risk of credit loss is deemed remote is
recorded utilizing the level yield method. Changes in estimated
cash flows, both positive and negative, are accounted for with
retrospective changes to the carrying value of investments in
order to maintain a level yield over the life of the investment.
Interest income on mortgage-backed and other asset-backed
investments for which risk of credit loss is not deemed remote
is recorded under the prospective method in accordance with EITF
Issue No. 99-20,
Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets,
as adjustments of yield.
Securities with gross unrealized losses at the
consolidated balance sheet date are subject to our process for
identifying other-than-temporary impairments in accordance with
SFAS No. 115
“Accounting For Certain
Investments in Debt and Equity Securities,”
and EITF
Issue No. 99-20. We write down to fair value those
securities that we deem to be other-than-temporarily impaired in
the period the securities are deemed to be impaired. Under
SFAS No. 115, the assessment of whether such
impairment has occurred is based on management’s
case-by-case evaluation of the underlying reasons for the
decline in fair value. We consider a wide range of factors about
the security and use our best judgment in evaluating the cause
of the decline in the estimated fair value of the security and
in assessing the prospects for recovery. We evaluate investments
rated A and below for impairment under EITF Issue
No. 99-20. When an adverse change in expected cash flows
occurs and if the fair value of a security is less than its
carrying value, the investment is written down to fair value.
Any impairment charges are included in the Consolidated
Statement of Income under “Securities gains and losses,
net.” Fair value is generally based on quoted market
prices. However, certain investment securities are not readily
marketable. As a result, the carrying value of these investments
is based on cash flow projections, which require a significant
degree of management judgment as to default and recovery rates
of the underlying investments.
Substantially
Restricted
— We are
regulated by various state agencies, which generally require us
to maintain liquid assets and investments with an investment
rating of A or higher, in an amount generally equal to the
payment service obligation for those regulated payment
instruments, namely teller checks, agent checks, money orders,
and money transfers. Consequently, a significant amount of cash
and cash equivalents, receivables, and investments are
restricted to satisfy the liability to pay the face amount of
regulated payment service obligations upon presentment. We are
not regulated by state agencies for payment service obligations
resulting from outstanding cashier’s checks; however, we
restrict a portion of the funds related to these payment
instruments due to contractual arrangements, and/or Company
policy. Accordingly, assets restricted for regulatory or
contractual reasons are not available to satisfy working capital
or other financing requirements.
We have unrestricted cash and cash equivalents,
receivables, and investments to the extent those assets exceed
all payment service obligations. The following table shows the
total amount of assets restricted for payment service
obligations and unrestricted assets:
June 30
December 31
2004
2003
$
1,028,814
$
1,025,026
910,226
755,734
6,369,762
6,013,757
8,308,802
7,794,517
7,862,106
7,421,481
$
446,696
$
373,036
Table of Contents
Table of Contents
•
Fee revenues primarily consist of transaction
fees, foreign exchange revenue, and other revenue.
–
Transaction fees consist primarily of fees earned
on the sale of money transfers, retail money orders, and bill
payment services. The money transfer transaction fees are fixed
fees per transaction that may vary based upon the face value of
the amount of the transaction and the locations in which these
money transfers originate and to which they are sent. The money
order and bill payment transaction fees are fixed fees charged
on a per item basis and are recognized at the time of the
transaction or sale of the product.
–
Foreign exchange revenue is derived from the
management of currency exchange spreads (as a percentage of face
value of the transaction) on international money transfer
transactions. Foreign exchange revenue is recognized at the time
the exchange in funds occurs.
–
Other revenue consists of processing fees on
rebate checks and controlled disbursements, service charges on
aged outstanding money orders, money order dispenser fees, and
other miscellaneous charges. These fees are recognized in
earnings in the period the item is processed or billed.
•
Investment revenue is derived from the investment
of funds generated from the sale of official checks, money
orders and other payment instruments. These funds are available
for investment until the items are presented for payment.
Interest and dividends are recognized as earned.
•
Securities gains and losses are recognized on the
sale of securities, and impairments are recognized on securities
with gross unrealized losses and other-than-temporary
impairments in the period the other-than-temporary impairment
occurs.
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
(1,067
)
$
40,868
$
39,926
$
62,899
—
—
—
28
(345
)
(874
)
(1,406
)
(2,777
)
$
(1,412
)
$
39,994
$
38,520
$
60,150
$
(0.01
)
$
0.47
$
0.46
$
0.72
$
(0.02
)
$
0.46
$
0.44
$
0.70
$
(0.01
)
$
0.47
$
0.46
$
0.72
$
(0.02
)
$
0.46
$
0.44
$
0.70
Table of Contents
2004
2003
1.9%
2.3%
28.5%
30.4%
3.2%
2.7%
5 years
5 years
3.
Discontinued Operations
Viad Corp
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
207,378
$
236,190
$
414,933
$
461,528
(2,648
)
31,019
13,495
49,164
(1,615
)
19,762
8,232
28,763
Game Financial Corporation
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
—
$
15,921
$
10,668
$
33,303
—
1,072
852
2,131
—
—
11,417
—
1,118
648
13,050
1,289
$
33,576
8,687
22,557
$
19,706
4.
Investments (Substantially
Restricted)
June 30, 2004
Gross
Gross
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
$
912,149
$
47,651
$
(795
)
$
959,005
4,494,790
83,617
(39,478
)
4,538,929
488,328
1,177
(5,733
)
483,772
—
—
—
—
301,123
16,751
(2,323
)
315,551
75,458
705
(3,658
)
72,505
$
6,271,848
$
149,901
$
(51,987
)
$
6,369,762
Table of Contents
December 31, 2003
Gross
Gross
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
$
938,693
$
73,663
$
(271
)
$
1,012,085
4,092,067
92,131
(20,926
)
4,163,272
405,378
6,068
(405
)
411,041
5,373
321
—
5,694
323,747
23,142
(721
)
346,168
75,546
1,601
(1,650
)
75,497
$
5,840,804
$
196,926
$
(23,973
)
$
6,013,757
June 30, 2004
Amortized
Market
Cost
Value
$
24,852
$
25,121
227,943
235,063
971,222
997,675
477,583
500,469
4,494,790
4,538,929
75,458
72,505
$
6,271,848
$
6,369,762
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
1,921
$
3,270
$
8,976
$
7,899
(1,082
)
(394
)
(1,164
)
(561
)
(683
)
—
(6,611
)
(16,537
)
$
156
$
2,876
$
1,201
$
(9,199
)
Less Than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
$
47,539
$
(795
)
$
—
$
—
$
47,539
$
(795
)
1,804,904
(30,539
)
262,671
(8,939
)
2,067,575
(39,478
)
377,967
(5,733
)
—
—
377,967
(5,733
)
83,558
(1,844
)
7,303
(479
)
90,861
(2,323
)
30,775
(1,258
)
7,600
(2,400
)
38,375
(3,658
)
$
2,344,743
$
(40,169
)
$
277,574
$
(11,818
)
$
2,622,317
$
(51,987
)
Less Than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
$
18,670
$
(271
)
$
—
$
—
$
18,670
$
(271
)
1,383,395
(14,554
)
163,036
(6,372
)
1,546,431
(20,926
)
81,747
(405
)
—
—
81,747
(405
)
38,319
(721
)
—
—
38,319
(721
)
—
—
8,350
(1,650
)
8,350
(1,650
)
$
1,522,131
$
(15,951
)
$
171,386
$
(8,022
)
$
1,693,517
$
(23,973
)
Table of Contents
5.
Derivative Financial Instruments
Notional
Amount
$
100,000
975,000
620,000
1,200,000
592,000
$
3,487,000
Table of Contents
6.
Sale of Receivables
7.
Property and Equipment
June 30
December 31
2004
2003
$
16,641
$
21,831
108,265
111,001
80,139
76,664
205,045
209,496
(113,791
)
(114,289
)
$
91,254
$
95,207
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
2,712
$
2,329
$
5,444
$
4,507
2,154
2,259
4,287
4,506
1,984
1,563
3,866
3,186
$
6,850
$
6,151
$
13,597
$
12,199
8.
Intangible Assets and Goodwill
Gross
Net
Carrying
Accumulated
Carrying
Value
Amortization
Value
$
30,568
$
(17,765
)
$
12,803
13,200
(10,698
)
2,502
480
(155
)
325
44,248
(28,618
)
15,630
3,127
—
3,127
$
47,375
$
(28,618
)
$
18,757
Gross
Net
Carrying
Accumulated
Carrying
Value
Amortization
Value
$
29,607
$
(17,062
)
$
12,545
13,200
(10,385
)
2,815
480
(149
)
331
43,287
(27,596
)
15,691
3,127
—
3,127
$
46,414
$
(27,596
)
$
18,818
Table of Contents
$
2,214
2,214
1,959
1,959
1,646
$
297,704
97,822
$
395,526
9.
Debt
Table of Contents
Weighted Avg
Amount
Interest Rate
$
168,000
1.1
%
35,000
6.3
%
9,848
3.6
%
18,503
5.0
%
231,351
(30,000
)
10.5
%
$
201,351
10.
$4.75 Preferred Stock Subject to Mandatory
Redemption
11.
Income Taxes
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
2,974
$
11,250
$
7,816
$
11,904
744
1,451
1,155
2,063
4,253
(426
)
7,746
76
7,971
12,275
16,717
14,043
(4,384
)
(8,982
)
(8,297
)
(11,965
)
$
3,587
$
3,293
$
8,420
$
2,078
Six Months Ended June 30
2004
%
2003
%
$
9,472
35.0
%
$
12,224
35.0
%
1,278
4.7
%
1,072
3.1
%
6,690
24.7
%
—
0.0
%
(83
)
(0.3
)%
185
0.5
%
17,357
64.1
%
13,481
38.6
%
(8,937
)
(33.0
)%
(11,403
)
(32.6
)%
$
8,420
31.1
%
$
2,078
5.9
%
Table of Contents
June 30
December 31
2004
2003
$
(26,546
)
$
(24,670
)
(1,327
)
(1,172
)
2,976
1,997
40,781
41,537
(11,978
)
(12,364
)
6,607
6,646
(38,186
)
(67,605
)
23,665
68,072
27,203
24,889
35,464
34,464
7,423
4,604
(6,569
)
(5,765
)
$
59,513
$
70,633
June 30
December 31
2004
2003
$
144,119
$
182,209
(84,606
)
(111,576
)
$
59,513
$
70,633
12.
Stockholders’ Equity
Table of Contents
June 30
December 31
2004
2003
$
59,728
$
105,263
(37,015
)
(106,472
)
3,956
4,537
(38,536
)
(38,536
)
$
(11,867
)
$
(35,208
)
13.
Earnings Per Share
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
(570
)
$
20,457
$
18,644
$
32,847
—
(286
)
—
(572
)
$
(570
)
$
20,171
$
18,644
$
32,275
86,929
86,224
86,819
86,116
—
284
487
302
86,929
86,508
87,306
86,418
$
(0.01
)
$
0.24
$
0.21
$
0.38
$
(0.01
)
$
0.24
$
0.21
$
0.38
$
0.09
$
0.09
$
0.18
$
0.18
14.
Pensions and Other Benefits
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
465
$
781
$
930
$
1,562
2,800
2,823
5,600
5,646
(2,176
)
(2,385
)
(4,352
)
(4,770
)
192
129
384
258
963
530
1,925
1,014
$
2,244
$
1,878
$
4,487
$
3,710
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
149
$
125
$
298
$
249
160
149
321
298
—
—
—
—
(72
)
(72
)
(144
)
(144
)
15
7
30
16
$
252
$
209
$
505
$
419
Table of Contents
15.
Stock-Based Compensation
Table of Contents
Weighted
Total
Average
Options
Shares
Exercise Price
Exercisable
5,460,465
17.36
3,711,237
937,150
15.66
(297,865
)
10.54
(469,291
)
18.74
5,630,459
17.31
4,322,053
774,700
17.30
(239,822
)
19.32
(113,173
)
10.60
6,052,164
17.78
4,732,200
Table of Contents
Options Outstanding
Options Exercisable
Weighted Average
Weighted
Weighted
Remaining
Average
Average
Range of Exercise Prices
Shares
Contractual Life
Exercise Price
Shares
Exercise Price
883,285
2.4 years
$
11.91
848,286
$
11.87
1,292,819
8.2 years
15.64
737,678
15.65
1,020,313
4.9 years
18.66
1,001,689
18.69
1,620,547
6.5 years
19.25
911,847
19.19
1,235,200
6.6 years
21.37
1,232,700
21.38
6,052,164
6.0 years
17.78
4,732,200
17.82
16.
Commitments and Contingencies
$
5,284
5,383
5,136
4,963
5,025
25,859
17.
Segment Information
Table of Contents
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
128,165
$
111,500
$
249,133
$
216,725
71,655
76,221
142,008
142,622
$
199,820
$
187,721
$
391,141
$
359,347
$
24,777
$
24,169
$
45,755
$
45,859
5,848
6,289
15,038
3,678
30,625
30,458
60,793
49,537
20,661
20,661
1,905
2,765
3,127
5,995
5,042
3,943
9,941
8,617
$
3,017
$
23,750
$
27,064
$
34,925
$
6,386
$
5,921
$
12,728
$
11,770
1,010
705
1,891
1,379
$
7,396
$
6,626
$
14,619
$
13,149
$
6,988
$
5,985
$
12,716
$
10,605
57
21
352
406
$
7,045
$
6,006
$
13,068
$
11,011
Table of Contents
June 30
December 31
2004
2003
$
2,381,716
$
2,700,500
6,588,771
6,112,957
—
408,697
$
8,970,487
$
9,222,154
Three Months Ended
Six Months Ended
June 30
June 30
2004
2003
2004
2003
$
162,881
$
157,307
$
320,455
$
302,489
36,939
30,414
70,686
56,858
$
199,820
$
187,721
$
391,141
$
359,347
Table of Contents
| Item 2. | Management’s Discussion and Analysis of Results of Operations and Financial Condition |
The following discussion should be read in conjunction with MoneyGram International, Inc.’s consolidated financial statements and related notes. Reference to “MoneyGram”, the “Company”, “we”, “us” and “our” are to MoneyGram International Inc., and its subsidiaries and consolidated entities. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Quarterly Report.
Overview
| Our Separation from Viad Corp: |
On July 24, 2003, Viad Corp (“Viad”) announced a plan to separate its payment services segment, operated by Travelers Express Company, Inc. (“Travelers”), from its other businesses into a new company and to effect a tax-free distribution of its shares in that company to Viad’s shareholders. On December 18, 2003, MoneyGram was incorporated in Delaware as a subsidiary of Viad for the purpose of effecting the proposed distribution. On June 30, 2004, Travelers was merged with a wholly owned subsidiary of MoneyGram and then Viad distributed 88,556,077 shares of MoneyGram common stock to Viad shareholders in a tax-free distribution. Shareholders of Viad received one share of MoneyGram common stock for every one share of Viad common stock owned.
The businesses of MoneyGram consist solely of the payment services business. The continuing business of Viad, which is referred herein to as “New Viad,” consists of the businesses of the convention show services, exhibit design and construction, and travel and recreation services operations, including Viad’s centralized corporate functions located in Phoenix, Arizona. Notwithstanding the legal form of the spin-off, due to the relative significance of MoneyGram to Viad, MoneyGram is considered the divesting entity and treated as the accounting successor to Viad for financial reporting purposes in accordance with the EITF No. 02-11, Accounting for Reverse Spinoffs . The spin-off of New Viad has been accounted for pursuant to Accounting Principles Board (“APB”) Opinion No. 29, Accounting for Non-Monetary Transactions . MoneyGram charged directly to equity as a dividend $426.6 million, which is the historical cost carrying amount of the net assets of New Viad.
As part of the separation from Viad, we entered into a variety of agreements with Viad to govern each of our responsibilities related to the distribution. These agreements include a Separation and Distribution Agreement, a Tax Sharing Agreement, an Employee Benefits Agreement, and an Interim Services Agreement.
In connection with the spin-off, we entered into bank credit facilities providing availability of up to $350 million, in the form of a $250 million revolving credit facility and $100 million term loan. On June 30, 2004 we borrowed $150 million under these facilities which was paid to Viad and used by Viad to repay $188 million of its commercial paper. Viad also retired a substantial majority of its outstanding subordinated debentures and medium term notes for an aggregate amount of $52.6 million (including a tender premium), retired industrial revenue bonds of $9.0 million, and redeemed outstanding preferred stock at an aggregate call price of approximately $24.0 million. The remaining $200 million of the MoneyGram credit facilities is available for general corporate purposes.
| Our Business: |
MoneyGram operates in two reportable business segments (previously reported as the payment services segment by Viad) as follows:
| Global Funds Transfer — this segment provides global money transfer services, money orders and bill payment services to consumers through a network of agents. Fee revenues are driven by transaction volume and contract pricing through a network of agents and customers. In addition, investment and related income is generated by investing funds received from the sale of money orders until the instruments are settled. |
32
| Payment Systems — this segment provides financial institutions with payment processing services, primarily of official check outsourcing services, and money orders for sale to their customers, and processes controlled disbursements. Investment and related income is generated by investing funds received from the sale of payment instruments until such instruments are settled. In addition, revenue is derived from fees paid by its customers. |
| Basis of Presentation: |
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the historical results of operations of New Viad in discontinued operations in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets . There are certain amounts related to other investment income, debt and costs associated with Viad’s centralized corporate functions that are related to Viad but in accordance with GAAP, are not allowed to be reflected in discontinued operations. The consolidated financial statements may not necessarily be indicative of our results of operations, financial position and cash flows in the future or what our results of operations, financial position and cash flows would have been had we operated as a stand-alone company during the periods presented.
| Highlights: |
The following are financial highlights of the second quarter 2004 and other recent trends:
| • | Total revenue increased 6 percent to $199.8 million | |
| • | Fee and other revenue increased 19 percent to 122.1 million | |
| • | Global money transfer transaction volume increased 35 percent and revenue increased over 25 percent | |
| • | Loss per share from continuing operations was $0.01, including non-recurring debt tender and redemption costs related to Viad’s debt which amounts to $0.22 per share |
In 2002 and 2003, we faced market challenges and difficult economic conditions. While our businesses experienced increased transaction volume and higher investment balances, our operating income growth was slowed due to historically low interest rates and unprecedented mortgage refinancing activity. With higher average float balances from greater numbers of official checks issued for mortgage refinancings, and accelerated prepayments from mortgage-backed securities in our portfolio, funds were invested or reinvested at the historically low interest rates. Furthermore, we recorded significant other-than-temporary impairment losses and adjustments on certain investments in 2003.
In March 2004, we completed the sale of Game Financial Corporation for approximately $43 million in cash. Game Financial Corporation provides cash access services to casinos and gaming establishments throughout the United States. As a result of the sale, we recorded an after-tax gain of approximately $11 million in the first quarter of 2004. In addition, in June 2004, we recorded an after-tax gain of $1.1 million from the settlement of a lawsuit brought by Game Financial Corporation. These amounts are reflected in the consolidated income statements in “(Loss) income and gain from discontinued operations, net of tax.”
33
Results of Operations
| Financial Summary |
The following tables provide the results of our operations and the results of our operations as a percentage of revenue for the periods indicated:
| Table One — Quarter Results of Operations |
| As a | ||||||||||||||||||||||
| Quarter Ended | Percentage of | |||||||||||||||||||||
| June 30 | Revenue | |||||||||||||||||||||
|
|
2004 vs |
|
||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | ||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
|
REVENUE:
|
||||||||||||||||||||||
|
Fee and other revenue
|
$ | 122,084 | $ | 102,828 | 19 | % | 61 | % | 55 | % | ||||||||||||
|
Investment revenue
|
77,580 | 82,017 | (5 | )% | 39 | % | 44 | % | ||||||||||||||
|
Securities gains and losses, net
|
156 | 2,876 | (95 | )% | 0 | % | 1 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total revenue
|
199,820 | 187,721 | 6 | % | 100 | % | 100 | % | ||||||||||||||
|
Fee commissions expense
|
43,925 | 34,987 | 26 | % | 22 | % | 19 | % | ||||||||||||||
|
Investment commissions expense
|
53,706 | 60,802 | (12 | )% | 27 | % | 32 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total commissions expense
|
97,631 | 95,789 | 2 | % | 49 | % | 51 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Net revenue
|
102,189 | 91,932 | 11 | % | 51 | % | 49 | % | ||||||||||||||
|
EXPENSES:
|
||||||||||||||||||||||
|
Compensation and benefits
|
33,644 | 26,533 | 27 | % | 17 | % | 14 | % | ||||||||||||||
|
Transaction and operations support
|
27,447 | 25,296 | 9 | % | 14 | % | 13 | % | ||||||||||||||
|
Depreciation and amortization
|
7,396 | 6,626 | 12 | % | 4 | % | 4 | % | ||||||||||||||
|
Occupancy, equipment and supplies
|
8,119 | 6,962 | 17 | % | 4 | % | 4 | % | ||||||||||||||
|
Interest expense
|
1,905 | 2,765 | (31 | )% | 1 | % | 1 | % | ||||||||||||||
|
Debt tender and redemption costs
|
20,661 | — | NM | 10 | % | 0 | % | |||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total expenses
|
99,172 | 68,182 | 45 | % | 50 | % | 36 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Income from continuing operations before income
taxes
|
3,017 | 23,750 | (87 | )% | 1 | % | 13 | % | ||||||||||||||
|
Income tax expense
|
3,587 | 3,293 | 9 | % | 1 | % | 2 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
(Loss) income from continuing operations
|
$ | (570 | ) | $ | 20,457 | (103 | )% | 0 | % | 11 | % | |||||||||||
|
|
|
|
|
|
||||||||||||||||||
| NM — | Not meaningful |
34
| Table Two — Year-to-Date Results of Operations |
| As a | ||||||||||||||||||||||
| Six Months Ended | Percentage of | |||||||||||||||||||||
| June 30 | Revenue | |||||||||||||||||||||
|
|
2004 vs |
|
||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | ||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
|
REVENUE:
|
||||||||||||||||||||||
|
Fee and other revenue
|
$ | 235,706 | $ | 199,891 | 18 | % | 60 | % | 56 | % | ||||||||||||
|
Investment revenue
|
154,234 | 168,655 | (9 | )% | 40 | % | 47 | % | ||||||||||||||
|
Securities gains and losses, net
|
1,201 | (9,199 | ) | (113 | )% | 0 | % | (3 | )% | |||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total revenue
|
391,141 | 359,347 | 9 | % | 100 | % | 100 | % | ||||||||||||||
|
Fee commissions expense
|
84,428 | 66,934 | 26 | % | 22 | % | 19 | % | ||||||||||||||
|
Investment commissions expense
|
103,451 | 119,728 | (14 | )% | 26 | % | 33 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total commissions expense
|
187,879 | 186,662 | 1 | % | 48 | % | 52 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Net revenue
|
203,262 | 172,685 | 18 | % | 52 | % | 48 | % | ||||||||||||||
|
EXPENSES:
|
||||||||||||||||||||||
|
Compensation and benefits
|
66,389 | 54,599 | 22 | % | 17 | % | 15 | % | ||||||||||||||
|
Transaction and operations support
|
55,687 | 50,682 | 10 | % | 14 | % | 14 | % | ||||||||||||||
|
Depreciation and amortization
|
14,619 | 13,149 | 11 | % | 4 | % | 4 | % | ||||||||||||||
|
Occupancy, equipment and supplies
|
15,715 | 13,335 | 18 | % | 4 | % | 4 | % | ||||||||||||||
|
Interest expense
|
3,127 | 5,995 | (48 | )% | 1 | % | 2 | % | ||||||||||||||
|
Debt tender and redemption costs
|
20,661 | — | NM | 5 | % | 0 | % | |||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Total expenses
|
176,198 | 137,760 | 28 | % | 45 | % | 38 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Income from continuing operations before income
taxes
|
27,064 | 34,925 | (23 | )% | 7 | % | 10 | % | ||||||||||||||
|
Income tax expense
|
8,420 | 2,078 | 305 | % | 2 | % | 1 | % | ||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
Income from continuing operations
|
$ | 18,644 | $ | 32,847 | (43 | )% | 5 | % | 9 | % | ||||||||||||
|
|
|
|
|
|
||||||||||||||||||
| NM — | Not meaningful |
| Revenue |
Net fee revenue — The following table provides a summary of our fee and other revenue, fee commissions expense and fee commissions expense as a percentage of our fee and other revenue for the periods indicated:
| Table Three — Net Fee Revenue Analysis |
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||||
|
|
2004 vs |
|
2004 vs | ||||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | 2003 | ||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
|
Fee and other revenue
|
$ | 122,084 | $ | 102,828 | $ | 19,256 | $ | 235,706 | $ | 199,891 | $ | 35,815 | |||||||||||||
|
Fee commissions expense
|
43,925 | 34,987 | 8,938 | 84,428 | 66,934 | 17,494 | |||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net fee revenue
|
$ | 78,159 | $ | 67,841 | $ | 10,318 | $ | 151,278 | $ | 132,957 | $ | 18,321 | |||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
|
Commissions as a % of revenue
|
36.0 | % | 34.0 | % | 35.8 | % | 33.5 | % | |||||||||||||||||
Fee and other revenue includes fees on money transfer transactions, money orders and, to a lesser extent, official check transactions. It is a growing portion of our total revenue, increasing to 61 percent of total revenue for the second quarter of 2004 from 55 percent for the second quarter of 2003. Fee and other
35
Fee commissions consist primarily of fees paid to our third-party agents for the money transfer service. Fee commissions expense was up 26 percent for both the three and six-month periods ended June 30, 2004, compared to the prior year periods, primarily driven by higher transaction volume.
Net fee revenue increased $10.3 million or 15 percent in the second quarter of 2004 and $18.3 million or 14 percent in the first six months in 2004, driven by the increase in money transfer and urgent bill payment transactions. Growth in net fee revenue was less than fee and other revenue growth and money transfer transaction growth primarily due to the targeted pricing initiatives as well as product mix.
Net investment revenue — The following table provides a summary of the investment revenue and investment commissions expense associated with our investment portfolio for the periods indicated:
| Table Four — Net Investment Revenue Analysis |
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||||
|
|
2004 vs |
|
2004 vs | ||||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | 2003 | ||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
|
Components of net investment revenue:
|
|||||||||||||||||||||||||
|
Investment revenue
|
$ | 77,580 | $ | 82,017 | $ | (4,437 | ) | $ | 154,234 | $ | 168,655 | $ | (14,421 | ) | |||||||||||
|
Investment commissions expense(1)
|
53,706 | 60,802 | (7,096 | ) | 103,451 | 119,728 | (16,277 | ) | |||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net investment revenue
|
$ | 23,874 | $ | 21,215 | $ | 2,659 | $ | 50,783 | $ | 48,927 | $ | 1,856 | |||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
|
Average balances:
|
|||||||||||||||||||||||||
|
Cash equivalents and investments
|
$ | 6,888,115 | $ | 7,142,154 | $ | (254,039 | ) | $ | 6,736,531 | $ | 6,940,122 | $ | (203,591 | ) | |||||||||||
|
Payment service obligations(2)
|
5,510,137 | 5,792,583 | (282,446 | ) | 5,334,893 | 5,568,136 | (233,243 | ) | |||||||||||||||||
|
Average yields earned and rates paid(3):
|
|||||||||||||||||||||||||
|
Investment yield
|
4.53 | % | 4.61 | % | (0.08 | )% | 4.60 | % | 4.90 | % | (0.30 | )% | |||||||||||||
|
Investment commission rate
|
3.92 | % | 4.21 | % | (0.29 | )% | 3.90 | % | 4.34 | % | (0.44 | )% | |||||||||||||
|
Net investment margin
|
1.39 | % | 1.19 | % | 0.20 | % | 1.52 | % | 1.42 | % | 0.10 | % | |||||||||||||
| (1) | Investment commissions expense reported includes payments made to financial institution customers, costs associated with swaps and the sale of receivables program. |
| (2) | Commissions are paid to financial institution customers based upon average outstanding balances generated by the sale of official checks only. The average balance in the table reflects only the payment service obligations for which commissions are paid and does not include the average balance of the sold receivables ($407 million and $433 million for the second quarter of 2004 and 2003, respectively, and $411 million and $437 million for the first six months of 2004 and 2003, respectively) as these are not recorded on the consolidated balance sheets. |
| (3) | Average yields/rates are calculated by dividing the applicable amount shown in the “components of net investment revenue” section by the applicable amount shown in the “Average balances” section |
36
| divided by the number of days in the period presented and multiplied by the number of days in the year. The “Net investment margin” is calculated by dividing “Net investment revenue” by the “Cash equivalents and investments” average balance divided by the number of days in the period presented and multiplied by the number of days in the year. |
Investment revenue in the second quarter and first six months of 2004 declined by 5 percent and 9 percent, respectively, over the same periods in 2003 due to lower average investable balances in the portfolio as well as lower interest yields earned on the investment portfolio. The average investable balances in 2003 were driven by the unprecedented mortgage refinancing activity that occurred during late 2002 and into 2003 due to the dramatic decline in interest rates. Refinancing activities caused an increase in the sale of official checks and, therefore, an increase in our average investable balances. In 2004, the refinancing activity declined from 2003 causing average investable balances to decline. The refinancing activity in 2003 also caused a significant increase in the prepayments of mortgage-backed debt securities in our investment portfolio which we reinvested at lower interest rates. Consequently, the yield declined 8 basis points in the second quarter 2004 and 30 basis points year to date 2004 compared to the same periods in 2003.
Investment commissions expense in the second quarter and first six months of 2004 declined by 12 percent and 14 percent from the same periods in 2003, primarily driven by lower interest rates. Commission expense paid to our financial institution customers, which is based on short-term interest rate indices, declined due to lower short-term interest rates. The average federal funds rate declined by 24 basis points in each of the comparable periods. Commission expense also declined as lower notional balances resulted in less swap expense.
Net investment revenue increased by 13 percent and 4 percent for the second quarter and first six months of 2004 compared to the same periods in 2003. The net interest margin was 1.39 percent in the second quarter 2004, up 20 basis points over second quarter 2003. The net interest margin was 1.52 percent in the first six months of 2004, up 10 basis points compared to the prior year period. These increases were due to lower investment commissions. We anticipate the full year 2004 net interest margin will be in the range of 1.25 percent to 1.30 percent, declining compared to the first six months of 2004 primarily due to increased swap costs.
Securities gains and losses, net — The following table provides a summary of the realized gains and losses and impairments during the periods presented:
| Table Five — Summary of Gains, Losses and Impairments |
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||||
|
|
2004 vs |
|
2004 vs | ||||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | 2003 | ||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
|
Gross realized gains
|
$ | 1,921 | $ | 3,270 | $ | (1,349 | ) | $ | 8,976 | $ | 7,899 | $ | 1,077 | ||||||||||||
|
Gross realized losses
|
(1,082 | ) | (394 | ) | (688 | ) | (1,164 | ) | (561 | ) | (603 | ) | |||||||||||||
|
Other-than-temporary impairments
|
(683 | ) | (683 | ) | (6,611 | ) | (16,537 | ) | 9,926 | ||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
|
Securities gains and losses, net
|
$ | 156 | $ | 2,876 | $ | (2,720 | ) | $ | 1,201 | $ | (9,199 | ) | $ | 10,400 | |||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
Net securities gains in the second quarter declined as a result of increasing interest rates. Other-than-temporary impairments are related to certain asset-backed securities which experienced adverse changes in estimated future cash flows in the periods reported. The investment is impaired to the extent that the recorded value of the investments exceeds fair value.
Expenses
Expenses include various MoneyGram operating expenses, other than commissions. As MoneyGram is the accounting successor to Viad, these expenses also include corporate overhead that Viad did not allocate to its subsidiaries and, consequently, cannot be classified as discontinued operations. Included in expenses
37
Following is a discussion of the operating expenses for the second quarter and year-to-date periods as presented in Tables One and Two.
Compensation and benefits — Compensation and benefits includes salaries and benefits, management incentive programs, severance costs and other employee related costs. Compensation and benefits in the second quarter of 2004 increased 27 percent over 2003. Because of the significant impact that declining interest rates had on the Company’s performance in 2003, incentive accruals were substantially lower in 2003. In addition, the total number of our employees was higher in 2004 because we increased personnel to drive money transfer growth. Employee benefit costs, including pension expense, increased $2.4 million or 50 percent in the second quarter 2004 compared to 2003.
Compensation and benefits for the first six months 2004, increased 22 percent over the same period in 2003 for the same reasons the quarterly expenses increased. Employee benefit costs, including pension expense, increased $4.5 million or 43 percent in the first six months of 2004 compared to 2003.
Transaction and operations support — Transaction and operations support expenses include marketing costs, professional fees and other outside services costs, telecommunications and forms expense related to our products. Transaction and operations support costs were up 9 percent in the second quarter 2004 over 2003 and up 10 percent for the year to date period over 2003, primarily driven by transaction growth.
Depreciation and amortization — Depreciation and amortization includes depreciation on point of sale equipment, computer hardware and software (including capitalized software development costs), and office furniture, equipment and leasehold improvements. Depreciation and amortization expense in the second quarter and first six months of 2004 was up 12 percent and 11 percent over the same period in 2003, primarily due to the amortization of capitalized software developed to enhance the money transfer platform. These investments helped drive the growth in the money transfer product.
Occupancy, equipment and supplies — Occupancy, equipment and supplies includes facilities rent and maintenance costs, software and equipment maintenance costs, freight and delivery costs, and supplies. Occupancy, equipment and supplies in the second quarter and year-to-date 2004 increased 17 percent and 18 percent over 2003 primarily due to increased facilities rent and increased cost of equipment and software.
Interest expense — Interest expense in the second quarter of 2004 was down 31 percent over 2003 and declined 48 percent for the first six months of 2004 on lower average outstanding debt balances. Viad paid down debt in anticipation of the spin-off. Lower average interest rates on those balances also contributed to the decline in interest expense. MoneyGram borrowed $150 million on June 30, 2004, and expects interest expense to be approximately $2 million for the last half of 2004 based on current interest rates.
Debt tender and redemption costs — Debt tender and redemption costs of $20.7 million relate to the redemption of Viad’s preferred shares and tender of its subordinated debt and medium term notes in connection with the spin-off.
Income taxes — The effective tax rate of 119 percent and 31 percent in the second quarter and first six months of 2004, respectively, was affected by the costs related to the redemption of Viad’s redeemable preferred shares which is not tax deductible. Excluding the redemption costs, the effective tax rate would have been 18 percent in the second quarter and 19 percent for the first six months of 2004. The relatively low effective tax rate is primarily attributable to income from tax-exempt bonds in our investment portfolio. Tax-exempt bonds are declining as a percentage of the portfolio which has caused, and in the future will cause, the effective tax rate to increase. We anticipate the effective tax rate to be in the low to mid 20 percent range for the last six months of 2004.
38
| Segment Performance |
We measure financial performance by our two business segments — Global Funds Transfer and Payment Systems. The business segments are determined based upon factors such as the type of customers, the nature of products and services provided and the distribution channels used to provide those services. Segment pre-tax operating income and segment operating margin are used to evaluate performance and allocate resources. “Other unallocated expenses” includes corporate overhead and interest expense that is not allocated to the segments.
We manage our investment portfolio on a consolidated level and the specific investment securities are not identifiable to a particular segment. However, we allocate revenue to our segments based upon allocated average investable balances and an allocated yield. Average investable balances are allocated to our segments based upon the average balances generated by that segments sale of payment instruments. The investment yield is generally allocated based upon the total average investment yield. Gains and losses are allocated based upon the allocation of average investable balances. Our derivatives portfolio is also managed on a consolidated level and the derivative instruments are not specifically identifiable to a particular segment. The total costs associated with our swap portfolio are allocated to each segment based upon the percentage of that segment’s average investable balances to the total average investable balances. The following table reconciles segment operating income to income from continuing operations before income taxes as reported in the financial statements:
| Table Six — Segment Information |
| Quarter Ended | Six Months Ended | ||||||||||||||||
| June 30 | June 30 | ||||||||||||||||
|
|
|
||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||
|
|
|
|
|
||||||||||||||
| (In thousands) | |||||||||||||||||
|
Operating income:
|
|||||||||||||||||
|
Global Funds Transfer
|
$ | 24,777 | $ | 24,169 | $ | 45,755 | $ | 45,859 | |||||||||
|
Payment Systems
|
5,848 | 6,289 | 15,038 | 3,678 | |||||||||||||
|
|
|
|
|
||||||||||||||
| 30,625 | 30,458 | 60,793 | 49,537 | ||||||||||||||
|
Debt tender and redemption costs
|
20,661 | — | 20,661 | — | |||||||||||||
|
Interest expense
|
1,905 | 2,765 | 3,127 | 5,995 | |||||||||||||
|
Other unallocated expenses
|
5,042 | 3,943 | 9,941 | 8,617 | |||||||||||||
|
|
|
|
|
||||||||||||||
|
Income from continuing operations before
income taxes
|
$ | 3,017 | $ | 23,750 | $ | 27,064 | $ | 34,925 | |||||||||
|
|
|
|
|
||||||||||||||
Included in other unallocated expenses for the first six months of 2004 is approximately $5.5 million that will not be incurred by MoneyGram in the future.
| Global Funds Transfer Segment |
| Table Seven — Global Funds Transfer Segment |
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||||
|
|
2004 vs |
|
2004 vs | ||||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | 2003 | ||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
|
Revenue
|
$ | 128,165 | $ | 111,500 | 15 | % | $ | 249,133 | $ | 216,725 | 15 | % | |||||||||||||
|
Operating income
|
24,777 | 24,169 | 3 | % | 45,755 | 45,859 | 0 | % | |||||||||||||||||
|
Operating margin
|
19.3 | % | 21.7 | % | 18.4 | % | 21.2 | % | |||||||||||||||||
Global Funds Transfer revenue increased by 15 percent in both the second quarter and the year-to-date period 2004, primarily driven by the growth in the money transfer and urgent bill payment services as total transaction volume grew 35 percent and 34 percent in the same periods. Domestic originated
39
Retail money order volume increased slightly in the second quarter and the first six months of 2004. While we continue to focus on signing new locations, we believe the money order market as a whole will decline over time. Investment revenue in Global Funds Transfer declined slightly in the second quarter and first six months of 2004 compared to 2003, primarily due to lower interest rates earned on the portfolio as the average investable balances remained relatively flat.
Commissions expense consists of fees paid to our third-party agents for the money transfer service and costs associated with swaps and the sale of receivables program. Commissions expense in the second quarter and first six months of 2004 was up 23 percent and 22 percent compared to the prior year periods, primarily driven by the growth in fee revenue which was up 15 percent. Commissions expense as a percentage of revenue increased over the prior year primarily due to business mix as we continue to see growth in the money transfer business compared to money orders. We anticipate this trend to continue with the continued growth of the money transfer business.
Global Funds Transfer operating margins declined as a result of declining interest rates and the mix of business with money transfer activity increasing and the higher margin money order product declining as a percentage of the business.
| Payment Systems Segment |
| Table Eight — Payment Systems Segment |
| Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30 | June 30 | ||||||||||||||||||||||||
|
|
2004 vs |
|
2004 vs | ||||||||||||||||||||||
| 2004 | 2003 | 2003 | 2004 | 2003 | 2003 | ||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
|
Revenue
|
$ | 71,655 | $ | 76,221 | (6 | )% | $ | 142,008 | $ | 142,622 | 0 | % | |||||||||||||
|
Operating income
|
5,848 | 6,289 | (7 | )% | 15,038 | 3,678 | 309 | % | |||||||||||||||||
|
Operating margin
|
8.2 | % | 8.3 | % | 10.6 | % | 2.6 | % | |||||||||||||||||
|
Taxable equivalent basis(1):
|
|||||||||||||||||||||||||
|
Revenue
|
$ | 76,878 | $ | 82,755 | (7 | )% | $ | 152,447 | $ | 155,627 | (2 | )% | |||||||||||||
|
Operating income
|
11,071 | 12,823 | (14 | )% | 25,477 | 16,682 | 53 | % | |||||||||||||||||
|
Operating margin
|
14.4 | % | 15.5 | % | 16.7 | % | 10.7 | % | |||||||||||||||||
| (1) | The taxable equivalent basis numbers are non-GAAP measures that are used by the Company’s management to evaluate the effect of tax-exempt securities on the payment systems segment. The tax-exempt investments in the investment portfolio have lower pre-tax yields but produce higher income on an after-tax basis than comparable taxable investments. An adjustment is made to present revenue and operating income resulting from amounts invested in tax-exempt securities on a taxable equivalent basis. The adjustment is calculated using a 35 percent tax rate and is $5.2 million and $6.5 million for the second quarter 2004 and 2003, respectively, and $10.4 and $13.0 for the first six months of 2004 and 2003, respectively. The presentation of taxable equivalent basis numbers is supplemental to results presented under GAAP and may not be comparable to similarly titled measures used by other companies. These non-GAAP measures should be used in addition to, but not a substitute for measures presented under GAAP. |
Payment Systems revenue includes investment revenue, fees charged to our official check financial institution customers and fees earned on our rebate processing business. Revenue in the second quarter 2004 declined by 6 percent compared to 2003, primarily due to lower average balances in the investment
40
Commissions expense includes payments made to financial institution customers based on official check average investable balances and short-term interest rate indices, as well as costs associated with swaps and the sale of receivables program. Commissions expense declined 13 percent and 14 percent in the second quarter and first six months of 2004, compared to the same periods in 2003, because of lower interest rates and lower average investable balances. The average federal funds rate in the second quarter and the first six months of 2004 declined by 24 basis points from the average federal funds rate for the same periods in 2003. In addition, commission expense declined due to lower swap costs on lower notional balances.
Payment Systems operating margin was 8.2 percent in the second quarter 2004, relatively flat compared to second quarter 2003. On a taxable equivalent basis, the operating margin in the second quarter 2004 was 14.4 percent down slightly from 2003. The second quarter 2004 operating margin was affected by the decline in investment revenue, offset by the decline in commissions expense. The operating margin for the first six months of 2004 was 10.6 percent, up from 2.6 percent in 2003. The taxable equivalent operating margin for the first six months of 2004 was 16.7 percent, up 6 percentage points from 10.7 percent in 2003. The 2003 operating margin was affected by net securities losses and the 2004 operating margin benefited from lower commissions expense.
Liquidity and Capital Resources
One of our primary financial goals is to maintain an adequate level of liquidity to manage the fluctuations in the balances of payment service assets and obligations resulting from varying levels of sales of official checks, money orders and other payment instruments, the timing of the collections of receivables, and the timing of the presentment of such instruments for payment. In addition, we strive to maintain adequate levels of liquidity for capital expenditures and other normal operating cash needs.
At June 30, 2004, we had cash and cash equivalents of $1.0 billion, net receivables of $910 million and investments of $6.4 billion, all substantially restricted for payment service obligations. We rely on the funds from ongoing sales of payment instruments and portfolio cash flows to settle payment service obligations as they are presented. Due to the continuous nature of the sales and settlement of our payment instruments, we are able to invest in securities with a longer term than the average life of our payment instruments.
We are regulated by various state agencies, which generally require us to maintain liquid assets and investments with an investment rating of A or higher, in an amount generally equal to the payment service obligation for regulated payment instruments (teller checks, agent checks, money orders and money transfers). We are not regulated by state agencies for our payment service obligations resulting from outstanding cashier’s checks; however, we restrict the funds related to these payment instruments due to contractual arrangements and/or Company policy. Accordingly, assets restricted for regulatory or contractual reasons, or by Company policy, are not available to satisfy working capital or other financing requirements.
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We have unrestricted cash and cash equivalents, receivables, and investments to the extent those assets exceed all payment service obligations. The following table summarizes the assets restricted for payment service obligations and unrestricted assets:
| Table Nine — Unrestricted Assets |
| June 30 | December 31 | |||||||
| 2004 | 2003 | |||||||
|
|
|
|||||||
| (In thousands) | ||||||||
|
Cash and cash equivalents
|
$ | 1,028,814 | $ | 1,025,026 | ||||
|
Receivables, net
|
910,226 | 755,734 | ||||||
|
Investments
|
6,369,762 | 6,013,757 | ||||||
|
|
|
|||||||
| 8,308,802 | 7,794,517 | |||||||
|
Amounts restricted to cover payment service
obligations
|
7,862,106 | 7,421,481 | ||||||
|
|
|
|||||||
|
Unrestricted assets
|
$ | 446,696 | $ | 373,036 | ||||
|
|
|
|||||||
| Cash Flows |
Net cash provided by operating activities was $81.1 million for the second quarter of 2004. To understand the cash flow activity of our business, the cash used in or provided by operating activities relating to the payment service assets and obligations should be reviewed in conjunction with the related cash provided by or used in investing activities related to our investment portfolio. During the second quarter of 2004, the net change in cash and cash equivalents (substantially restricted), receivables, net (substantially restricted) and payment service obligations combined with the proceeds from and purchases of investments classified as available-for-sale was relatively small with a net increase of $7.9 million. Before the changes in cash and cash equivalents (substantially restricted), receivables, net (substantially restricted) and payment service obligations cash used in operating activities was $28.2 million for the second quarter of 2004.
Net cash used in investing activities was $52.0 million for the second quarter 2004. These amounts primarily consist of investing the cash flow from the sale of our payment instruments included in the operating cash flows as discussed above. We also had capital expenditures for property and equipment of $7.0 million primarily related to certain leasehold improvements and information systems.
Net cash provided by financing activities during the second quarter of 2004 was $84.4 million. During the quarter Viad paid off its commercial paper, retired a substantial majority of its outstanding subordinated debentures and medium term notes and retired industrial revenue bonds which is reflected in the Consolidated Statements of Cash Flows as “Payments on debt retirement” of $206.9 million. Viad also redeemed its outstanding preferred stock for $23.9 million. MoneyGram borrowed $150 million under its bank credit facilities as discussed below. On June 30, 2004 we also received proceeds of $173 million under a reverse repurchase agreement that was outstanding for one day. We utilize reverse repurchase agreements for short term cash flow needs to manage our portfolio and the funding of our payment service obligations.
| Other Funding Sources |
In connection with the spin off, MoneyGram entered into bank credit facilities providing availability of up to $350 million, in the form of a $250 million four-year revolving credit facility and a $100 million term loan. On June 30, 2004, the Company borrowed $150 million (consisting of the $100 million term loan and $50 million under the revolving credit facility) and paid the proceeds to Viad. The remaining amount of the credit facilities is available for general corporate purposes and to support letters of credit. The interest rate on both the term loan and the credit facility is LIBOR plus 60 basis points, subject to adjustment in the event of a change in our debt rating. The term loan is due in two equal installments on the third and fourth anniversary of the loan. The revolving credit facility expires on June 30, 2008. The
42
At June 30, 2004, we had reverse repurchase agreements and various overdraft facilities totaling $2.1 billion available to assist in the management of our investments and the clearing of payment service obligations. At June 30, 2004, $173.0 million was outstanding under a reverse repurchase agreement and at December 31, 2003, $2.0 million was outstanding under an overdraft facility.
| Other Funding Requirements |
The following table presents MoneyGram’s contractual obligations at June 30, 2004:
| Table Ten — Contractual Obligations |
| Payments Due by Period | |||||||||||||||||||||
|
|
|||||||||||||||||||||
| Less Than | After | ||||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
| (In thousands) | |||||||||||||||||||||
|
Debt
|
$ | 150,000 | $ | — | $ | 50,000 | $ | 100,000 | $ | — | |||||||||||
|
Operating leases
|
50,650 | 5,284 | 10,519 | 9,938 | 24,909 | ||||||||||||||||
|
Derivative financial instruments
|
59,932 | 70,905 | (2,474 | ) | (7,855 | ) | (644 | ) | |||||||||||||
|
Other obligations(1)
|
187,348 | 183,471 | 3,818 | 59 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
Total contractual cash obligations
|
$ | 447,930 | $ | 259,660 | $ | 61,863 | $ | 102,142 | $ | 24,265 | |||||||||||
|
|
|
|
|
|
|||||||||||||||||
| (1) | Other obligations include $173 million outstanding under a reverse repurchase agreement, capital lease obligations of $732 thousand and funding commitments of $13.5 million related to private equity obligations. |
MoneyGram has certain funded, noncontributory pension plans that cover certain employees. Funding policies provide that payments to defined benefit pension trusts shall be equal to the minimum funding required by applicable regulations. During the second half of 2004, MoneyGram expects to contribute $1.8 million to the funded pension plans. MoneyGram also has certain unfunded pension plans that require benefit payments over extended periods of time and we expect to pay benefits of $1.3 million during the second half of 2004. See “Critical Accounting Policies — Pension obligations”.
We have agreements with clearing banks that provide processing and clearing functions for money orders and official checks. One clearing bank contract has covenants that include maintenance of total cash and cash equivalents, receivables and investments substantially restricted for payment services obligations at least equal to total outstanding payment service obligations; maintenance of a minimum ratio of total assets held at that bank to instruments clearing through that bank of 103 percent and the certain of the financial covenants contained in the credit facilities.
Working in cooperation with certain financial institutions, we have established separate consolidated entities (special-purpose entities) and processes that provide these financial institutions with additional assurance of our ability to clear their official checks. These processes include maintenance of specified ratios of segregated investments to outstanding payment instruments, typically 1 to 1. In some cases, alternative credit support has been purchased that provides backstop funding as additional security for payment of instruments. However, we remain liable to satisfy the obligations, both contractually and by
43
The Company has investment grade ratings of BBB/ Baa2 and a stable outlook from the major credit rating agencies. Our ability to maintain an investment grade rating is important because it affects the cost of borrowing and certain financial institution customers require that we maintain an investment grade rating. Any ratings downgrade could increase our cost of borrowing or require certain actions to be performed to rectify such a situation. A downgrade could also have an effect on our ability to attract new customers and retain existing customers.
Although no assurance can be given, we expect operating cash flows and short-term borrowings to be sufficient to finance our ongoing business, maintain adequate capital levels, and meet debt and clearing agreement covenants and investment grade rating requirements. Should financing requirements exceed such sources of funds, we believe we have adequate external financing sources available, including unused commitments under our credit facilities, to cover any shortfall.
Viad sold treasury stock in 1992 to its employee equity trust to fund certain existing employee compensation and benefit plans. In connection with the spin-off, Viad transferred 1,632,964 shares of MoneyGram stock to a MoneyGram International, Inc. employee equity trust (the “Trust”) to be used by MoneyGram to fund employee compensation and benefit plans. The fair market value of the shares held by this Trust, representing unearned employee benefits, is recorded as a deduction from common stock and other equity and is reduced as employee benefits are funded. For financial reporting purposes, the Trust is consolidated.
Capital Adequacy
On June 30, 2004, MoneyGram charged directly to equity as a dividend, the historical cost carrying amount of the net assets of Viad in the amount of $426.6 million.
We have not yet determined whether we will pay dividends on MoneyGram common stock (and if so, the amount), and we may determine not to pay any dividends on MoneyGram common stock. Any future determination to pay dividends on MoneyGram common stock will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, cash requirements, prospects and such other factors as our Board of Directors may deem relevant.
Stockholders’ equity can be affected adversely by changing interest rates, as after tax changes in the fair value of securities classified as available for sale and in the fair value of derivative financial instruments are included as components of stockholder’s equity under the caption “Accumulated changes in other comprehensive loss.” The fair value of derivative financial instruments generally increases when the market value of fixed rate long-term investments decline and vice versa. However, an increase or decrease in stockholder’s equity related to changes in the fair value of securities classified as available for sale may not be offset, in whole or in part, by the decrease or increase in stockholders’ equity related to changes in the fair value of derivative financial instruments.
Off-Balance Sheet Arrangements
We have an agreement to sell, on a periodic basis, undivided percentage ownership interests in certain receivables, primarily from our money order agents, in an amount not to exceed $450 million. These
44
Any transactions and strategies, including any potential off-balance sheet arrangements, that materially affect investment results and cash flows must generally be approved by MoneyGram’s Board of Directors. Once any such transactions or strategies are implemented, MoneyGram’s Asset and Liability Committee (“ALCO”), which is comprised of senior officers of MoneyGram and which reports to MoneyGram’s chief executive officer, is responsible for monitoring such transactions. MoneyGram’s ALCO committee is also responsible for reviewing any such proposed transactions and making recommendations to MoneyGram’s Chief Executive Officer.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements. Critical accounting policies are those policies that management believes are most important to the portrayal of a company’s financial position and results of operations, and that require management to make estimates that are difficult, subjective or complex. Based on this criteria, management has identified the following critical accounting policies and estimates, and the methodology and disclosures related to those estimates:
Fair Value of Investment Securities — Our investment securities are classified as available-for-sale, including securities being held for indefinite periods of time, and those securities that may be sold to assist in the clearing of payment service obligations or in the management of securities. These securities are carried at market value (or fair value), with the net after-tax unrealized gain or loss reported as a separate component of stockholders’ equity. Fair value is generally based on quoted market prices. However, certain investment securities are not readily marketable. As a result, the carrying value of these investments is based on cash flow projections which require a significant degree of management judgment as to default and recovery rates of the underlying investments. Accordingly, the estimates determined may not be indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. In general, as interest rates increase, the fair value of the available-for-sale portfolio and stockholders’ equity decreases and as interest rates fall, the fair value of the available-for-sale portfolio increases as well as stockholders’ equity.
Other Than Temporary Impairments — Securities with gross unrealized losses at the consolidated balance sheet date are subjected to the Company’s process for identifying other-than-temporary impairments in accordance with SFAS No. 115, Accounting For Certain Investments in Debt and Equity Securities, and EITF Issue No. 99-20. The Company writes down to fair value securities that it deems to be other-then-temporarily impaired in the period the securities are deemed to be impaired. Under SFAS No. 115, the assessment of whether such impairment has occurred is based on management’s case-by-case evaluation of the underlying reasons for the decline in fair value. Management considers a wide range of factors about the security and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for recovery. The Company evaluates investments rated A and below for impairment under EITF Issue No. 99-20. When an adverse change in expected cash flows occurs and if the fair value of a security is less that its carrying value, the investment is written down to fair value. The evaluation for other than temporary impairments is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of
45
We recorded $6.6 million and $16.5 million of other-than-temporary impairment losses in the first six months of 2004 and 2003, respectively, primarily related to certain other asset-backed securities, collateralized mortgage obligations and certain structured notes held in our investment portfolio. Adverse changes in estimated cash flows in the future could result in impairment losses to the extent that the recorded value of such investments exceeds fair value.
Derivative financial instruments — Derivative financial instruments are used as part of MoneyGram’s risk management strategy to manage exposure to fluctuations in interest and foreign currency rates. MoneyGram does not enter into derivatives for speculative purposes. Derivatives are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related amendments and interpretations. The derivatives are recorded as either assets or liabilities on the balance sheet at fair value, with the change in fair value recognized in earnings or in other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. A derivative that does not qualify, or is not designated, as a hedge will be reflected at fair value, with changes in value recognized through earnings. The estimated fair value of derivative financial instruments has been determined using available market information and certain valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined may not be indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. While MoneyGram intends to continue to meet the conditions to qualify for hedge accounting treatment under SFAS No. 133, if hedges did not qualify as highly effective or if forecasted transactions did not occur, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. MoneyGram does not believe it is exposed to more than a nominal amount of credit risk in its hedging activities as the counterparties are generally well-established, well-capitalized financial institutions.
Goodwill — SFAS No. 142, Goodwill and Other Intangible Assets, requires annual impairment testing of goodwill based on the estimated fair value of MoneyGram’s reporting units. The fair value of MoneyGram’s reporting units is estimated based on discounted expected future cash flows using a weighted average cost of capital rate. Additionally, an assumed terminal value is used to project future cash flows beyond base years. The estimates and assumptions regarding expected cash flows, terminal values and the discount rate require considerable judgment and are based on historical experience, financial forecasts, and industry trends and conditions.
Pension obligations — MoneyGram has trusteed, noncontributory pension plans that cover certain employees of MoneyGram and Viad, and former employees of Viad and of sold operations of Viad. Through December 31, 2000, the principal retirement plan was structured using a traditional defined benefit formula based primarily on final average pay and years of service. Benefits earned under this formula ceased accruing at December 31, 2000, with no change to retirement benefits earned through that date. Effective January 1, 2001, benefits began accruing under a cash accumulation account formula based upon a percentage of pay plus interest. Effective January 1, 2004, benefits under the cash accumulation formula ceased accruing new benefits for service periods subsequent to December 31, 2003 with no change in benefits earned through that date. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. Certain defined pension benefits, primarily those in excess of benefit levels permitted under qualified pension plans, are unfunded. In determining the projected benefit obligation at December 31, 2003, MoneyGram assumed a discount rate of 6.25 percent and an expected return on plan assets of 8.75 percent, both of which were determined with the assistance of an external actuary. The weighted average assumptions used to determine the net periodic benefit cost for year ended December 31, 2003, was a discount rate of
46
MoneyGram’s discount rate used in determining future pension obligations is measured on November 30 and is based on rates determined by actuarial analysis and management review.
In developing the expected rate of return, MoneyGram employs a total return investment approach whereby a mix of equities and fixed income securities are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. MoneyGram’s current asset allocation consists of approximately 55 percent in large capitalization and international equities, approximately 35 percent in fixed income securities such as long-term treasury bonds, intermediate government bonds and global bonds, approximately seven percent in a real estate limited partnership interest and three percent in other securities. The investment portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified across U.S. and non-U.S. stocks. Other assets such as real estate and cash are used judiciously to enhance long-term returns while improving portfolio diversification. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements.
Additionally, historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return also takes proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed for reasonableness and appropriateness.
MoneyGram’s pension assets are primarily invested in marketable securities that have readily determinable current market values. MoneyGram’s investments are rebalanced regularly to stay within the investment guidelines. MoneyGram will continue to evaluate its pension assumptions, including its rate of return, and will adjust these factors as necessary.
Future actual pension income or expense will depend on future investment performance, changes in future rates and various other factors related to the populations participating in MoneyGram’s pension plans.
Stock-based compensation — As permitted by SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, MoneyGram uses the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock-based compensation plans. Accordingly, MoneyGram does not use the fair value method to value stock options in accordance with SFAS No. 123. See notes to consolidated financial statements for the pro forma impact of stock-based awards using the fair value method of accounting.
Recent Accounting Developments
Recent accounting pronouncements are set forth in Note 2 to the consolidated financial statements and are incorporated herein by reference.
Forward Looking Statements
The statements contained in this document regarding the business of MoneyGram International, Inc. that are not historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s
47
| • | fluctuations in interest rates that may materially adversely affect revenue derived from investment of funds received from the sale of payment instruments; | |
| • | material changes in the market value of securities we hold; | |
| • | material changes in our need for and the availability of liquid assets; | |
| • | successful management of the credit and fraud risks of retail agents, and the credit risk related to our investment portfolio; | |
| • | continued growth rates approximating recent levels for consumer money transfer transactions and other payment product markets; | |
| • | renewal of material retail agent and financial institution customer contracts, or loss of business from significant agents or customers; | |
| • | technological and competitive changes in the payment services industry; | |
| • | changes in laws, regulations or other industry practices and standards which may require significant systems redevelopment, reduce the market for or value of the company’s products or services or render products or services less profitable or obsolete; | |
| • | continued political stability in countries in which MoneyGram has material agent relationships; | |
| • | material lawsuits or investigations; | |
| • | catastrophic events that could materially adversely impact operating facilities, communication systems and technology of MoneyGram, its clearing banks or major customers, or that may have a material adverse impact on current economic conditions or levels of consumer spending; | |
| • | material breach of security of any of our systems; and | |
| • | other factors more fully discussed in MoneyGram’s filings with the Securities and Exchange Commission. |
Actual results may differ materially from historical and anticipated results. These forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
MoneyGram’s market risk exposure relates to fluctuations in interest rates and to a lesser degree, relate to fluctuations in foreign exchange rates. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates and is concentrated in our investment portfolio. In addition, we pay commissions to our financial institution customers and have costs associated with our sale of receivables program which are based on short-term variable interest rates. Certain derivative instruments are used as part of our risk management strategy. Derivatives are not used for speculative purposes. We also have exposure to changing rates related to pension and postretirement plan assumptions including the expected return on plan assets, the discount rate and the health care cost trend rate.
We are also exposed to foreign exchange risk as we have certain receivables and payables denominated in foreign currencies. We primarily utilize forward contracts to hedge our exposure to fluctuations in foreign exchange rates. Forward contracts relating to money transfer transactions generally have maturities less than thirty days and forward contracts related to the receivables and payables are generally less than twelve months. The forward contracts are recorded on the Consolidated Balance Sheets, and the effect of changes in foreign exchange rates on the foreign-denominated receivables and payables, net of the effect of the related forward contracts, is not significant.
48
We are also exposed to short-term interest risk on our bank credit facilities. We currently do not use derivative financial instruments to hedge cash flows for these obligations.
Fair Value Sensitivity to Interest Rate Changes. Stockholders’ equity can be affected adversely by changing interest rates, as after-tax changes in the fair value of securities classified as available-for-sale and in the fair value of derivative financial instruments are included as a component of stockholders’ equity. The fair value of derivative financial instruments generally increases when the market value of fixed rate, long-term debt investments decline and vice versa. However, an increase or decrease in stockholders’ equity related to changes in the fair value of securities classified as available-for-sale, may not be offset, in whole or in part, by the decrease or increase in stockholders’ equity related to changes in the fair value of derivative financial instruments. A ten percent proportionate increase in interest rates would result in an estimated decrease in the fair value of securities classified as available-for-sale of approximately $52.5 million (reflected as an after-tax decrease in accumulated other comprehensive income of approximately $32.0 million) and an estimated increase in the fair value of derivative financial instruments of approximately $16.9 million (reflected as an after-tax increase in accumulated other comprehensive income of approximately $10.3 million) at June 30, 2004. A ten percent proportionate decrease in interest rates would result in an estimated increase in the fair value of securities classified as available-for-sale of approximately $42.8 million (reflected as an after-tax increase in accumulated other comprehensive income of approximately $26.1 million) and an estimated decrease in the fair value of derivative financial instruments of approximately $17.0 million (reflected as an after-tax decrease in accumulated other comprehensive income of approximately $10.4 million) at June 30, 2004. These amounts are estimated based on a certain set of assumptions about interest rates and portfolio balance growth and are not necessarily indicative of actual current period factors.
Earnings Sensitivity to Interest Rate Changes. Based on a hypothetical ten percent proportionate increase in interest rates from the average level of interest rates during the last twelve months, and taking into consideration expected investment positions, commissions paid to selling agents, growth in new business, effects of the swap agreements and expected borrowing level of variable-rate debt, the increase in pre-tax income would be approximately $5.0 million. A hypothetical ten percent proportionate decrease in interest rates, based on the same set of assumptions, would result in a decrease in pre-tax income of approximately $7.9 million. These amounts are estimated based on a certain set of assumptions about interest rates and portfolio balance growth and do not represent expected results.
| Item 4. | Controls and Procedures |
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2004, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2004. During the quarter ended June 30, 2004, there were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
49
PART II. OTHER INFORMATION
| Item 6. | Exhibits and Reports on Form 8-K |
(a)
Exhibits
Exhibit
Number
Description
*2.1
Separation and Distribution Agreement, dated as
of June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc., MGI Merger Sub, Inc. and Travelers Express
Company, Inc.
*3.1
Amended and Restated Certificate of Incorporation
*3.2
Bylaws of MoneyGram International, Inc.
4.1
Form of Specimen Certificate for MoneyGram Common
Stock (Incorporated by reference from Exhibit 4.1 to
Amendment No. 4 to Registrant’s Form 10)
*4.2
Rights Agreement, dated as of June 30, 2004,
between MoneyGram International, Inc. and Wells Fargo Bank, N.A.
as Rights Agent
*4.3
Certificate of Designations, Preferences and
Rights of Series A Junior Participating Preferred Stock of
MoneyGram International, Inc.
*10.1
Employee Benefits Agreement, dated as of
June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc. and Travelers Express Company, Inc.
*10.2
Tax Sharing Agreement, dated as of June 30,
2004, by and between Viad Corp and MoneyGram International, Inc.
*10.3
Interim Services Agreement, dated as of
June 30, 2004, between Viad Corp and MoneyGram
International, Inc.
*†10.4
MoneyGram International, Inc. 2004 Omnibus
Incentive Plan
†10.5
Form of Indemnification Agreement between
MoneyGram International, Inc. and Directors of MoneyGram
International, Inc. (Incorporated by reference from
Exhibit 10.5 to Amendment No. 4 to Registrant’s
Form 10)
*†10.6
MoneyGram International, Inc. Management
Incentive Plan, dated June 30, 2004, pursuant to the 2004
MoneyGram International, Inc. Omnibus Incentive Plan
*†10.7
MoneyGram International, Inc. Deferred
Compensation Plan, as stated July 1, 2004
*†10.8
MoneyGram International, Inc. Executive Severance
Plan (Tier I)
*†10.9
MoneyGram International, Inc. Executive Severance
Plan (Tier II)
*†10.10
MoneyGram International, Inc. Supplemental 401(k)
Plan
†10.11
Travelers Express Company, Inc. Supplemental
Pension Plan (Incorporated by reference from Exhibit 10.11
to Amendment No. 3 to Registrant’s Form 10)
*†10.12
Deferred Compensation Plan for Directors of
MoneyGram International, Inc.
*†10.13
Description of MoneyGram International, Inc.
Director’s Charitable Matching Program
†10.14
Director’s Charitable Award Program
(Incorporated by reference from Exhibit 10.14 to Amendment
No. 3 to Registrant’s Form 10)
10.15
$350,00,000 Credit Agreement, dated as of
June 29, 2004, among MoneyGram International, Inc., the
Lenders named therein, and Bank One, NA, as Agent (Incorporated
by reference from Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed June 30, 2004)
*10.16
MoneyGram Employee Equity Trust, effective as of
June 30, 2004
*31.1
Section 302 Certification of Chief Executive
Officer
*31.2
Section 302 Certification of Chief Financial
Officer
50
Exhibit
Number
Description
*32.1
Section 906 Certification of Chief Executive
Officer
*32.2
Section 906 Certification of Chief Financial
Officer
| * | Filed herewith. |
| † | Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit to this report. |
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed with or furnished to the SEC during the quarterly period covered by this report:
| • | Current Report on Form 8-K dated July 29, 2004 furnishing the financial results for the Company’s 2004 second quarter ended June 30, 2004. | |
| • | Current Report on Form 8-K filed July 1, 2004 announcing the completion of the spin-off of the Company from Viad Corp. | |
| • | Current Report on Form 8-K filed June 30, 2004 announcing that the Company entered into a $350 million credit facility. | |
| • | Current Report on Form 8-K dated June 17, 2004 furnishing the Company’s spin-off investor presentation materials. |
51
SIGNATURES
Pursuant to the requirements 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.
| MONEYGRAM INTERNATIONAL, INC. | |
| (Registrant) |
| By: | /s/ JEAN C. BENSON |
|
|
|
| Jean C. Benson | |
| Vice President — Controller | |
| (Chief Accounting Officer | |
| and Authorized Officer) |
August 13, 2004
52
EXHIBIT INDEX
53
Exhibit
Number
Description
*2.1
Separation and Distribution Agreement, dated as
of June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc., MGI Merger Sub, Inc. and Travelers Express
Company, Inc.
*3.1
Amended and Restated Certificate of Incorporation
*3.2
Bylaws of MoneyGram International, Inc.
4.1
Form of Specimen Certificate for MoneyGram Common
Stock (Incorporated by reference from Exhibit 4.1 to
Amendment No. 4 to Registrant’s Form 10)
*4.2
Rights Agreement, dated as of June 30, 2004,
between MoneyGram International, Inc. and Wells Fargo Bank, N.A.
as Rights Agent
*4.3
Certificate of Designations, Preferences and
Rights of Series A Junior Participating Preferred Stock of
MoneyGram International, Inc.
*10.1
Employee Benefits Agreement, dated as of
June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc. and Travelers Express Company, Inc.
*10.2
Tax Sharing Agreement, dated as of June 30,
2004, by and between Viad Corp and MoneyGram International, Inc.
*10.3
Interim Services Agreement, dated as of
June 30, 2004, between Viad Corp and MoneyGram
International, Inc.
*†10.4
MoneyGram International, Inc. 2004 Omnibus
Incentive Plan
†10.5
Form of Indemnification Agreement between
MoneyGram International, Inc. and Directors of MoneyGram
International, Inc. (Incorporated by reference from
Exhibit 10.5 to Amendment No. 4 to Registrant’s
Form 10)
*†10.6
MoneyGram International, Inc. Management
Incentive Plan, dated June 30, 2004, pursuant to the 2004
MoneyGram International, Inc. Omnibus Incentive Plan
*†10.7
MoneyGram International, Inc. Deferred
Compensation Plan, as stated July 1, 2004
*†10.8
MoneyGram International, Inc. Executive Severance
Plan (Tier I)
*†10.9
MoneyGram International, Inc. Executive Severance
Plan (Tier II)
*†10.10
MoneyGram International, Inc. Supplemental 401(k)
Plan
†10.11
Travelers Express Company, Inc. Supplemental
Pension Plan (Incorporated by reference from Exhibit 10.11
to Amendment No. 3 to Registrant’s Form 10)
*†10.12
Deferred Compensation Plan for Directors of
MoneyGram International, Inc.
*†10.13
Description of MoneyGram International, Inc.
Director’s Charitable Matching Program
†10.14
Director’s Charitable Award Program
(Incorporated by reference from Exhibit 10.14 to Amendment
No. 3 to Registrant’s Form 10)
10.15
$350,00,000 Credit Agreement, dated as of
June 29, 2004, among MoneyGram International, Inc., the
Lenders named therein, and Bank One, NA, as Agent (Incorporated
by reference from Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed June 30, 2004)
*10.16
MoneyGram Employee Equity Trust, effective as of
June 30, 2004
*31.1
Section 302 Certification of Chief Executive
Officer
*31.2
Section 302 Certification of Chief Financial
Officer
Table of Contents
Exhibit
Number
Description
*32.1
Section 906 Certification of Chief Executive
Officer
*32.2
Section 906 Certification of Chief Financial
Officer
*
Filed herewith.
†
Denotes management contract or compensatory plan
or arrangement required to be filed as an exhibit to this report.
54
Exhibit 2.1
SEPARATION AND DISTRIBUTION AGREEMENT
BY AND AMONG
VIAD CORP
MONEYGRAM INTERNATIONAL, INC.
MGI MERGER SUB, INC.
AND
TRAVELERS EXPRESS COMPANY, INC.
DATED AS OF
JUNE 30, 2004
TABLE OF CONTENTS
|
ARTICLE I DEFINITIONS
|
1 | |||
|
1.01 General
|
1 | |||
|
1.02 References to Time
|
9 | |||
|
ARTICLE II THE MERGER
|
9 | |||
|
2.01 The Merger
|
9 | |||
|
2.02 Effective Time
|
9 | |||
|
2.03 Effect on Stock
|
9 | |||
|
2.04 Surviving Corporation Articles of Incorporation; By-laws
|
10 | |||
|
2.05 Surviving Corporation Directors; Officers
|
10 | |||
|
2.06 Cash Accounts
|
10 | |||
|
2.07 MoneyGram Certificate of Incorporation; Bylaws; Rights Plan
|
10 | |||
|
2.08 Board of Directors
|
10 | |||
|
ARTICLE III ACTIONS PRIOR TO THE EFFECTIVE TIME AND THE DISTRIBUTION
|
11 | |||
|
3.01 Redemption of Viad Preferred Stock
|
11 | |||
|
3.02 Debt Tender Offers
|
11 | |||
|
3.03 The Dividend
|
12 | |||
|
3.04 Recapitalization of MoneyGram
|
13 | |||
|
3.05 Other Agreements
|
13 | |||
|
3.06 Credit Agreements
|
13 | |||
|
ARTICLE IV THE DISTRIBUTION
|
14 | |||
|
4.01 Actions Prior to the Distribution
|
14 | |||
|
4.02 The Distribution
|
15 | |||
|
4.03 Conditions to Distribution
|
15 | |||
|
4.04 Conditions for the Benefit of Viad
|
16 | |||
|
ARTICLE V SURVIVAL, RELEASE, ASSUMPTION AND INDEMNIFICATION
|
17 | |||
|
5.01 Survival of Agreements
|
17 | |||
|
5.02 Release of Pre-Merger Claims
|
17 | |||
|
5.03 Taxes; Plan Audits
|
19 | |||
|
5.04 Assumption and Indemnification
|
19 | |||
|
5.05 Procedure for Indemnification
|
21 | |||
|
5.06 Remedies Cumulative
|
22 |
-i-
|
ARTICLE VI ACCESS TO INFORMATION
|
23 | |||
|
6.01 Provision of Corporate Records
|
23 | |||
|
6.02 Access to Information
|
23 | |||
|
6.03 Production of Witnesses
|
23 | |||
|
6.04 Retention of Records
|
23 | |||
|
6.05 Confidentiality
|
24 | |||
|
6.06 Tax Matters
|
24 | |||
|
ARTICLE VII NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
|
24 | |||
|
7.01 No Representations or Warranties; Exceptions
|
24 | |||
|
ARTICLE VIII INSURANCE
|
24 | |||
|
8.01 Insurance Coverage
|
24 | |||
|
8.02 Post-Merger Claims
|
25 | |||
|
8.03 Administration and Reserves
|
25 | |||
|
8.04 Payment or Refund of Premiums, Retentions and Losses with Respect
to MoneyGram Liabilities
|
25 | |||
|
8.05 Allocation of Insurance Proceeds; Cooperation
|
26 | |||
|
8.06 Reimbursement of Expenses
|
26 | |||
|
8.07 Insurer Insolvency
|
26 | |||
|
8.08 Assumption of Management of Liabilities
|
27 | |||
|
8.09 No Reduction of Coverage
|
27 | |||
|
8.10 Future Insurance Coverage
|
27 | |||
|
8.11 Assistance, Waiver of Conflict and Shared Defense
|
27 | |||
|
ARTICLE IX FURTHER ASSURANCES AND ADDITIONAL COVENANTS
|
27 | |||
|
9.01 Further Assurances
|
27 | |||
|
9.02 Publicity
|
28 | |||
|
9.03 Certain Business Matters
|
29 | |||
|
ARTICLE X TERMINATION
|
29 | |||
|
10.01 Termination
|
29 | |||
|
10.02 Effect of Termination
|
29 | |||
|
ARTICLE XI MISCELLANEOUS
|
29 | |||
|
11.01 Complete Agreement
|
29 | |||
|
11.02 Expenses
|
29 | |||
|
11.03 Governing Law
|
30 | |||
|
11.04 Notices
|
30 | |||
|
11.05 Amendment and Modification
|
30 |
-ii-
|
11.06 Successors and Assigns; No Third-Party Beneficiaries
|
30 | |||
|
11.07 Counterparts
|
31 | |||
|
11.08 Interpretation
|
31 | |||
|
11.09 Legal Enforceability
|
31 | |||
|
11.10 References; Construction
|
31 | |||
|
11.11 Corporate Power
|
31 | |||
|
11.12 Waivers of Default
|
32 |
SCHEDULES
|
Schedule 1.01(a)
|
MoneyGram Insurance Policies | |
|
Schedule 1.01(b)
|
MoneyGram Subsidiaries | |
|
Schedule 1.01(c)
|
Certain Insurance Policies Relating to Viad and MoneyGram | |
|
Schedule 2.08
|
Directors of Viad and MoneyGram | |
|
Schedule 5.04(b)(iii)
|
Certain Litigations | |
|
Schedule 8.04
|
Certain MoneyGram Insurance Policies |
EXHIBITS
|
Exhibit A
|
Form of Restated Certificate of Incorporation of MoneyGram | |
|
Exhibit B
|
Form of Amended and Restated Bylaws of MoneyGram | |
|
Exhibit C
|
Rights Agreement of MoneyGram |
-iii-
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT, dated as of June 30, 2004, is by and among Viad Corp, a Delaware corporation (“ Viad ”), Travelers Express Company, Inc., a Minnesota corporation and direct wholly-owned subsidiary of Viad (“ TECI ”), MoneyGram International, Inc., a Delaware corporation and direct wholly-owned subsidiary of Viad (“ MoneyGram ”), and MGI Merger Sub, Inc., a Minnesota corporation and a direct wholly-owned subsidiary of MoneyGram (“ Merger Sub ”).
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Viad, TECI, MoneyGram and Merger Sub have determined that it is appropriate and desirable: (1) for TECI to pay to Viad the Dividend; (2) for Merger Sub to merge with and into TECI, with TECI as the surviving corporation, and as a result of that Merger, all shares of capital stock of TECI outstanding prior to the Merger being cancelled and TECI becoming a direct wholly-owned subsidiary of MoneyGram; (3) in connection with the Merger for MoneyGram to make a cash payment to Viad of $150 million; and (4) following the Merger, for Viad to distribute to the holders of the issued and outstanding shares of Viad Common Stock at the close of business on the Record Date all of the issued and outstanding shares of MoneyGram Common Stock;
WHEREAS, the Merger is intended to be treated as a contribution of the stock of TECI to MoneyGram for federal income tax purposes;
WHEREAS, the Merger and the Distribution are intended to qualify as a tax-free reorganization and distribution under Sections 368(a)(1)(D) and 355 of the Code; and
WHEREAS, the parties have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Merger and the Distribution and to set forth other agreements that will govern certain other matters prior to or following such transactions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound thereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 General. As used herein, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
Acceptable Credit Rating : A long-term credit rating by Standard & Poor’s Ratings Group that is at least BBB- or by Moody’s Investors Service that is at least Baa3; provided , however , that if MoneyGram applies for and receives long-term credit ratings from both Standard & Poor’s Ratings Group and Moody’s Investors Service, such ratings shall be at least BBB- from Standard & Poor’s Ratings Group and Baa3 from Moody’s Investors Service.
Action : any claim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.
Affiliate : with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided , however , that for purposes hereof, no member of either Group shall be deemed to be an Affiliate of any member of the other Group.
Agent : Viad, in the capacity as distribution agent, or at Viad’s election, another distribution agent to be appointed by Viad, in each case, to distribute the shares of MoneyGram Common Stock to the holders of shares of Viad Common Stock pursuant to the Distribution.
Agreement : this Separation and Distribution Agreement, including all of the Schedules and Exhibits hereto.
Articles of Merger : the articles of merger to be filed with the Minnesota Secretary of State as contemplated by the MBCA in connection with the Merger.
Assets : any and all assets and properties of any kind whatsoever, whether tangible or intangible, real, personal or mixed and any and all rights, contracts and claims, including the following: (1) cash, notes and accounts receivable (whether current or non-current); (2) certificates of deposit, banker’s acceptances, stock, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, reorganization certificates or subscriptions, transferable shares, investment contracts, voting-trust certificates, fractional undivided interests in oil, gas or other mineral rights, puts, calls, straddles, options and other securities of any kind; (3) trade secrets, confidential information, U.S. and foreign registered and unregistered trademarks, service marks, service names, trade styles and trade names, product bar codes and associated goodwill; U.S. and foreign patents; U.S. and foreign statutory, common law and registered copyrights; applications for any of the foregoing, rights to use the foregoing and other rights in, to and under the foregoing; (4) rights under leases, contracts, licenses, software license and development agreements, permits, distribution arrangements, sales and purchase agreements, other agreements and business arrangements; (5) real estate and buildings and other improvements thereon; (6) leasehold improvements, fixtures, trade fixtures, machinery, equipment (including transportation and office equipment), tools, dies and furniture; (7) office supplies, production supplies, spare parts, other miscellaneous supplies and other tangible property of any kind; (8) raw materials, work-in-process, finished goods, consigned goods and other inventories; (9) prepayments or prepaid expenses; (10) claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind; (11) the right to receive mail, payments on accounts receivable and other communications; (12) lists of advertisers, records pertaining to advertisers and accounts, personnel records, lists and records pertaining to suppliers and agents, and books, ledgers, files and business records of every kind; (13) advertising materials and other printed or written materials; (14) goodwill as a going concern and other intangible properties; (15) employee contracts, including any rights thereunder to restrict an employee from competing in certain respects and all rights under employee patent and trade secret agreements; and (16) licenses and authorizations issued by any Governmental Authority.
-2-
Business Day : any day other than a Saturday, a Sunday or a day on which banking institutions located in the States of Arizona, Minnesota, New York or Delaware are authorized or obligated by law or executive order to close.
Claims Administration : the processing of claims made under the Insurance Policies, including the reporting of claims to the insurance carrier, management and defense of claims and provision for appropriate releases upon settlement of claims.
Code : the Internal Revenue Code of 1986, as amended.
Commission : the Securities and Exchange Commission.
Distribution : the distribution by Viad pursuant to Article IV hereof of all of the issued and outstanding shares of MoneyGram Common Stock owned by Viad to holders of shares of Viad Common Stock.
Distribution Date : as defined in Section 4.03 hereof.
Distribution Registration Statement : the registration statement on Form 10 to effect the registration under the Exchange Act of the MoneyGram Common Stock.
Dividend : as defined in Section 3.03(a) hereof.
Effective Time : as defined in Section 2.02 hereof.
Employee Benefits Agreement : the Employee Benefits Agreement, dated as of the date hereof, by and among Viad, MoneyGram and TECI.
Estimated Net Income : an amount equal to (1) the consolidated Net Income of TECI for the Interim Period, minus (2) the sum of all dividends paid by TECI to Viad during the Interim Period in respect of income of TECI earned in the Interim Period other than a special dividend of $7.25 million paid by TECI in respect of certain deferred employee compensation (it being understood and agreed that the payment made by MoneyGram under Section 2.03(a) hereof shall not be included in this clause (2)), which amount shall be estimated in good faith by Viad, based on discussions with the financial staff of Viad and TECI prior to the Effective Time.
Exchange Act : the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
Final Net Income : an amount equal to (1) the consolidated Net Income of TECI for the Interim Period, minus (2) the sum of all dividends paid by TECI to Viad during the Interim Period in respect of income of TECI earned in the Interim Period other than a special dividend of $7.25 million paid by TECI in respect of certain deferred employee compensation (it being understood and agreed that the payment made by MoneyGram under Section 2.03(a) hereof shall not be included in this clause (2)), as agreed to (or deemed to be agreed to) by Viad and MoneyGram in accordance with the terms of Section 3.03 hereof or resulting from the determinations made by the Neutral Auditors in accordance with Section 3.03 hereof.
-3-
Foreign Exchange Rate : with respect to any currency other than United States dollars, as of any date, the average of the opening bid and asked rates on such date at which such currency may be exchanged for United States dollars as quoted by Citibank, N.A., except that, with respect to any Indemnifiable Loss covered by insurance, the Foreign Exchange Rate for such currency shall be determined as set forth in Section 5.04(e)(ii) hereof.
Former MoneyGram Businesses : all of the businesses and operations (1) heretofore but not currently conducted by any member of the MoneyGram Group or (2) currently or heretofore conducted by any former Subsidiary of any such member.
Former Viad Businesses : all of the businesses and operations (1) heretofore but not currently conducted by any member of the Viad Group or (2) currently or heretofore conducted by any former Subsidiary of any such member, other than any Former MoneyGram Business.
Governmental Authority : any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.
Group : either the MoneyGram Group or the Viad Group, as the context requires.
Indemnifiable Losses : all losses, Liabilities, damages, claims, demands, judgments or settlements of any nature or kind whatsoever, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all reasonable costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto, suffered by an Indemnitee.
Indemnifying Party : a Person that is obligated hereunder to provide indemnification.
Indemnitee : a Person that may seek indemnification hereunder.
Indemnity Payment : an amount that an Indemnifying Party is required to pay to an Indemnitee pursuant to Article V hereof.
Information : all records, books, contracts, instruments, computer data and other data and information, whether written or unwritten.
Information Statement : the Information Statement to be sent to holders of shares of Viad Common Stock in connection with the Distribution.
Insurance Administration : with respect to each Insurance Policy, (1) the accounting for premiums (including retrospectively rated premiums), defense costs, indemnity payments, deductibles and retentions as appropriate under the terms and conditions of each of the Insurance Policies, (2) the reporting to excess insurance carriers of any losses or claims that may cause the per-occurrence or aggregate limits of any Insurance Policy to be exceeded and (3) the distribution of Insurance Proceeds as contemplated hereby.
Insurance Policy : insurance policies and insurance contracts of any kind that are owned or maintained by any member of either Group as the insured interest, including primary and excess policies, comprehensive general liability policies, crime, employee dishonesty,
-4-
employment practices liability, property and casualty, automobile, aircraft and workers’ compensation insurance policies and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder, but not including any policies that fund Plans.
Insurance Proceeds : those monies received by an insured from an insurance carrier or paid by an insurance carrier on behalf of the insured (including defense costs of any third party claim), in either case net of any applicable premium adjustment, retrospectively rated premium, deductible, retention, cost or reserve paid or held by or for the benefit of such insured.
Insured Claims : those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Insurance Policies, whether or not subject to deductibles, coinsurance, uncollectability or retrospectively rated premium adjustments, but only to the extent that such Liabilities are within applicable Insurance Policy limits, including aggregates.
Interim Period : the period beginning on January 1, 2004 and ending on the date on which the Effective Time is to occur.
Interim Period Financial Statements : as defined in Section 3.03(b) hereof.
Interim Services Agreement : the Interim Services Agreement, dated as of the date hereof, by and between Viad and MoneyGram.
IRS : the Internal Revenue Service.
Liabilities : all debts, liabilities and obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and whether or not the same would properly be reflected on a balance sheet prepared in accordance with U.S. generally accepted accounting principles, including all costs and expenses relating thereto.
Material Adverse Effect : a material adverse effect on (1) the business, assets, liabilities, financial condition, results of operations or prospects of Viad or TECI, or (2) the ability of Viad, TECI or MoneyGram to perform its obligations hereunder.
MBCA : the Minnesota Business Corporation Act.
Medium-Term Note Offer : as defined in Section 3.02 hereof.
Medium-Term Notes : the outstanding Medium-Term Notes, Series A, due 2004, 2005 and 2009, issued by Viad (as successor to The Dial Corp) on October 12, 1993, each governed by the MTN Indenture.
Merger : the merger of Merger Sub with and into TECI.
Merger Sub : as defined in the Preamble hereto.
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MoneyGram : as defined in the Preamble hereto.
MoneyGram Assets : (1) all of the outstanding shares of all classes of capital stock of the MoneyGram Subsidiaries; (2) all of the Assets of such Subsidiaries; (3) all of the Assets held by any member of either Group immediately prior to the Effective Time, that are used or held primarily for use in or necessary to the operation of the MoneyGram Business, including those Assets reflected on MoneyGram’s audited balance sheet as of December 31, 2003; and (4) the claims under and any proceeds from the lawsuit captioned Game Financial Corp. v. Global Cash Access, LLC (Minn. Dist. Ct., File No. CT-03-007098 ).
MoneyGram Business : all of the businesses conducted immediately prior to the Distribution Date by any member of either Group and reported by Viad in the “Payment Services” segment in the footnotes to the Viad consolidated financial statements (or that would have been so reported had it been conducted on December 31, 2003) in Viad’s Annual Report on Form 10-K for the year ended December 31, 2003.
MoneyGram Claim : any claim against any MoneyGram Individual or member of the MoneyGram Group with respect to any injury, loss, Liability, damage or expense that (1) is or was incurred or asserted to have been incurred prior to the Distribution Date in, or in connection with, the conduct of the Viad Assets, the MoneyGram Assets, the Viad Business, the Former Viad Businesses, the MoneyGram Business or the Former MoneyGram Businesses and (2) arose or may have arisen out of one or more occurrences or events that are or may be insured or insurable under one or more of the Viad Policies.
MoneyGram Common Stock : the common stock, $0.01 par value per share, of MoneyGram.
MoneyGram Group : MoneyGram and the MoneyGram Subsidiaries.
MoneyGram Individual : as defined in the Employee Benefits Agreement.
MoneyGram Liabilities : subject to the provisions of the Other Agreements, (1) all of the Liabilities of any member of either Group that relate directly to the MoneyGram Assets or the MoneyGram Business as conducted immediately prior to the Effective Time, or that relate directly to any Former MoneyGram Business, in each case whether incurred or arising prior to, on or after the Effective Time and (2) all Liabilities of any member of the MoneyGram Group under or pursuant to any Other Agreement.
MoneyGram New Credit Agreement : The credit agreement to be entered into by and among MoneyGram, as borrower, and an agent or co-agents selected by MoneyGram pursuant to which MoneyGram may borrow funds, in form and substance reasonably acceptable to the Board of Directors of MoneyGram, but that, in any event, shall permit sufficient borrowings such that MoneyGram may comply with its obligations to be performed on or prior to the Distribution Date hereunder.
MoneyGram Policies : all Insurance Policies, current and past, that relate to the MoneyGram Business and do not relate to the Viad Business, including the Insurance Policies listed on Schedule 1.01(a) hereto.
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MoneyGram Subsidiaries : all of the corporations, limited liability companies, business trusts and other Persons listed on Schedule 1.01(b) hereto.
MoneyGram Support Agreements : any obligation or agreement of the Viad Group under any guarantee, letter of credit, letter of comfort or working capital maintenance agreement obtained prior to the Distribution Date for the benefit of the MoneyGram Business or any member of the MoneyGram Group.
MTN Indenture : the indenture, dated as of April 1, 1993, between Viad (as successor to The Dial Corp) and The Chase Manhattan Bank, N.A., as trustee.
Net Income : net income determined in accordance with U.S. generally accepted accounting principles, as applied in accordance with the past practice of TECI and Viad, without taking into account any amounts expensed by MoneyGram under Section 11.02 hereof or any proceeds received by MoneyGram from the lawsuit captioned Game Financial Corp. v. Global Cash Access, LLC (Minn. Dist. Ct., File No. CT-03-007098 ).
Neutral Auditors : as defined in Section 3.03(e) hereof.
NYSE : The New York Stock Exchange, Inc.
Offers : as defined in Section 3.02 hereof.
Other Agreements : the Interim Services Agreement, the Employee Benefits Agreement and the Tax Sharing Agreement.
Person : an individual, a general or limited partnership, a joint venture, a corporation, a trust, an unincorporated organization, a limited liability company, any other entity and any Governmental Authority.
Plan : as defined in the Employee Benefits Agreement.
Record Date : the close of business on the date to be determined by the Board of Directors of Viad, or the Executive Committee thereof, as the record date for determining holders of shares of Viad Common Stock entitled to receive shares of MoneyGram Common Stock in the Distribution.
Representative : with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.
Resolution Period : as defined in Section 3.03(d) hereof.
Service Agreement : any third-party administrator or claims handling agreement of any kind or nature to which any member of either Group is directly or indirectly a party, in effect as of the date hereof, related to the handling of MoneyGram Claims.
Subordinated Debt Offer : as defined in Section 3.02(a) hereof.
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Subordinated Debentures : the outstanding 10 1/2% Subordinated Debentures due May 15, 2006, issued by Viad (as successor to The Greyhound Corporation) on February 21, 1986.
Subordinated Debt Indenture : the indenture, dated as of November 15, 1985, between Viad (as successor to The Greyhound Corporation) and Continental Illinois National Bank & Trust Company of Chicago as trustee.
Subsidiary : with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, stock or other equity interests representing in excess of 50% of the votes entitled to be cast in the election of members to the board of directors or similar governing body; provided , however , that for purposes hereof, (1) the MoneyGram Subsidiaries shall be deemed to be Subsidiaries of MoneyGram and (2) neither MoneyGram nor any of the MoneyGram Subsidiaries shall be deemed to be Subsidiaries of Viad or any of Viad’s Subsidiaries.
Surviving Corporation : as defined in Section 2.01 hereof.
Tax : as defined in the Tax Sharing Agreement.
Tax Sharing Agreement : the Tax Sharing Agreement, dated as of the date hereof, by and between Viad and MoneyGram.
TECI : as defined in the Preamble hereto.
Third-Party Claim : any claim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal asserted by a Person that is not a party hereto.
Transfer Tax : all transfer, documentary, sales, use, registration, value-added and other similar Taxes (including interest, penalties and additions to such Taxes).
Viad : as defined in the Preamble hereto.
Viad Assets : any and all Assets (other than the MoneyGram Assets) held immediately prior to the Effective Time by any member of either Group.
Viad Business : all of the businesses, other than the MoneyGram Business, conducted immediately prior to the Effective Time by any member of either Group.
Viad Common Stock : the common stock, $1.50 par value per share, of Viad.
Viad Group : Viad and its Affiliates, other than members of the MoneyGram Group.
Viad Individual : as defined in the Employee Benefits Agreement.
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Viad Liabilities : subject to the provisions of the Other Agreements, (1) all of the Liabilities, other than the MoneyGram Liabilities, of any member of either Group; and (2) all Liabilities of any member of the Viad Group under or pursuant to any Other Agreement.
Viad New Credit Agreement : The credit agreement to be entered into by and among Viad, as borrower, and an agent or co-agents selected by Viad pursuant to which Viad may borrow funds, in form and substance reasonably acceptable to the Board of Directors of Viad.
Viad Plan : as defined in the Employee Benefits Agreement.
Viad Policies : all Insurance Policies, current and past, which relate to both the Viad Business and the MoneyGram Business, including the Insurance Policies listed on Schedule 1.01(c) hereto.
Viad Preferred Stock : The $4.75 Preferred Stock, without par value but with a liquidation preference of $100 per share, of Viad.
Section 1.02 References to Time. All references herein to times of the day shall be to New York City time.
ARTICLE II
THE MERGER
Section 2.01 The Merger. At the Effective Time and on the terms and subject to the conditions set forth herein and in the MBCA, Merger Sub shall be merged with and into TECI, the separate corporate existence of Merger Sub shall cease and TECI shall continue as the surviving corporation (the “ Surviving Corporation ”). At the Effective Time, the effect of the Merger shall be as provided herein and in the Articles of Merger and the applicable provisions of the MBCA.
Section 2.02 Effective Time. No later than the Distribution Date, the parties shall cause the Merger to be consummated by filing the Articles of Merger as contemplated by the MBCA, together with any required certificates, with the Secretary of State of the State of Minnesota, in such forms as required by, and executed in accordance with, the relevant provisions of the MBCA. The Merger shall be effective at the time of the later to occur of the filing of the Articles of Merger and such related certificates and such later time specified in the Articles of Merger (the “ Effective Time ”).
Section 2.03 Effect on Stock. At the Effective Time, as a result of the Merger and without any action on the part of TECI and Merger Sub, or any holder of the capital stock thereof:
(a) Each share of capital stock of TECI issued and outstanding immediately prior to the Effective Time shall cease to be outstanding, shall be canceled and retired, and in consideration therefor, MoneyGram shall make an aggregate cash payment to Viad in the amount of $150 million.
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(b) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall constitute one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
Section 2.04 Surviving Corporation Articles of Incorporation; By-laws.
(a) The articles of incorporation of TECI as in effect immediately prior to the Effective Time shall be the articles of incorporation of the Surviving Corporation until thereafter amended as provided by applicable law and such articles of incorporation.
(b) The bylaws of TECI as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended as provided by applicable law.
Section 2.05 Surviving Corporation Directors; Officers.
(a) The directors of TECI immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or retirement in accordance with the articles of incorporation and bylaws of the Surviving Corporation.
(b) The officers of TECI immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or retirement in accordance with the articles of incorporation and bylaws of the Surviving Corporation.
Section 2.06 Cash Accounts. The cash accounts at the Effective Time of Viad and each Viad Subsidiary and TECI and each MoneyGram Subsidiary shall remain the property of each respective company or Subsidiary.
Section 2.07 MoneyGram Certificate of Incorporation; Bylaws; Rights Plan. At or prior to the Effective Time, Viad and MoneyGram shall each take all actions that may be required to provide for the adoption by MoneyGram of the Restated Certificate of Incorporation of MoneyGram substantially in the form attached as Exhibit A hereto, the Amended and Restated Bylaws of MoneyGram substantially in the form attached as Exhibit B hereto, and the Rights Agreement of MoneyGram substantially in the form attached as Exhibit C hereto.
Section 2.08 Boards of Directors. Prior to the Effective Time, Viad shall take all actions that may be required to cause the Board of Directors of Viad to consist of the individuals specified on part A of Schedule 2.08 hereto, and to cause the Board of Directors MoneyGram to consist of the individuals identified on part B of Schedule 2.08 hereto.
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ARTICLE III
ACTIONS PRIOR TO THE EFFECTIVE TIME AND THE DISTRIBUTION
Section 3.01 Redemption of Viad Preferred Stock. Prior to the Effective Time, Viad shall deposit for the pro rata benefit of the holders of the shares of Viad Preferred Stock in trust with a bank or trust company in good standing, having capital, surplus and undivided profits aggregating at least $25 million according to its latest published statement of condition, the funds necessary to redeem all of the outstanding shares of Viad Preferred Stock. Prior to the Effective Time, Viad shall give such bank or trust company irrevocable authorization promptly to give notice of such redemption to the holders of the Viad Preferred Stock, and Viad shall take all other steps necessary for the Viad Preferred Stock to be deemed redeemed at or prior to the Effective Time.
Section 3.02 Debt Tender Offers.
(a) At such time prior to the Effective Time as determined by Viad in its sole and absolute discretion, Viad shall commence an offer to purchase all of the outstanding Medium-Term Notes under the MTN Indenture and all of the Subordinated Debentures (“ Medium-Term Note Offer ” and “ Subordinated Debt Offer ,” respectively, and collectively, the “ Offers ”) at an amount per note or debenture, as applicable, at least equal to the outstanding principal amount plus accrued and unpaid interest of each such note or debenture, as applicable. In connection with the Offers, Viad shall solicit consents from the holders of the Subordinated Debentures and the Medium-Term Notes to amend the Subordinated Debt Indenture and the MTN Indenture, respectively, to eliminate substantially all of the restrictive covenants from those indentures in the event all of the Subordinated Debentures or Medium-Term Notes, as the case may be, are not tendered for repurchase in the Offers. It shall be a condition to the Subordinated Debt Offer that the holders of at least a majority in outstanding principal amount of the Subordinated Debentures sufficient to satisfy the requirements specified in the Subordinated Debt Indenture for amendments to the Subordinated Debt Indenture by holders of the Subordinated Debentures consent to an amendment of the Subordinated Debt Indenture eliminating substantially all of the restrictive covenants contained in such Indenture, and tender their Subordinated Debentures to Viad, and it shall be a condition to the Medium-Term Note Offer that the holders of at least two-thirds in outstanding principal amount of the Medium-Term Notes sufficient to satisfy the requirements specified in the MTN Indenture for amendments to the MTN Indenture by holders of the Medium-Term Notes consent to an amendment of the MTN eliminating substantially all of the restrictive covenants contained in such Indenture, and tender their Medium-Term Notes to Viad. Such conditions may be waived by Viad in its sole and absolute discretion.
(b) To the extent that any notes or debentures outstanding under the MTN Indenture or the Subordinated Debt Indenture are not repurchased by Viad in the Offers, except as otherwise provided in Section 3.02(c), Viad shall be solely responsible for all obligations with respect to such notes and debentures (including all payments of principal, interest and premium thereon). All liabilities relating to the Offers shall be Viad Liabilities.
(c) In the event that the holders of at least a majority in principal amount of Subordinated Debentures do not consent to the amendment of the Subordinated Debt Indenture
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and tender their Subordinated Debentures to Viad in the Offers, MoneyGram shall take all action necessary to, effective as of the Effective Time, assume and become a co-obligor with Viad with respect to all of Viad’s obligations under the Subordinated Debt Indenture in accordance with the terms thereof (it being understood and agreed that MoneyGram shall have no similar obligation with respect to the MTN Indenture). Notwithstanding the foregoing, as between the Viad Group, on one hand, and the MoneyGram Group, on the other hand, all obligations under the Subordinated Debt Indenture are (i) Viad Liabilities, and none of such obligations shall be considered to be MoneyGram Liabilities, and (ii) the primary obligation of Viad, and, if any member of the MoneyGram Group is required to make any payment therefor, Viad shall reimburse such payment in the full amount of such payment within one Business Day of receipt of notice that such payment has been made.
Section 3.03 The Dividend.
(a) Prior to the Effective Time, TECI shall declare a dividend (the " Dividend ”) in an aggregate amount equal to the Final Net Income and shall immediately pay to Viad an amount equal to Estimated Net Income, with the final payment of the Dividend being made in accordance with Section 3.03(f) hereof.
(b) Within 90 calendar days following the Effective Time, MoneyGram shall prepare and deliver to Viad statements of income and cash flows for the Interim Period, and a balance sheet as of the date on which the Effective Time is to occur, for TECI and its subsidiaries (as such may be adjusted following resolution of disputes in accordance with this Section 3.03, the “ Interim Period Financial Statements ”). The Interim Period Financial Statements shall be prepared on a consolidated basis in accordance with U.S. generally accepted accounting principles, as applied in accordance with the past practice of TECI and Viad. Based on the Interim Period Financial Statements and this Section 3.03, MoneyGram shall prepare a certificate setting forth a calculation of (1) the consolidated Net Income of TECI for the Interim Period, minus (2) the sum of all dividends paid by TECI to Viad during the Interim Period in respect of income of TECI earned in the Interim Period other than a special dividend of $7.25 million paid by TECI in respect of certain deferred employee compensation (it being understood and agreed that the payment made by MoneyGram under Section 2.03(a) hereof shall not be included in this clause (2).
(c) During the preparation of the Interim Period Financial Statements and the calculation of Final Net Income, and the period of any dispute within the contemplation of this Section 3.03, MoneyGram shall: (1) provide Viad with reasonable access to the books, records, facilities and employees of TECI; and (2) cooperate fully with Viad, including by providing on a timely basis all information necessary or useful in the calculation of Final Net Income.
(d) After receipt of the calculation of Final Net Income, Viad shall use commercially reasonable efforts to review promptly the calculation of Final Net Income. Unless Viad delivers written notice to MoneyGram on or prior to the 90th calendar day following the delivery of certificate contemplated by Section 3.03(b) hereof (or such longer time as MoneyGram and Viad may agree) specifying in reasonable detail the amount, nature and basis of all disputed items, Viad shall be deemed to have accepted and agreed to the calculation of Final Net Income. If Viad so notifies MoneyGram of its objection to the calculation of Final Net
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Income, MoneyGram and Viad shall, within 30 calendar days following such notice (or such longer period as Viad and MoneyGram may agree) (the “ Resolution Period ”), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive.
(e) If, at the conclusion of the Resolution Period, there remain amounts in dispute, then all amounts remaining in dispute shall be submitted to an internationally recognized accounting firm that has no material relationship with Viad to be selected by Viad (the “ Neutral Auditor ”) within ten calendar days after the expiration of the Resolution Period. Each party agrees to execute, if requested by the Neutral Auditor, a reasonable engagement letter, including customary indemnities. All fees and expenses relating to the work, if any, to be performed by the Neutral Auditors shall be borne pro rata as between Viad on the one hand and MoneyGram on the other, in proportion to the final allocation of the dollar amounts remaining in dispute between Viad and MoneyGram as determined by the Neutral Auditors such that the prevailing party pays the lesser proportion of the fees and expenses. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 3.03 and the presentations by Viad and MoneyGram, and not by independent review, only those issues still in dispute. The Neutral Auditors’ determination shall be made as promptly as reasonably practical following their selection, shall be set forth in a written statement delivered to Viad and MoneyGram and shall be final, binding and conclusive.
(f) In the event that (1) Final Net Income is greater than Estimated Net Income, MoneyGram shall make an additional cash payment to Viad in an amount equal to the excess of Final Net Income over Estimated Net Income (which amount represents the declared but unpaid portion of the Dividend), or (2) Estimated Net Income is greater than Final Net Income, Viad shall make a cash payment to MoneyGram in an amount equal to the excess of Estimated Net Income over Final Net Income (which amount represents the amount paid by MoneyGram to Viad in excess of the Dividend).
Section 3.04 Recapitalization of MoneyGram. On or prior to the Distribution Date, Viad shall consummate a recapitalization of the MoneyGram Common Stock, such that the number of shares of MoneyGram Common Stock outstanding immediately prior to the effective time of the Distribution (in accordance with Section 4.02(b) hereof) shall equal the number of shares of Viad Common Stock outstanding at the close of business on the Record Date.
Section 3.05 Other Agreements. Each of Viad and MoneyGram shall enter into or to cause the appropriate members of its Group to enter into each Other Agreement on or prior to the Distribution Date. If there shall be a conflict between the provisions hereof and the provisions of any Other Agreement, the provisions of the Other Agreement shall control.
Section 3.06 Credit Agreements. Each of the parties shall use reasonable best efforts to obtain, prior to the Effective Time, all necessary consents, waivers or amendments to each bank credit agreement, debt security or other financing facility to which it or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound, or to refinance such agreement, security or facility, in each case on terms satisfactory to Viad and MoneyGram as may be necessary to permit the Merger and the Distribution to be consummated without any material breach of the terms of such agreement, security or facility. Each of Viad and
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MoneyGram shall use reasonable best efforts to enter into, prior to the Effective Time, the MoneyGram New Credit Agreement and the Viad New Credit Agreement.
ARTICLE IV
THE DISTRIBUTION
Section 4.01 Actions Prior to the Distribution. Prior to the Distribution Date, and in each case at the request of and to the extent requested by Viad:
(a) Viad and MoneyGram shall prepare the Distribution Registration Statement. MoneyGram shall file with the Commission the Distribution Registration Statement. Viad and MoneyGram shall use their reasonable best efforts to cause the Distribution Registration Statement to become effective under the Exchange Act as promptly as reasonably practicable. Viad and MoneyGram shall prepare and, to the extent required under applicable law, file with the Commission the Information Statement and any requisite no-action letters which Viad deems are necessary, proper or desirable to effect the Distribution. Viad and MoneyGram shall each use their respective reasonable best efforts to obtain all necessary approvals from the Commission with respect thereto, if any, as soon as practicable. After the Distribution Registration Statement becomes effective, Viad shall mail the Information Statement to the holders of Viad Common Stock as of the Record Date.
(b) The parties shall use their reasonable best efforts to take all such actions as may be necessary, proper or appropriate under state securities and blue sky laws in connection with the transactions contemplated hereby.
(c) Viad and MoneyGram shall prepare, and MoneyGram shall file and seek to make effective, an application for the listing on the NYSE of the MoneyGram Common Stock to be distributed in the Distribution, subject to official notice of issuance.
(d) The parties shall cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereto that are necessary or appropriate in order to effect the transactions contemplated hereby or to reflect the establishment of, or amendments to, any Plans contemplated hereby.
(e) Subject to the satisfaction or waiver of the conditions set forth in Section 4.03 hereof, the Board of Directors of Viad, or the Executive Committee thereof, if so authorized by the Board of Directors, shall establish the Record Date and any appropriate procedures in connection with the Distribution.
(f) Except as otherwise contemplated by the Other Agreements, each of Viad and MoneyGram shall use its reasonable best efforts to settle all intercompany receivables, payables, loans or advances between any member of the Viad Group and any member of the MoneyGram Group within 60 days after the Distribution Date. Any amounts that remain outstanding thereafter shall be resolved pursuant to the terms hereof and of the Other Agreements.
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Section 4.02 The Distribution.
(a) MoneyGram shall cooperate with Viad to accomplish the Distribution and shall, at Viad’s direction, promptly take any and all actions necessary, proper or desirable to effect the Distribution.
(b) Subject to the satisfaction of the conditions set forth in Section 4.03 hereof, on or prior to the Distribution Date, Viad shall deliver to the Agent for the benefit of holders of Viad Common Stock on the Record Date a single stock certificate, duly endorsed by Viad in blank, representing all of the outstanding shares of MoneyGram Common Stock then owned by Viad or any member of the Viad Group, and shall cause the transfer agent for the shares of Viad Common Stock to instruct the Agent to distribute on the Distribution Date the appropriate number of such shares of MoneyGram Common Stock to each such holder or designated transferee or transferees of such holder. The Distribution shall be effective at 11:59 p.m. on the Distribution Date.
(c) Each holder of Viad Common Stock on the Record Date (or such holder’s designated transferee or transferees) shall be entitled to receive in the Distribution a number of shares of MoneyGram Common Stock equal to the number of shares of Viad Common Stock held by such holder on the Record Date.
Section 4.03 Conditions to Distribution. Viad shall have the sole and absolute discretion to determine the date of consummation of the Distribution; and such date as so determined by Viad in accordance with this Article IV is referred to herein as the “ Distribution Date .” Viad’s intention to consummate the Distribution is subject to the satisfaction or waiver of the conditions set forth below, and Viad shall not complete the Distribution unless all such conditions are satisfied (or waived by Viad in its sole and absolute discretion).
(a) The MoneyGram Common Stock to be distributed in the Distribution shall have been approved for listing on the NYSE, subject to official notice of issuance;
(b) The Distribution Registration Statement shall have become effective, and no stop order with respect thereto shall be in effect;
(c) All material authorizations, consents, approvals and clearances of all Governmental Authorities required to permit the valid consummation of the Distribution shall have been obtained; and no such authorization, consent, approval or clearance shall contain any conditions that would have a Material Adverse Effect; and all statutory requirements for such valid consummation shall have been fulfilled;
(d) The consummation of the Distribution will not violate, conflict with, result in a breach of any provision under, constitute a default (or an event that, with or without notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate or result in a right of acceleration of the performance required by, or require any approval, waiver or consent under, any material contract, indenture, preferred stock certificate of designation or Plan of any member of the Viad Group or any member of the MoneyGram Group;
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(e) There shall not have occurred any event or occurrence, or exist any state of facts, that would have a Material Adverse Effect, including, among other things, any such effect resulting from or arising in connection with any terrorist attacks or the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or the occurrence of any other similar calamity or crisis;
(f) The Board of Directors of Viad shall have declared a dividend payable to the holders of Viad Common Stock of shares of MoneyGram Common Stock and in connection with the declaration of such dividend shall have determined that the declaration and payment of such dividend is in the best interests of Viad and the holders of Viad Common Stock;
(g) Viad shall have provided the NYSE with the prior written notice of the Record Date required by Rule 10b-17 of the Exchange Act and the rules and regulations of the NYSE;
(h) No preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a Governmental Authority and no statute, rule, regulation or executive order promulgated or enacted by any Governmental Authority, shall be in effect preventing the consummation of the Distribution;
(i) The Distribution shall be payable in accordance with applicable law;
(j) (1) Viad shall have received the rulings from the IRS requested in the documents submitted to the IRS by Viad relating to the treatment of the Merger, the Distribution and related transactions, such rulings shall be satisfactory to Viad in its sole and absolute discretion, and (2) no event or circumstance shall have occurred that could reasonably be expected to have any adverse effect on such rulings;
(k) One or more of members of the MoneyGram Group shall have been substituted, as of the Distribution Date, in all respects for the Viad Group or any member thereof in respect of all MoneyGram Support Agreements;
(l) A letter or letters from the relevant ratings agency or agencies shall have been received stating that after the Distribution and subject to the conditions set forth therein, the long term debt of MoneyGram shall have an Acceptable Credit Rating; and
(m) The MoneyGram New Credit Agreement, the Viad New Credit Agreement and the Other Agreements shall be in effect.
Section 4.04 Conditions for the Benefit of Viad. The foregoing conditions are for the sole benefit of Viad and shall not give rise to or create any duty on the part of Viad or the Viad Board of Directors to waive or not waive such conditions or in any way limit Viad’s right to terminate this Agreement as set forth in Article X hereof or alter the consequences of any such termination from those specified in such Article. Any determination made by the Board of Directors of Viad in good faith prior to the Distribution Date concerning the satisfaction or waiver of any or all of the conditions set forth in Section 4.03 hereof shall be conclusive.
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ARTICLE V
SURVIVAL, RELEASE, ASSUMPTION AND INDEMNIFICATION
Section 5.01 Survival of Agreements. All covenants and agreements of the parties contained herein shall survive the Distribution Date.
Section 5.02 Release of Pre-Merger Claims.
(a) Except as provided in Section 5.02(c) hereof, effective as of the Effective Time, MoneyGram does hereby, for itself and each other member of the MoneyGram Group, their respective Affiliates (other than any member of the Viad Group), successors and assigns, and all Persons that at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the MoneyGram Group (in each case, in their respective capacities as such), remise, release and forever discharge Viad and the members of the Viad Group, their respective Affiliates (other than any member of the MoneyGram Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Viad Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Effective Time, including in connection with the transactions and all other activities to implement the Merger and the Distribution.
(b) Except as provided in Section 5.02(c) hereof, effective as of the Effective Time, Viad does hereby, for itself and each other member of the Viad Group, their respective Affiliates (other than any member of the MoneyGram Group), successors and assigns, and all Persons that at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Viad Group (in each case, in their respective capacities as such), remise, release and forever discharge MoneyGram and the members of the MoneyGram Group, their respective Affiliates (other than any member of the Viad Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the MoneyGram Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Effective Time, including in connection with the transactions and all other activities to implement the Merger and the Distribution.
(c) Nothing contained in Section 5.02(a) or (b) hereof shall impair any right of any Person to enforce this Agreement or any Other Agreement, in accordance with the terms hereof and thereof. Nothing contained in Section 5.02(a) or (b) hereof shall release any Person from:
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(i) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with this Agreement or any Other Agreement or any other Liability of any member of any Group hereunder or under any Other Agreement, it being understood and agreed that all Viad Liabilities have been allocated to Viad and all MoneyGram Liabilities have been allocated to MoneyGram;
(ii) except with respect to categories of Liabilities, products, services and refunds that are covered by any Other Agreement (with respect to which Section 5.02(c)(i) shall govern), any Liability to pay or reimburse for services provided in the ordinary course of business to a member of one Group by a member of the other Group prior to the Effective Time or for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;
(iii) except as otherwise provided herein or in any Other Agreement, any Liability relating to any intercompany receivables, payables, loans or advances between any member of the Viad Group and any member of the MoneyGram Group existing at the Effective Time;
(iv) any Liability that any party may have with respect to indemnification or contribution pursuant hereto for claims brought against any party by third parties, which Liability shall be governed by the provisions of this Article V or, if applicable, the appropriate provisions of the Other Agreements; or
(v) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.02.
In addition, nothing contained in Section 5.02(a) or (b) hereof shall release any party from honoring its existing obligations to indemnify any director, officer or employee of either Group who was a director, officer or employee of such party, at or prior to the Effective Time, to the extent such director, officer or employee becomes a named defendant in any Action involving such party, and was entitled to such indemnification pursuant to then existing obligations; provided , however , that to the extent applicable, Section 5.04 hereof shall determine whether any party shall be required to indemnify the other in respect of such Liability.
(d) MoneyGram shall not make, and shall not permit any member of the MoneyGram Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Viad or any member of the Viad Group, or any other Person released pursuant to Section 5.02(a) hereof, with respect to any Liabilities released pursuant to Section 5.02(a) hereof. Viad shall not, and shall not permit any member of the Viad Group, to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against MoneyGram or any member of the MoneyGram Group, or any other Person released pursuant to Section 5.02(b) hereof, with respect to any Liabilities released pursuant to Section 5.02(b) hereof.
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(e) It is the intent of each party, by virtue of the provisions of this Section 5.02, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed at or before the Effective Time, between or among MoneyGram or any member of the MoneyGram Group, on the one hand, and Viad or any member of the Viad Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members at or before the Effective Time), except as expressly set forth in Section 5.02(c) hereof. At any time, at the request of any party, each other party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions of this Section 5.02.
Section 5.03 Taxes; Plan Audits. This Article V shall not be applicable to any Indemnifiable Losses or Liabilities related to Taxes, which shall be governed by the Tax Sharing Agreement. In addition, this Article V shall not be applicable to any Indemnifiable Losses or Liabilities related to any Action by any Governmental Authority related to the Viad Plans, which shall be governed by Section 8.04 of the Employee Benefits Agreement.
Section 5.04 Assumption and Indemnification.
(a) Subject to Section 5.03 hereof and the Other Agreements, from and after the Effective Time, Viad shall retain or assume (as between the Viad Group and the MoneyGram Group), as the case may be, and shall indemnify, defend and hold harmless each MoneyGram Individual and each member of the MoneyGram Group, and each of their Representatives and Affiliates, from and against:
(i) all Liabilities for Third-Party Claims relating to, arising out of or due to, directly or indirectly, the Distribution or to the service prior to the Effective Time by any MoneyGram Individual as an officer, director or employee of any member of the Viad Group, except as provided in the Employee Benefits Agreement and except to the extent covered by insurance; provided such indemnification would be permitted by law if such officer, director or employee made a claim for indemnification;
(ii) all Viad Liabilities;
(iii) any material breach by Viad or any member of the Viad Group hereof or of any Other Agreement;
(iv) all Indemnifiable Losses of any such MoneyGram Individual, member of the MoneyGram Group, Representative or Affiliate relating to, arising out of or due to, directly or indirectly, the Viad Assets, the Viad Liabilities, the Viad Business, the Former Viad Businesses, the Viad Individuals or the Viad Group’s Representatives, whether relating to or arising out of occurrences prior to, at or after the Effective Time, including any Indemnifiable Losses that Viad may incur as a result of any litigation set forth on Schedule 5.04(b)(iii); and
(v) all Liabilities related to or arising out of any untrue statement or alleged untrue statement of a material fact or omission to state a material fact required to be stated in any portion of the Distribution Registration Statement or the Information Statement (or any preliminary or final form thereof or any amendment thereto), or necessary to make the
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statements therein not misleading, but only to the extent that such material relates solely to Viad or any member of the Viad Group; and
(vi) all Viad obligations under Section 3.02(c) hereof.
(b) Subject to Section 5.03 hereof and the Other Agreements, and except as specifically provided in Section 5.04(a) hereof, from and after the Effective Time, MoneyGram shall retain or assume (as between the Viad Group and the MoneyGram Group), and shall indemnify, defend and hold harmless each Viad Individual and each member of the Viad Group, and each of their Representatives and Affiliates, from and against:
(i) all MoneyGram Liabilities;
(ii) any material breach by MoneyGram or any member of the MoneyGram Group hereof or of any Other Agreement;
(iii) all Indemnifiable Losses of any such Viad Individual, member of the Viad Group, Representative or Affiliate relating to, arising out of or due to, directly or indirectly, the MoneyGram Assets, the MoneyGram Liabilities, the MoneyGram Business, the Former MoneyGram Businesses, the MoneyGram Individuals or the MoneyGram Group’s Representatives, whether relating to or arising out of occurrences prior to, at or after the Effective Time;
(iv) all Liabilities for Third-Party Claims relating to, arising out of or due to, directly or indirectly, the Distribution or to the service prior to the Effective Time by any Viad Individual as an officer, director or employee of any member of the MoneyGram Group, except as provided in the Employee Benefits Agreement and except to the extent covered by insurance; provided such indemnification would be permitted by law if such officer, director or employee made a claim for indemnification; and
(v) all Liabilities relating to or arising out of any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated in any portion of the Distribution Registration Statement or the Information Statement (or any preliminary or final form thereof or any amendment thereto), or necessary to make the statements therein not misleading, except to the extent that Viad is liable therefor pursuant to Section 5.04(a)(v) hereof.
(c) If an Indemnitee realizes a Tax benefit or detriment by reason of having incurred an Indemnifiable Loss for which such Indemnitee receives an Indemnity Payment from an Indemnifying Party or by reason of receiving an Indemnity Payment, then such Indemnitee shall pay to such Indemnifying Party an amount equal to the Tax benefit (as and when actually realized in cash), or such Indemnifying Party shall pay to such Indemnitee an additional amount equal to the Tax detriment (taking into account any Tax detriment resulting from the receipt of such additional amounts), as the case may be. An Indemnitee shall claim any Tax benefit to which it is entitled by reason of an Indemnifiable Loss. If, following a payment by an Indemnitee or an Indemnifying Party pursuant to this Section 5.04(c) in respect of a Tax benefit or detriment, there is an adjustment to the amount of such Tax benefit or detriment, then each of
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Viad and MoneyGram shall make appropriate payments to the other, including the payment of interest thereon at the federal statutory rate then in effect, to reflect such adjustments.
(d) The amount that an Indemnifying Party is required to pay to any Indemnitee pursuant to this Section 5.04 shall be reduced (including retroactively) by any Insurance Proceeds and other amounts actually recovered by such Indemnitee in reduction of the related Indemnifiable Loss, it being understood and agreed that each party shall use its reasonable best efforts to collect any such proceeds or other amounts to which it or any of its Subsidiaries is entitled, without regard to whether it is the Indemnifying Party hereunder. If an Indemnitee receives an Indemnity Payment in respect of an Indemnifiable Loss and subsequently receives Insurance Proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party an amount equal to the difference between (1) the sum of the amount of such Indemnity Payment and the amount of such Insurance Proceeds or other amounts actually received and (2) the amount of such Indemnifiable Loss, adjusted (at such time as appropriate adjustment can be determined) in each case to reflect any premium adjustment attributable to such claim. Notwithstanding anything to the contrary in this Section 5.04, each party’s indemnity under this Section 5.04 shall include the increased cost and expense of purchasing insurance against future losses, provided and to the extent that such cost and expense is directly attributable to Indemnifiable Losses.
(e) If any Indemnity Payment required to be made hereunder or under any Other Agreement is denominated in a currency other than United States dollars, the amount of such payment shall be translated into United States dollars using the Foreign Exchange Rate for such currency determined in accordance with the following rules:
(i) with respect to an Indemnifiable Loss arising from payment by a financial institution under a guarantee, comfort letter, letter of credit, foreign exchange contract or similar instrument, the Foreign Exchange Rate for such currency shall be determined as of the date on which such financial institution is reimbursed;
(ii) with respect to an Indemnifiable Loss covered by insurance, the Foreign Exchange Rate for such currency shall be the Foreign Exchange Rate employed by the insurance company providing such insurance in settling such Indemnifiable Loss with the Indemnifying Party; and
(iii) with respect to an Indemnified Loss not described in clause (i) or (ii) of this Section 5.04(e), the Foreign Exchange Rate for such currency shall be determined as of the date that notice of the claim with respect to such Indemnifiable Loss is given to the Indemnitee.
Section 5.05 Procedure for Indemnification.
(a) If any Indemnitee receives notice of the assertion of any Third-Party Claim with respect to which an Indemnifying Party is obligated hereunder to provide indemnification, such Indemnitee shall give such Indemnifying Party notice thereof promptly after becoming aware of such Third-Party Claim; provided , however , that the failure of any Indemnitee to give notice as provided in this Section 5.05 shall not relieve any Indemnifying
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Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice. Such notice shall describe such Third-Party Claim in reasonable detail and, if practicable, shall indicate the estimated amount of the Indemnifiable Loss that has been or may be sustained by such Indemnitee.
(b) An Indemnifying Party, at such Indemnifying Party’s own expense and through counsel chosen by such Indemnifying Party (which counsel shall be reasonably satisfactory to the Indemnitee), may elect to defend any Third-Party Claim, with such an election by the Indemnifying Party being deemed an admission of its obligation to indemnify the Indemnitee with respect to such Third-Party Claim. If an Indemnifying Party elects to defend a Third-Party Claim, then, within ten Business Days after receiving notice of such Third-Party Claim (or sooner, if the nature of such Third-Party Claim so requires), such Indemnifying Party shall notify the Indemnitee of its intent to do so, and such Indemnitee shall cooperate in the defense of such Third-Party Claim. Such Indemnifying Party shall pay such Indemnitee’s reasonable out-of-pocket expenses incurred in connection with such cooperation. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnifying Party shall not be liable to such Indemnitee under this Article V for any legal or other expenses subsequently incurred by such Indemnitee in connection with the defense thereof; provided , however , that such Indemnitee shall have the right to employ one law firm as counsel to represent such Indemnitee (which firm shall be reasonably satisfactory to the Indemnifying Party) if, in such Indemnitee’s reasonable judgment, either a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim or there may be defenses available to such Indemnitee that are different from or in addition to those available to such Indemnifying Party, and in that event (1) the reasonable fees and expenses of one such separate counsel for all such Indemnitees shall be paid by such Indemnifying Party and (2) each of such Indemnifying Party and such Indemnitee shall have the right to conduct its own defense in respect of such claim. If an Indemnifying Party elects not to defend against a Third-Party Claim, or fails to notify an Indemnitee of its election as provided in this Section 5.05 within the period of ten Business Days described above, such Indemnitee may defend, compromise and settle such Third-Party Claim; provided , however , that no such Indemnitee may compromise or settle any such Third-Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be withheld unreasonably. Notwithstanding the foregoing, the Indemnifying Party shall not, without the prior written consent of the Indemnitee, (1) settle or compromise any Third-Party Claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to the Indemnitee of a written release from all Liability in respect of such Third-Party Claim or (2) settle or compromise any Third-Party Claim in any manner that may adversely affect the Indemnitee.
Section 5.06 Remedies Cumulative. The remedies provided in this Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any other remedies against any Indemnifying Party.
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ARTICLE VI
ACCESS TO INFORMATION
Section 6.01 Provision of Corporate Records. Prior to or as promptly as practicable after the Distribution Date, Viad shall deliver to MoneyGram all corporate books and records of the MoneyGram Group and copies of all corporate books and records of the Viad Group relating to the MoneyGram Assets, the MoneyGram Liabilities or the MoneyGram Business, including in each case all active agreements, active litigation files and government filings. From and after the Effective Time, all books, records and copies so delivered shall be the property of MoneyGram.
Section 6.02 Access to Information. From and after the Distribution Date, each of Viad and MoneyGram shall (and shall cause its controlled Affiliates to) afford to the other and to the other’s Representatives reasonable access and duplicating rights during normal business hours to all Information within such party’s possession relating to such other party’s businesses, Assets or Liabilities (including such Information as may be necessary to such other party to fulfill its obligations under the Other Agreements), insofar as such access is reasonably requested by such other party; provided , however , that the requesting party shall reimburse the providing party for all reasonable costs and expenses incurred in connection the provision of such requested Information. Without limiting the foregoing, Information may be requested under this Section 6.02 for audit, accounting, claims and litigation purposes, as well as for purposes of fulfilling disclosure and reporting obligations, it being understood and agreed that MoneyGram may request and shall be provided under this Section 6.02 such Information as may be necessary for MoneyGram to fulfill its status and obligations as “accounting successor” to Viad (including correspondence with the U.S. Securities and Exchange Commission, Hyperion databases, accounting position and policy memoranda, correspondence with independent auditors and details of restructuring costs and expenses).
Section 6.03 Production of Witnesses. After the Distribution Date, each of Viad and MoneyGram shall use reasonable efforts to make available to the other, upon written request, its (and its controlled Affiliates’) directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be requested (giving consideration to business demands of such individuals) in connection with any legal, administrative or other proceedings in which the requesting party may from time to time be involved.
Section 6.04 Retention of Records. Except as otherwise required by law or agreed in writing, or as otherwise provided in the Tax Sharing Agreement, each of Viad and MoneyGram shall retain, for a period of at least seven years following the Distribution Date, all significant Information in such party’s possession or under its control relating to the business, Assets or Liabilities of the other party and, after the expiration of such seven-year period, prior to destroying or disposing of any of such Information, (a) the party proposing to dispose of or destroy any such Information shall provide no less than 30 days’ prior written notice to the other party, specifying the Information proposed to be destroyed or disposed of and (b) if, prior to the scheduled date for such destruction or disposal, the other party requests in writing that any of the Information proposed to be destroyed or disposed of be delivered to such other party, the party proposing to dispose of or destroy such Information promptly shall arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting party.
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Section 6.05 Confidentiality. From and after the Distribution Date, each of Viad and MoneyGram shall hold, and shall use its reasonable best efforts to cause its Affiliates and Representatives to hold, in strict confidence all Information concerning the other party obtained by it prior to the Distribution Date or furnished to it by such other party pursuant hereto or to any Other Agreement and shall not release or disclose such Information to any other Person, except its Representatives, who shall be bound by the provisions of this Section 6.05; provided , however , that Viad and MoneyGram may disclose such Information to the extent that (a) disclosure is compelled by judicial or administrative process or, in the opinion of such party’s counsel, by other requirements of law ( provided that the party compelled to disclose such Information shall provide at least ten days prior notice to the other party) or (b) such party can show that such Information was (1) available to such party on a nonconfidential basis prior to its disclosure by the other party, (2) in the public domain through no fault of such party or (3) lawfully acquired by such party from other sources after the time that it was furnished to such party pursuant hereto or to any Other Agreement. Notwithstanding the foregoing, each of Viad and MoneyGram shall be deemed to have satisfied its obligations under this Section 6.05 with respect to any Information if it exercises the same care with regard to such Information as it takes to preserve confidentiality for its own similar Information.
Section 6.06 Tax Matters. The foregoing provisions of this Article VI shall not apply with respect to tax matters, which shall instead be governed by Article IV of the Tax Sharing Agreement.
ARTICLE VII
NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
Section 7.01 No Representations or Warranties; Exceptions. MoneyGram understands and agrees that no member of the Viad Group is, in this Agreement or in any other agreement or document, representing or warranting to MoneyGram in any way as to the MoneyGram Assets, the MoneyGram Liabilities, or the MoneyGram Business or as to any consents or approvals required in connection with the consummation of the transactions contemplated hereby, it being agreed and understood that MoneyGram shall take all of the MoneyGram Assets transferred to it or any other member of the MoneyGram Group “as is, where is” and that, except as provided in Section 9.01 hereof, MoneyGram shall bear the economic and legal risk that conveyances of the MoneyGram Assets shall prove to be insufficient or that the title of any member of the MoneyGram Group to any MoneyGram Assets shall be other than good and marketable and free from encumbrances.
ARTICLE VIII
INSURANCE
Section 8.01 Insurance Coverage.
(a) The parties intend by this Agreement that MoneyGram and each member of the MoneyGram Group be successors-in-interest to all rights that any member of the MoneyGram Group may have as of the Effective Time as a subsidiary, affiliate, division or department of Viad or as an insured party prior to the Effective Time under any Insurance Policy issued to Viad by any insurance carrier or under any agreements related to such policies executed
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prior to the Effective Time; provided , however , that MoneyGram shall have no remedy against Viad if such intent if not achieved.
(b) Without limiting the generality of the definition of MoneyGram Assets, the MoneyGram Assets shall include (1) any and all rights of an insured party under each of the Viad Policies, including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all MoneyGram Claims; provided , however , that nothing in this clause (1) shall be deemed to constitute (or to reflect) the assignment of any of the Viad Policies to MoneyGram, and (2) the MoneyGram Policies. The rights set forth in clause (1) and all MoneyGram Policies shall be deemed to have been transferred to MoneyGram at the Effective Time. MoneyGram shall be entitled to receive from Viad any Insurance Proceeds paid to any member of the Viad Group with respect to any MoneyGram Claim under any Viad Policy.
Section 8.02 Post-Merger Claims. If, subsequent to the Effective Time, any Person shall assert a MoneyGram Claim, then Viad shall at the time such MoneyGram Claim is asserted be deemed to assign, without need of further documentation, to MoneyGram all of the Viad Group’s rights, if any, as an insured party under the applicable Viad Policy with respect to such MoneyGram Claim, including rights of indemnity and the right to be defended by or at the expense of the insurer; provided , however , that nothing in this Section 8.02 shall be deemed to (1) constitute (or to reflect) the assignment of any of the Viad Policies to MoneyGram or (2) affect the Viad indemnity set forth herein.
Section 8.03 Administration and Reserves. Notwithstanding the provisions of Article V hereof, from and after the Effective Time:
(a) Viad shall be responsible for (1) Insurance Administration with respect to the Viad Policies and (2) Claims Administration with respect to any Liabilities of Viad; provided , however , that the retention of the Viad Policies by Viad is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under the Viad Policies;
(b) MoneyGram shall be responsible for (1) Insurance Administration with respect to the MoneyGram Policies, and (2) Claims Administration with respect to any Liabilities of MoneyGram; provided , however , that the retention of the MoneyGram Policies by MoneyGram is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under the MoneyGram Policies;
(c) Viad shall be entitled to reserves established by any member of either Group, or the benefit of reserves held by any insurance carrier, with respect to any Viad Liabilities; and
(d) MoneyGram shall be entitled to reserves established by any member of either Group, or the benefit of reserves held by any insurance carrier, with respect to any MoneyGram Liabilities.
Section 8.04 Payment or Refund of Premiums, Retentions and Losses with Respect to MoneyGram Liabilities. MoneyGram shall reimburse Viad for premiums (retrospectively-rated or otherwise adjusted), self-insured retentions or deductible losses that
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shall be due after the Distribution Date under the Viad Policies with respect to the MoneyGram Liabilities, and, prior to the Effective Time, MoneyGram shall pay Viad an amount equal to the premiums paid by Viad on behalf of MoneyGram in respect to the Insurance Policy set forth on Schedule 8.04 (less any amounts previously paid by MoneyGram Group in respect thereof). Viad shall have the right, but not the obligation, to pay such premiums, self insured retentions, or deductible losses under the Viad Policies with respect to MoneyGram Liabilities on behalf of MoneyGram, whereupon MoneyGram shall forthwith reimburse Viad for any such premiums, self-insured retentions and deductible losses paid by Viad with respect to MoneyGram Liabilities on behalf of MoneyGram. MoneyGram shall not dispute any such premiums, self-insured retentions and deductible losses paid by Viad in good faith. MoneyGram shall promptly receive a refund for any such premiums paid with respect to MoneyGram Liabilities and for any reductions in self-insured retentions or refunded losses received with respect to MoneyGram Liabilities, to the extent that Viad has been reimbursed or credited or has received payment for the same under Viad Policies.
Section 8.05 Allocation of Insurance Proceeds; Cooperation. Insurance Proceeds received with respect to claims, costs and expenses under the Insurance Policies shall be paid to Viad with respect to Viad Liabilities that are Insured Claims under the Viad Policies and to MoneyGram with respect to the MoneyGram Liabilities that are Insured Claims under the Viad Policies. Payment of the allocable portions of the Insurance Proceeds resulting from the Liability Policies shall be made to the appropriate party upon receipt from the insurer. In the event of the exhaustion of coverage under any Viad Policy, Viad and MoneyGram shall allocate Insurance Proceeds equitably based upon the bona fide claims of the Viad Group and the MoneyGram Group, respectively. The parties agree to use commercially reasonable efforts to fully cooperate with respect to insurance matters.
Section 8.06 Reimbursement of Expenses. MoneyGram shall (a) upon the request of Viad, reimburse the relevant insurer or the relevant third-party administrator, to the extent required under any Insurance Policy or Service Agreement with respect to any and all MoneyGram Claims that are paid, settled, adjusted, defended or otherwise handled by such insurer or third-party administrator pursuant to the terms and conditions of such Insurance Policy or Service Agreement and (b) to the extent the cost incurred exceeds internal charges made by Viad to MoneyGram prior to the Effective Time, pay or reimburse Viad, or such third party as Viad may require, for any and all costs, premiums, expenses, losses paid, attorneys’ fees or charges incurred prior to the Distribution Date by either Group or after the Distribution Date by the Viad Group arising directly or indirectly in connection with the payment, settlement, adjustment, defense or handling of any such MoneyGram Claim or under the terms and conditions of any Insurance Policies or Service Agreements (including any reimbursement paid by Viad with respect to any such MoneyGram Claim to any insurer or third-party administrator pursuant to the terms of any Insurance Policy or Service Agreement). MoneyGram shall make any reimbursement required by clause (a) of this Section 8.06 at the time required by the relevant Insurance Policy or Service Agreement. MoneyGram shall make any reimbursement required by clause (b) of this Section 8.06, on a monthly basis.
Section 8.07 Insurer Insolvency. Viad shall not be obligated to reimburse MoneyGram for any MoneyGram Claim under any Insurance Policies where such MoneyGram Claim would have been paid by the insurer or other third party, but for the insolvency of such
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insurer or other third party or the refusal by any insurer or other third party to pay such MoneyGram Claim.
Section 8.08 Assumption of Management of Liabilities. MoneyGram shall make reasonable efforts to negotiate agreements with any and all insurers or third-party administrators whereby MoneyGram shall assume direct responsibility for any and all Liabilities related to it under any Insurance Policies or Service Agreements and Viad shall provide reasonable assistance in this effort.
Section 8.09 No Reduction of Coverage. Viad shall take no action to eliminate or materially reduce coverage under any Viad Policy or Service Agreement for any MoneyGram Claim.
Section 8.10 Future Insurance Coverage. For a period of one year following the Distribution Date, Viad shall assist MoneyGram, to the extent reasonably requested by MoneyGram with the efforts of the MoneyGram Group to secure alternative insurance coverage or claim handling services.
Section 8.11 Assistance, Waiver of Conflict and Shared Defense. Each party agrees to provide reasonable assistance to the other parties in connection with any dispute with any third party (including insurers, third-party administrators and state guaranty funds) related to the Insurance Policies or Service Agreements, but only insofar as such dispute arises out of the acts or omissions of any third party with respect to a MoneyGram Claim. In the event that Insured Claims of more than one Group exist relating to the same occurrence, the parties agree to defend such Insured Claims jointly and to waive any conflict of interest necessary to the conduct of such joint defense. Nothing in this Section 8.11 shall be construed to limit or otherwise alter in any way the indemnity obligations of the parties, including those created hereby or by operation of law.
ARTICLE IX
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
Section 9.01 Further Assurances.
(a) In addition to the actions specifically provided for in this Agreement and the Other Agreements, each party shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable law, regulations and agreements to consummate and make effective the transactions contemplated hereby and thereby. Without limiting the foregoing, each party shall cooperate with the other parties, and execute and deliver, or use its best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, and take all such other actions as such party may reasonably be requested to take by any other party from time to time, consistent with the terms hereof, in order to effectuate the provisions and purposes of this Agreement and the Other Agreements and the transactions contemplated hereby and thereby. The parties agree that, as of the Effective Time, each party
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shall be deemed to have acquired complete and sole beneficial ownership of all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, that such party is entitled to acquire or required to assume pursuant to the terms hereof.
(b) Subject to Section 9.01(c) hereof, if at any time or from time to time after the date hereof any member of the Viad Group shall possess a MoneyGram Asset, or any member of the MoneyGram Group shall possess a Viad Asset, Viad or MoneyGram, as the case may be, shall promptly transfer, or cause to be transferred, such Asset to MoneyGram or Viad, as the case may be. Prior to any such transfer, the party possessing such Asset shall hold such Asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto), and shall take such other actions as may be reasonably requested by the party to which such Asset is to be transferred in order to place such party, insofar as reasonably possible, in the same position it would have been had such Asset been transferred on the Effective Time.
(c) Without limiting the generality of Section 9.01(a) or Section 9.01(b) hereof, if the valid, complete and perfected assignment or transfer to MoneyGram of any Assets or Liabilities to be transferred under this Agreement or any Other Agreement requires the consent, agreement or approval of or any filing or registration with any Person or Governmental Authority, and as a result of the failure to make or obtain any such consent, agreement, approval, filing or registration such transfer is not effected as contemplated hereby or thereby despite the provisions hereof purporting to effect such assignment or transfer, then, and until such time as any impediment to the validity, completeness or perfection of such assignment or transfer shall have been removed, nullified or waived, the party possessing such Asset or Liability shall hold such Asset or Liability in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto), and shall take such other action as may be reasonably requested by the party to whom such Asset or Liability is to be transferred in order to place such party, insofar as reasonably possible, in the same position it would have been had such Asset or Liability had been transferred on the Effective Time.
(d) Without limiting the generality of Section 9.01(a) hereof, prior to the Effective Time, (1) Viad, as the sole stockholder of each of TECI and MoneyGram, shall ratify any actions that are reasonably necessary, proper or desirable to be taken by TECI or MoneyGram to effectuate the transactions contemplated hereby in a manner consistent with the terms hereof and (2) MoneyGram, as the sole stockholder of Merger Sub, shall ratify any actions that are reasonably necessary, proper or desirable to be taken by Merger Sub to effectuate the transactions contemplated hereby in a manner consistent with the terms hereof.
Section 9.02 Publicity. Prior to the Distribution Date, each of MoneyGram and Viad shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.
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Section 9.03 Certain Business Matters.
(a) No member of either Group shall have any duty to refrain from (1) engaging in the same or similar activities or lines of business as any member of the other Group, (2) doing business with any potential or actual supplier or customer of any member of the other Group or (3) engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual suppliers or customers of any member of the other Group.
(b) Each of Viad and MoneyGram is aware that from time to time certain business opportunities may arise that more than one Group may be financially able to undertake, and that are, from their nature, in the line of more than one Group’s business and are of practical advantage to more than one Group. In connection therewith, the parties agree that if either Viad or MoneyGram acquires knowledge of an opportunity that meets the foregoing standard with respect to more than one Group, neither Viad nor MoneyGram shall have any duty to communicate or offer such opportunity to any of the others and each may pursue or acquire such opportunity for itself, or direct such opportunity to any other Person.
ARTICLE X
TERMINATION
Section 10.01 Termination. This Agreement may be terminated (a) at any time prior to the Distribution Date by Viad in its sole and absolute discretion, if at any time the Board of Directors of Viad determines that the Distribution is not in the best interests of Viad or its stockholders, or (b) upon the mutual consent of Viad and MoneyGram.
Section 10.02 Effect of Termination. In the event of any termination of this Agreement, no party (or any directors or officers of such party) shall have any Liability or further obligation to any other party.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Complete Agreement. This Agreement, the Exhibits and Schedules hereto and the agreements and other documents referred to herein shall constitute the entire agreement among the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.
Section 11.02 Expenses. Except as otherwise provided herein or in the Other Agreements, (a) Viad shall pay all investment banking fees incurred in connection with the Merger and the Distribution and (b) each of Viad and MoneyGram shall pay all other third-party fees, costs and expenses paid or incurred or to be paid or incurred by it in connection with the Merger and the Distribution (it being understood and agreed that one-half of all such third party fees, costs and expenses will be deemed incurred by Viad and one-half by MoneyGram). All Transfer Taxes and costs of recording the deeds, bills of conveyance, assignment and assumption, certificates and other documents effecting or evidencing the Merger and the transfer of the MoneyGram Subsidiaries, the MoneyGram Assets and the MoneyGram Liabilities hereunder shall be paid and borne by the party liable for such Transfer Taxes under applicable Transfer Tax law.
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Section 11.03 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware (other than the laws regarding choice of laws and conflicts of laws) as to all matters, including matters of validity, construction, effect, performance and remedies, except that the provisions concerning the effects of the Merger shall be governed by and construed in accordance with the MBCA.
Section 11.04 Notices. All notices, requests, claims, demands and other communications hereunder (collectively, “ Notices ”) shall be made in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, telex or other standard form of telecommunications, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to Viad:
Viad Corp
Viad Tower
Phoenix, Arizona 85077
Attention: General Counsel
If to MoneyGram:
MoneyGram International, Inc.
1550 Utica Avenue South
Minneapolis, Minnesota 55416
Attention: General Counsel
or to such other address as any party may have furnished to the other parties by a notice in accordance with this Section 11.04. Copies of all notices, requests, claims, demands and other communications hereunder shall also be given to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: David M. Silk, Esq.
Section 11.05 Amendment and Modification. This Agreement may be amended, modified or supplemented only by a written agreement signed by all of the parties.
Section 11.06 Successors and Assigns; No Third-Party Beneficiaries. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns, but neither this Agreement nor any rights, interests and obligations hereunder shall be assigned by any party without the prior written consent of each of the other parties (which consent shall not be unreasonably withheld). Except for the provisions of Sections 5.04, 5.05 and 5.06 hereof relating to indemnification, which are also for the benefit of the Indemnitees, this Agreement is solely for the benefit of the parties and their Subsidiaries and Affiliates and is not intended to confer upon any other Person any rights or remedies.
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Section 11.07 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 11.08 Interpretation. The Article and Section headings contained herein are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation hereof.
Section 11.09 Legal Enforceability. Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each party acknowledges that money damages would be an inadequate remedy for any breach of the provisions hereof and agrees that the obligations of the parties hereunder shall be specifically enforceable.
Section 11.10 References; Construction. References to any “Article,” “Exhibit,” “Schedule” or “Section,” without more, are to Appendices, Articles, Exhibits, Schedules and Sections hereof. The term “or” shall be inclusive and not exclusive. Unless otherwise expressly stated, (a) clauses beginning with the term “including” set forth examples only and in no way limit the generality of the matters thus exemplified, (b) any noun or pronoun shall be deemed to include the singular and the plural and to cover all genders and (c) the terms “hereof,” “herein,” “hereto,” “hereunder,” and similar terms refer to this Agreement as a whole (including all Exhibits and Schedules).
Section 11.11 Corporate Power.
(a) Viad represents on behalf of itself and each other member of the Viad Group, and MoneyGram represents on behalf of itself and each other member of the MoneyGram Group, as follows:
(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute and deliver this Agreement and each other Other Agreement to which it is a party, to fully perform (or cause to be performed) its obligations hereunder and thereunder to consummate the transactions contemplated hereby and thereby; and
(ii) this Agreement and each Other Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof and thereof.
(b) Notwithstanding any provision hereof or of any Other Agreement, neither Viad nor MoneyGram shall be required to take or omit to take any act that would violate its fiduciary duties to any minority stockholders of any non wholly-owned Subsidiary of Viad or MoneyGram, as the case may be (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned).
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Section 11.12 Waivers of Default. Waiver by any party of any default by any other party of any provision hereof or of any Other Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of such other party.
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IN WITNESS WHEREOF, the parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.
|
VIAD CORP
|
||||
| By: | /s/ Scott E. Sayre | |||
| Name: | Scott E. Sayre | |||
| Title: | Vice President – General Counsel and Secretary | |||
|
MONEYGRAM INTERNATIONAL, INC.
|
||||
| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | President & CEO | |||
|
MGI MERGER SUB, INC.
|
||||
| By: | /s/ Scott E. Sayre | |||
| Name: | Scott E. Sayre | |||
| Title: | Vice President and Secretary | |||
|
TRAVELERS EXPRESS COMPANY, INC.
|
||||
| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | President & CEO | |||
[Schedules:
Schedule 1.01(a) – MoneyGram Insurance Policies
Schedule 1.01(b) – MoneyGram Subsidiaries
Schedule 1.01(c) – Certain Insurance Policies Relating to Viad and MoneyGram
Schedule 2.08 – Directors of Viad and MoneyGram
Schedule 8.04 – Certain MoneyGram Insurance Policies]
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Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
MONEYGRAM INTERNATIONAL, INC.
1. The name of the corporation (which is hereinafter referred to as the
Corporation) is “MoneyGram International, Inc.”
2. The original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on December 18, 2003.
3. A Certificate of Amendment to the Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on June 28, 2004.
4. This Amended and Restated Certificate of Incorporation has been duly
proposed by resolutions adopted and declared advisable by the Board of
Directors of the Corporation, duly adopted by written consent of the sole
stockholder of the Corporation in lieu of a meeting and vote and duly executed
and acknowledged by the officers of the Corporation in accordance with the
provisions of Sections 103, 228, 242 and 245 of the General Corporation Law of
the State of Delaware and, upon filing with the Secretary of State in
accordance with Section 103 of the General Corporation Law of the State of
Delaware shall thenceforth supercede the original Certificate of Incorporation
and shall, as it may thereafter be amended in accordance with its terms and
applicable law, be the Certificate of Incorporation of the Corporation.
5. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated in its entirety to read as follows:
Article I
The name of the corporation (which is hereinafter referred to as the
“
Corporation
”) is:
MoneyGram International, Inc.
Article II
The address of the Corporation’s registered office in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation’s registered
agent at such address is The Corporation Trust Company.
Article III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the “
GCL
”).
Article IV
(A) Authorized Stock . The total number of shares of stock that the Corporation shall have authority to issue is two hundred and fifty-seven million (257,000,000), consisting of (i) two hundred and fifty million (250,000,000) shares of Common Stock, par value $0.01 per share (hereinafter referred to as “ Common Stock ”) and (ii) seven million (7,000,000) shares of Preferred Stock, par value $0.01 per share (hereinafter referred to as “ Preferred Stock ”).
(B) Preferred Stock . Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the GCL (hereinafter, along with any similar designation relating to any other class of stock that may hereafter be authorized, referred to as a “ Preferred Stock Designation ”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(i) The designation of the series, which may be by distinguishing number, letter or title.
(ii) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(iii) The amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative.
(iv) Dates on which dividends, if any, shall be payable.
(v) The redemption rights and price or prices, if any, for shares of the series.
(vi) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(vii) The amounts payable on and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(viii) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made.
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(ix) Restrictions on the issuance of shares of the same series or of any other class or series.
(x) The voting rights, if any, of the holders of shares of the series.
(C) Common Stock . The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Each shares of Common Stock shall be equal to each other share of Common Stock. Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, the holders of shares of Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders.
(D) Vote . Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, or as may be required by applicable law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote.
(E) Record Holders . The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
Article V
The Board of Directors is hereby authorized to create and issue, whether or not in connection with the issuance and sale of any of stock or other securities or property of the Corporation, rights entitling the holders thereof to purchase from the Corporation shares of stock or other securities of the Corporation or any other corporation. The times at which and the terms upon which such rights are to be issued will be determined by the Board of Directors and set forth in the contracts or instruments that evidence such rights. The authority of the Board of Directors with respect to such rights shall include, but not be limited to, determination of the following:
(A) The initial purchase price per share or other unit of the stock or other securities or property to be purchased upon exercise of such rights.
(B) Provisions relating to the times at which and the circumstances under which such rights may be exercised or sold or otherwise transferred, either together with or separately from, any other stock or other securities of the Corporation.
(C) Provisions that adjust the number or exercise price of such rights or amount or nature of the stock or other securities or property receivable upon exercise of such rights in the event of a combination, split or recapitalization of any stock of the Corporation, a change in ownership of the Corporation’s stock or other securities or a reorganization, merger, consolidation, sale of assets or other occurrence relating to the Corporation or any stock of the Corporation, and provisions restricting the ability of the Corporation to enter into any such
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transaction absent an assumption by the other party or parties thereto of the obligations of the Corporation under such rights.
(D) Provisions that deny the holder of a specified percentage of the outstanding stock or other securities of the Corporation the right to exercise such rights and/or cause the rights held by such holder to become void.
(E) Provisions that permit the Corporation to redeem or exchange such rights.
(F) The appointment of a rights agent with respect to such rights.
Article VI
(A) In furtherance of, and not in limitation of, the powers conferred by applicable law, the Board of Directors is expressly authorized and empowered:
(i) to adopt, amend or repeal the Bylaws of the Corporation; provided , however , that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be amended or repealed by the Board of Directors or by the stockholders having voting power with respect thereto, provided further that in the case of amendments by stockholders, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provision of the Bylaws; and
(ii) from time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to inspection of stockholders; and, except as so determined, or as expressly provided in this Certificate of Incorporation or in any Preferred Stock Designation, no stockholder shall have any right to inspect any account, book or document of the Corporation other than such rights as may be conferred by applicable law.
(B) The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with paragraph (A)(i) of this Article VI. For the purposes of this Certificate of Incorporation, “ Voting Stock ” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
Article VII
Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation to elect additional directors under specific circumstances, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing in lieu of a meeting of such
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stockholders. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article VII.
Article VIII
(A) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed by the Bylaws of the Corporation and may be increased or decreased from time to time in such a manner as may be prescribed by the Bylaws.
(B) Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.
(C) The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock as set forth in the Certificate of Incorporation, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2005, another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2006, and another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2007. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the stockholders of the Corporation commencing with the 2005 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.
(D) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock, as set forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled, unless the Board of Directors otherwise determines, only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, or by the sole remaining director, and not by stockholders. Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director.
(E) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, to elect additional directors under specified circumstances, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the
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holders of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class.
(F) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article VIII.
Article IX
(A) Vote Required for Certain Business Combinations .
(i) Higher Vote for Certain Business Combinations . In addition to any affirmative vote required by applicable law or this Certificate of Incorporation, and except as otherwise expressly provided in paragraph (B) of this Article IX:
(a) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (1) any Interested Stockholder (as hereinafter defined) or (2) any other corporation (whether or not itself an Interested Stockholder) that is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder, including all Affiliates of the Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $10,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder, including all Affiliates of the Interested Stockholder, in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $10,000,000 or more; or
(d) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliates of an Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not an Interested Stockholder is a party thereto) that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary that are directly or indirectly owned by any Interested Stockholder or one or more Affiliates of the Interested Stockholder;
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shall require the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of the then outstanding Voting Stock, voting together as a single class, including the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of the then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder, unless the requirement of such vote is not permitted under applicable law. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be permitted, by applicable law or in any agreement with any national securities exchange or otherwise.
(ii) Definition of Business Combination . The term “ Business Combination ” as used in this Article IX shall mean any transaction described in any one or more of clauses (a) through (e) of paragraph (A)(i) of this Article IX.
(B) When Higher Vote is Not Required . The provisions of paragraph (A) of this Article IX shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by applicable law or any other provision of this Certificate of Incorporation, if the conditions specified in either of the following paragraphs (B)(i) or (ii) of this Article IX are met:
(i) Approval by Continuing Directors . The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined).
(ii) Price and Procedure Requirements . All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash, to be received per share by holders of Common Stock in such Business Combination, shall be at least equal to the highest of the following:
(1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (x) within the two-year period immediately prior to the first public announcement of the proposal of such Business Combination (the “ Announcement Date ”), or (y) in the transaction in which it became an Interested Stockholder, whichever is higher;
(2) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (the “ Determination Date ”), whichever is higher; and
(3) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to paragraph (B)(ii)(a)(2) of this Article IX, multiplied by the ratio of (x) the highest per
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share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of Common Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of Common Stock.
(b) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class, other than Common Stock or Excluded Preferred Stock, of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph (B)(ii)(b) shall be required to be met with respect to every such class of outstanding Voting Stock whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock):
(1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (x) within the two-year period immediately prior to the Announcement Date, or (y) in the transaction in which it became an Interested Stockholder, whichever is higher;
(2) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;
(3) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and
(4) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to paragraph (B)(ii)(b)(3) of this Article IX, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of such class of Voting Stock.
(c) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock and other than Excluded Preferred Stock) shall be in cash or in the same form as the Interested Stockholder
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has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (1) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock, except as approved by a majority of the Continuing Directors; (2) there shall have been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors; (3) there shall have been an increase in the annual rate of dividends as necessary fully to reflect any recapitalization (including any reverse stock split), reorganization or any similar reorganization that has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (4) such Interested Stockholder shall not have become the Beneficial Owner of any additional Voting Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).
(C) Certain Definitions . For purposes of this Article IX:
(i) “ Person ” shall mean any individual, firm, corporation or other entity.
(ii) “ Interested Stockholder ” shall mean any Person (other than the Corporation or any Subsidiary) that:
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(a) itself, or along with its Affiliates, is the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the then outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was itself, or along with its Affiliates, the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any Voting Stock that was at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.
(iii) “ Beneficial Owner ” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations of the Securities Exchange Act of 1934, as in effect on the date hereof. In addition, a Person shall be the “ Beneficial Owner ” of any Voting Stock that such Person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, provided that, in the case of rights issued pursuant to the Rights Agreement between the Corporation and Wells Fargo Bank, N.A., as rights agent, dated as of June 30, 2004, or any successor rights agreement, once such rights are exercisable, a holder thereof shall not be deemed to be a “ Beneficial Owner ” for purposes of this provision of the shares of Voting Stock issuable pursuant to such rights unless and until such holder, on or after the date that such rights become exercisable, acquires any additional such rights or shares of Voting Stock, or (b) the right to vote pursuant to any agreement, arrangement or understanding (but neither such Person nor any such Affiliate or Associate shall be deemed to be the Beneficial Owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such Person nor any such Affiliate or Associate is otherwise deemed the Beneficial Owner).
(iv) For the purpose of determining whether a Person is an Interested Stockholder pursuant to paragraph (C)(ii) of this Article IX, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (C)(iii) of this Article IX but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options or otherwise.
(v) “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date hereof.
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(vi) “ Subsidiary ” shall mean any corporation of which a majority of any share of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph (C)(ii) of this Article IX, the term “ Subsidiary ” shall mean only a corporation of which a majority of each share of equity security is owned, directly or indirectly, by the Corporation.
(vii) “ Continuing Director ” shall mean any member of the Board of Directors of the Corporation (the “Board of Directors”) who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any director who is thereafter chosen to fill any vacancy on the Board of Directors or who is elected and who, in either event, is unaffiliated with the Interested Stockholder and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of Continuing Directors then on the Board of Directors.
(viii) “ Fair Market Value ” shall mean (x) in the case of stock, the highest closing sale price during the thirty (30) day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty (30) day period preceding the date in question on the NASDAQ Stock Market or any system then in use in its stead, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in accordance with paragraph (D) of this Article IX; and (y) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in accordance with paragraph (D) of this Article IX.
(ix) In the event of any Business Combination in which the Corporation survives, the phrase “ other consideration to be received ” as used in paragraphs (B)(ii)(a) and (b) of this Article IX shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares.
(x) “ Excluded Preferred Stock ” means any series of Preferred Stock with respect to which a majority of the Continuing Directors have approved a Preferred Stock Designation creating such series that expressly provides that the provisions of this Article IX shall not apply.
(D) The Continuing Directors of the Corporation shall have the power and duty to determine for the purposes of this Article IX, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article IX, including, without limitation (i) whether a Person is an Interested Stockholder, (ii) the number of shares of Voting Stock beneficially owned by any Person, (iii) whether a Person is an Affiliate or Associate of another, (iv) whether the applicable conditions set forth in paragraph (B)(ii) of this Article IX have been met with respect to any Business Combination, (v) the Fair Market Value
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of stock or other property in accordance with paragraph (C)(viii) of this Article IX, and (vi) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $10,000,000 or more.
(E) No Effect on Fiduciary Obligations of Interested Stockholders . Nothing contained in this Article IX shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by applicable law.
(F) Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be permitted by applicable law, this Certificate of Incorporation or the Bylaws of the Corporation), but in addition to any affirmative vote of the holders of any particular class of the Voting Stock required by applicable law or this Certificate of Incorporation, the affirmative vote of the holders of two-thirds (66 2/3%) of the voting power of the shares of the then outstanding Voting Stock voting together as a single class, including the affirmative vote of the holders of two-thirds (66 2/3%) of the voting power of the then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article IX of this Certificate of Incorporation.
Article X
Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as a director, officer or trustee of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executor, administrators or estate of such person), shall be indemnified by the Corporation, in accordance with the Bylaws of the Corporation, to the fullest extent permitted from time to time by the GCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect. The Corporation may, by action of the Board of Directors or through the adoption of Bylaws, provide indemnification to employees and agents of the Corporation, and to persons serving as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, at the request of the Corporation, with the same scope and effect as the foregoing indemnification of directors and officers. The Corporation shall be required to indemnify any person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors or is a proceeding to enforce such person’s claim to indemnification pursuant to the rights granted by this Certificate of Incorporation or otherwise by the Corporation. The right to indemnification conferred in this Article X shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within twenty (20) days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided , however , that if the General Corporation Law
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of the State of Delaware requires, the payment of such expenses incurred by such a person in his or her capacity as such a director or officer of the Corporation in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article X or otherwise. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person that provide for indemnification greater or different than that provided in this Article X. Any amendment or repeal of this Article X shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
Article XI
To the fullest extent permitted by applicable law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment or repeal of this Article XI shall not adversely affect any right or protection of a director of the Corporation existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
Article XII
Except as may be expressly provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation or a Preferred Stock Designation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article XII; provided , however , that any amendment or repeal of Article X or Article XI of this Certificate of Incorporation shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal; and provided further that no Preferred Stock Designation shall be amended after the issuance of any shares of the series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law; and provided further that paragraph (C) of Article IV shall not be amended except in accordance with the terms thereof and the requirements of applicable law.
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IN WITNESS WHEREOF, said MoneyGram International, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer and has caused its corporate seal to be affixed, this 28th day of June, 2004.
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MONEYGRAM INTERNATIONAL, INC.
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| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | Chief Executive Officer | |||
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Exhibit 3.2
BYLAWS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AS AMENDED June 22, 2004
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1.
Delaware Office
. The principal office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.2.
Other Offices
. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
SECTION 1.3.
Books and Records
. The books and records of the Corporation
may be kept at the Corporation’s principal executive offices in Minneapolis,
Minnesota or at such other locations outside of the State of Delaware as may
from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1.
Annual Meeting
. Commencing in 2005, the annual meeting of
the stockholders of the Corporation shall be held on the second Tuesday in May
of each year, if not a legal holiday, and if a legal holiday then on the next
succeeding business day, at 9:00 a.m., local time, at the principal executive
offices of the Corporation, or at such other date, place and/or time as may be
fixed by resolution of the Board of Directors.
SECTION 2.2.
Special Meeting
. Subject to the rights of the holders of any
series of preferred stock of the Corporation (the “
Preferred Stock
”), or any
other series or class of stock as set forth in the Certificate of Incorporation
of the Corporation, as amended or restated from time to time (the “
Certificate
of Incorporation
”), special meetings of the stockholders may be called only by
the Chairman of the Board of Directors or by the Board of Directors pursuant to
a resolution adopted by a majority of the total number of directors that the
Corporation would have if there were no vacancies (the “
Whole Board
”).
SECTION 2.3.
Place of Meeting
. The Chairman of the Board of Directors or
the Board of Directors may designate the place of meeting for any meeting of
the stockholders. If no designation is made by the Chairman of the Board of
Directors or the Board of Directors, the place of meeting shall be the
principal executive offices of the Corporation.
OF
MONEYGRAM INTERNATIONAL, INC.
SECTION 2.4. Notice of Meeting . Written or printed notice, stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be prepared and delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally, or by mail, facsimile or electronic transmission, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at such address as it appears on the stock transfer books of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the General Corporation Law of the State of Delaware. Such further notice shall be given as may be required by law. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived by all such stockholders not present. Any previously scheduled meeting of the stockholders may be postponed, and any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.
SECTION 2.5. Quorum and Adjournment . Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of all classes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the " Voting Stock ”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series voting as a class, the holders of a majority of the voting power of the shares of such class or series shall constitute a quorum for the transaction of such business. The chairman of the meeting or a majority of the voting power of the shares of Voting Stock so represented may adjourn the meeting from time to time, whether or not there is such a quorum (or, in the case of specified business to be voted on by a class or series, the chairman or a majority of the shares of such class or series so represented may adjourn the meeting with respect to such specified business). No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6. Proxies . At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as otherwise permitted by law, or by the stockholder’s duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or the Secretary’s representative at or before the time of the meeting.
SECTION 2.7. Notice of Stockholder Business and Nominations .
(A) Annual Meetings of Stockholders . (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s notice of meeting delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the Chairman of the Board of Directors or the Board of Directors or (c) by any stockholder of the Corporation that is entitled to vote at the meeting and that complied with the notice procedures
2
set forth in clauses (2) and (3) of this paragraph (A) of this Bylaw and that was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting; provided , however , that with respect to the annual meeting to be held in 2005, the anniversary date shall be deemed to be May 11, 2005; provided further , that in the event that the date of the annual meeting is advanced by more than thirty (30) days, or delayed by more than sixty (60) days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described in this paragraph (A) of this Bylaw. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on behalf of which the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on behalf of which the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting, and (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder.
(3) Notwithstanding anything in the second sentence of paragraph (A) (2) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty (80) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of
3
business on the tenth (10 th ) day following the day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting pursuant to Section 2.4 of these Bylaws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation that is entitled to vote at the meeting, that complies with the notice procedures set forth in this Bylaw and that is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate such number of persons for election to such position(s) as are specified in the Corporation’s Notice of Meeting, if the stockholder’s notice as required by paragraph (A) (2) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.
(C) General . (1) Only persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or business is not in compliance with this Bylaw, to declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any series of Preferred Stock or any other series or class of stock to elect directors under specified circumstances.
4
SECTION 2.8. Procedure for Election of Directors; Required Vote . Except as otherwise set forth in the Certificate of Incorporation with respect to the right of the holders of any series of Preferred Stock or any other series or class of stock to elect additional directors under specified circumstances, a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, listing standards applicable to the Corporation’s capital stock, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the stockholders at any meeting shall be decided by the affirmative vote of a majority of the votes cast with respect thereto.
SECTION 2.9. Inspectors of Elections; Opening and Closing the Polls .
(A) The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.
SECTION 2.10. No Stockholder Action by Written Consent . Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in the Certificate of Incorporation to elect directors under specific circumstances, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers . The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.
SECTION 3.2. Number, Tenure and Qualifications . Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of stock as set forth in the
5
Certificate of Incorporation, to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the Whole Board, but shall consist of not more than seventeen nor less than three directors. The directors, other than those who may be elected by the holders of any series of Preferred Stock, or any other series or class of stock as set forth in the Certificate of Incorporation, shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 2005 annual meeting of stockholders, the term of office of the second class to expire at the 2006 annual meeting of stockholders and the term of office of the third class to expire at the 2007 annual meeting of stockholders. Each director shall hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing at the 2005 annual meeting, (A) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (B) if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created.
Notwithstanding the foregoing, no outside director shall be nominated by the Board of Directors for election as a director for another term of office unless such term of office shall begin before he attains age 75 ( provided , however , that any outside director who is a director at the time these Bylaws are adopted may continue to serve as a director), and no inside director’s term of office shall continue after he attains age 65 or after termination of his services as an officer or employee of the Corporation, unless such continuance is approved by a majority of the outside directors on the Board of Directors at the time the disqualifying event occurs and each time thereafter that such inside director is nominated for reelection. The term “outside director” means any person who has never served as an officer or employee of the Corporation or an affiliate and the term “inside director” means any director who is not an “outside director.” Any person who is ineligible for re-election as a director under this paragraph may, by a majority vote of the Board of Directors, be designated as a “Director Emeritus” and as such shall be entitled to receive notice of, and to attend meetings of, the Board of Directors, but shall not vote at such meetings.
SECTION 3.3. Chairman of the Board of Directors. The Board of Directors may elect from its members a Chairman of the Board of Directors. If a Chairman of the Board of Directors has been elected and is present, such Chairman shall preside at all meetings of the Board of Directors and stockholders. The Chairman of the Board of Directors shall have such other powers and perform such other duties as the Board of Directors may determine, including (if the Chairman of the Board of Directors is not the Chief Executive Officer) providing advice and counsel to the Chief Executive Officer and other members of senior management in areas such as corporate and strategic planning and policy, mergers and acquisitions, investor relations and other areas requested by the Board of Directors. Except where by law the signature of the Chief Executive Officer or President is required, the Chairman of the Board of Directors shall possess the same power as the Chief Executive Officer or President to sign all certificates, contracts and other instruments of the Corporation that may be duly authorized by the Board of Directors. The Chairman of the Board of Directors shall make reports to the Board of Directors and shall perform such other duties as are properly required of the Chairman by the Board of Directors.
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SECTION 3.4. Regular Meetings . A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, each annual meeting of stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.
SECTION 3.5. Special Meetings . Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board of Directors, the Chief Executive Officer, the President or a majority of the Whole Board. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.
SECTION 3.6. Notice . Notice of any special meeting shall be given to each director at his or her business or residence in writing by hand delivery, first-class or overnight mail or courier service, facsimile transmission, electronic transmission or orally by telephone communication. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by overnight mail or courier service, such notice shall be deemed adequately delivered when the notice is delivered to the overnight mail or courier service at least twenty four (24) hours before such meeting. If by hand delivery, facsimile transmission or electronic transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twenty four (24) hours before such meeting. If by telephone, the notice shall deemed adequately given if given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of these Bylaws. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing, either before or after such meeting.
SECTION 3.7. Conference Telephone Meetings . Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.
SECTION 3.8. Quorum . A whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.
SECTION 3.9. Vacancies . Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock, as set forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement,
7
disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, or the sole remaining director, though less than a quorum of the Board of Directors and not by stockholders. Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Whole Board shall shorten the term of any incumbent director.
SECTION 3.10. Executive and Other Committees . The Board of Directors may designate an Executive Committee to exercise, subject to applicable provisions of law, all the powers of the Board of Directors in the management of the business and affairs of the Corporation when the Board of Directors is not in session, including the power to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware. The Board of Directors may also, by resolution similarly adopted, designate one or more other committees. The Executive Committee and each such other committee shall consist of two (2) or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, other than the Executive Committee (the powers of which are expressly provided for herein), may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution or the charter of such committee duly approved by the Board of Directors. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors of the Directors to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board of Directors when required.
A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide; provided , however , that in the event of a deadlock, the chairman of such committee shall cast the deciding vote. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.5 of these Bylaws. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such committee. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.
SECTION 3.11. Removal . Subject to the rights of the holders of any series of Preferred Stock, or any other series or class of capital stock as set forth in the Certificate of Incorporation, to elect additional directors under specified circumstances, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class.
8
SECTION 3.12. Compensation . Each director, in consideration of his or her service as such, shall be entitled to receive from the Corporation such consideration per annum and for attendance at meetings of the Board of Directors or any committee thereof as the Board of Directors may from time to time determine. The Board of Directors may also provide that the Corporation shall reimburse each director for any expenses incurred by such director in connection with his or her attendance at any meeting of the Board of Directors or any committee thereof. Nothing in this bylaw shall be construed to preclude any director from serving the Corporation in any other capacity and receiving proper compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers . The elected officers of the Corporation shall be a Chief Executive Officer, a President, any number of Vice Presidents that the Board of Directors may deem proper, a Chief Financial Officer, a Controller, a Secretary, a Treasurer, and such other officers as the Board of Directors from time to time may deem proper. All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.
SECTION 4.2. Election and Term of Office . The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Subject to Section 4.7 of these Bylaws, each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his death or until he or she shall resign.
SECTION 4.3. Chief Executive Officer . The Chief Executive Officer shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to his office that may be required by law and all such other duties as are properly required of him by the Board of Directors. The Chief Executive Officer shall make reports to the Board of Directors, and shall perform all such other duties as are properly required of him by the Board of Directors, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chief Executive Officer may sign, alone or with the Secretary, or an Assistant Secretary, or any other proper officer of the Corporation authorized by the Board of Directors, certificates, contracts, and other instruments of the Corporation as authorized by the Board of Directors.
SECTION 4.4. President . The President shall be subject to the direction of the Board of Directors and the Chief Executive Officer and shall act in a general executive capacity and shall assist the Chief Executive Officer in the administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President shall, in the absence of or because of the inability to act of the Chief Executive Officer, perform all duties of the Chief Executive Officer. The President may sign, alone or with the Secretary, or an Assistant Secretary, or any other proper officer of the Corporation authorized by the Board of Directors,
9
certificates, contracts, and other instruments of the Corporation as authorized by the Board of Directors.
SECTION 4.5. Vice Presidents . The Vice Presidents, if any, shall be subject to the direction of the Chief Executive Officer and President and shall have such powers and duties as the Board of Directors, the Chief Executive Officer or the President may provide.
SECTION 4.6. Chief Financial Officer . The Chief Financial Officer, if any, shall be subject to the direction of the Chief Executive Officer and President and shall have primary responsibility for the financial affairs of the Corporation and have such other powers and duties as the Board of Directors, the Chief Executive Officer or the President may provide.
SECTION 4.7. Controller . The Controller, if any, shall be subject to the direction of the Chief Financial Officer, shall be the Corporation’s chief accounting officer and shall have primary responsibility for the Corporation’s books of account, accounting records and accounting procedures.
SECTION 4.8. Secretary . The Secretary shall give, or cause to be given, notice of all meetings of stockholders and Directors and all other notices required by law or by these Bylaws, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board of Directors, the Chief Executive Officer or the President, or by the Board of Directors, upon whose request the meeting is called as provided in these Bylaws. The Secretary shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the stockholders of the Corporation in a book to be kept for that purpose, and shall perform such other duties as may be assigned to the Secretary by the Board of Directors, the Chief Executive Officer or the President. The Secretary shall have the custody of the seal of the Corporation and may affix the same to all instruments requiring it, and attest to the same.
SECTION 4.9. Treasurer . The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the Chief Executive Officer, or the President, taking proper vouchers for such disbursements. The Treasurer shall render to the Chairman of the Board of Directors, the Chief Executive Officer, the President and the Board of Directors, whenever requested, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of Directors shall prescribe.
SECTION 4.10. Removal . Any officer elected by the Board of Directors may be removed by a majority of the members of the Whole Board whenever, in their judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of such officer’s successor or such officer’s death, resignation or removal,
10
whichever event shall first occur, except as otherwise provided in an employment contract or an employee plan.
SECTION 4.11. Vacancies . A newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers .
(A) The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the appropriate officers of the Corporation may from time to time prescribe, provided, that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the Chief Executive Officer, the President or any Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation representing the number of shares registered in certificate form. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
(B) The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution prescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
(C) The shares of the stock of the Corporation represented by certificates shall be transferred on the books of the Corporation by the holder thereof in person or by his or her attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Corporation. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the General Corporation Law of the State of Delaware or, unless otherwise provided
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by the General Corporation Law of the State of Delaware, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 5.2. Lost, Stolen, or Destroyed Certificates . No certificate for shares or uncertificated shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any financial officer may in its or such officer’s discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year . The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year.
SECTION 6.2. Dividends . The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.
SECTION 6.3. Seal . The corporate seal shall be in circular form and shall have inscribed thereon the name of the Corporation and the words “Corporate Seal—Delaware.”
SECTION 6.4. Facsimile Signatures . In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 6.5. Reliance upon Books, Reports and Records . Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, to the fullest extent provided by law, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or documents presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person.
SECTION 6.6. Waiver of Notice . Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or any meeting of the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness of notice.
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SECTION 6.7. Audits . The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors or a committee thereof, and it shall be the duty of the Board of Directors to cause such audit to be made annually.
SECTION 6.8. Resignations . Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of such resignation on the Chief Executive Officer, the President or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chief Executive Officer, the President, or the Secretary or at such later date as is stated therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.
SECTION 6.9. Indemnification and Insurance . (A) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “ proceeding ”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, trustee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation, whether the basis of such proceeding is alleged action in an official capacity as such a director, officer, employee, trustee or agent or in any other capacity while serving as such a director, officer, employee, trustee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be such a director, officer, employee, trustee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided , however , that except as provided in paragraph (B) of this Bylaw with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
(B) To obtain indemnification under this Bylaw, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this paragraph (B), a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (1) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the claimant for a determination by Independent Counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as
13
hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the Corporation. In the event the determination of entitlement to indemnification is to be made by Independent Counsel at the request of the claimant, the Independent Counsel shall be selected by the Board of Directors unless there shall have occurred within two years prior to the date of the commencement of the action, suit or proceeding for which indemnification is claimed a “Change in Control” as defined in the Corporation’s Executive Severance Plan (Tier I), in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the Board of Directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid in full by the Corporation within thirty days (30) after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
(D) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to paragraph (C) of this Bylaw that the procedures and presumptions of this Bylaw are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all of the provisions of this Bylaw.
(E) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Bylaw shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
(F) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, trustee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether
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or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the Corporation maintains any policy or policies providing such insurance, each such director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in paragraph (G) of this Bylaw, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent.
(G) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to require the Corporation to pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation, and to persons serving as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, at the request of the Corporation, to the fullest extent of the provisions of this Bylaw with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
(H) The right to indemnification conferred in this Bylaw shall be a contract right and shall include the right to require the Corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within twenty (20) days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided , however , that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by such a person in his or her capacity as such a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such person while such a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Bylaw or otherwise.
(I) If any provision or provisions of this Bylaw shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Bylaw (including, without limitation, each portion of any paragraph of this Bylaw containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Bylaw (including, without limitation, each such portion of any paragraph of this Bylaw containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this By-Law:
(1) " Disinterested Director ” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.
(2) " Independent Counsel ” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any
15
person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant’s rights under this By-Law.
(K) Any amendment or repeal of this Bylaw shall not diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
ARTICLE VII
AMENDMENTS
SECTION 7.1. Amendments . These Bylaws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting and, in the case of a meeting of the Board of Directors, in a notice given no less than twenty four (24) hours prior to the meeting; provided , however , that, in the case of amendments by stockholders, notwithstanding any other provisions of these Bylaws or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of stock required by law, the Certificate of Incorporation or these Bylaws, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provision of these Bylaws.
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Exhibit 4.2
MONEYGRAM
INTERNATIONAL, INC.
and
WELLS FARGO BANK, NA.
Rights Agreement
Dated as of June 30, 2004
TABLE OF CONTENTS
| Page | ||||||
|
Number
|
||||||
|
Section 1.
|
Definitions | 1 | ||||
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Section 2.
|
Appointment of Rights Agent | 6 | ||||
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Section 3.
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Issue of Right Certificates | 6 | ||||
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Section 4.
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Form of Right Certificates | 9 | ||||
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Section 5.
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Countersignature and Registration | 9 | ||||
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Section 6.
|
Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates | 10 | ||||
|
Section 7.
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Exercise of Rights; Purchase Price; Expiration Date of Rights | 11 | ||||
|
Section 8.
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Cancellation and Destruction of Right Certificates | 13 | ||||
|
Section 9.
|
Availability of Preferred Shares | 14 | ||||
|
Section 10.
|
Preferred Shares Record Date | 14 | ||||
|
Section 11.
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Adjustment of Purchase Price, Number of Shares or Number of Rights | 15 | ||||
|
Section 12.
|
Certificate of Adjusted Purchase Price or Number of Shares | 26 | ||||
|
Section 13.
|
Consolidation, Merger or Sale or Transfer of Assets or Earning Power | 26 | ||||
|
Section 14.
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Fractional Rights and Fractional Shares | 28 | ||||
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Section 15.
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Rights of Action | 30 | ||||
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Section 16.
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Agreement of Right Holders | 30 | ||||
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Section 17.
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Right Certificate Holder Not Deemed a Stockholder | 31 | ||||
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Section 18.
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Concerning the Rights Agent | 32 | ||||
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Section 19.
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Merger or Consolidation or Change of Name of Rights Agent | 32 | ||||
-i-
| Page | ||||||
|
Number
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||||||
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Section 20.
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Duties of Rights Agent | 33 | ||||
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Section 21.
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Change of Rights Agent | 36 | ||||
|
Section 22.
|
Issuance of New Right Certificates | 38 | ||||
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Section 23.
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Redemption | 38 | ||||
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Section 24.
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Exchange | 39 | ||||
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Section 25.
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Notice of Certain Events | 41 | ||||
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Section 26.
|
Notices | 42 | ||||
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Section 27.
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Supplements and Amendments | 43 | ||||
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Section 28.
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Successors | 44 | ||||
|
Section 29.
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Benefits of this Agreement | 44 | ||||
|
Section 30.
|
Severability | 44 | ||||
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Section 31.
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Governing Law | 45 | ||||
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Section 32.
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Counterparts | 45 | ||||
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Section 33.
|
Descriptive Headings | 45 | ||||
|
Signatures
|
47 | |||||
|
Exhibit A
|
- | Form of Certificate of Designations | ||
|
Exhibit B
|
- | Form of Right Certificate | ||
|
Exhibit C
|
- | Summary of Rights to Purchase Preferred Shares |
-ii-
Exhibit C
Agreement, dated as of June 30, 2004, between MoneyGram International, Inc., a Delaware corporation (the “Company”), and Wells Fargo Bank, N.A., as rights agent (the “Rights Agent”).
The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Common Share (as hereinafter defined) of the Company outstanding on June 24, 2004 (the “Record Date”), each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
(a) “Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of an acquisition of Common Shares by the Company which, by reducing the number of Common
Shares of the Company outstanding, increases the proportionate number of Common Shares of the Company beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding; provided, however, that, if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an “Acquiring Person.” Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.
(b) “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.
(c) “Associate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement.
(d) A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” any securities:
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(i) which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of se-
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curities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder.
(e) “Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Minnesota are authorized or obligated by law or executive order to close.
(f) “Close of Business” on any given date shall mean 5:00 P.M., Minneapolis, Minnesota time, on such date; provided, however, that, if such date is not a Business Day, it shall mean 5:00 P.M., Minneapolis, Minnesota time, on the next succeeding Business Day.
(g) “Common Shares” when used with reference to the Company shall mean the shares of common stock, par value $0.01 per share, of the Company. “Common Shares” when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
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(h) “Distribution Date” shall have the meaning set forth in Section 3(a) hereof.
(i) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(j) “Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof.
(k) “Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.
(l) “NASDAQ” shall mean the National Association of Securities Dealers, Inc. Automated Quotation System.
(m) “Person” shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.
(n) “Preferred Shares” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Agreement as Exhibit A.
(o) “Purchase Price” shall have the meaning set forth in Section 4 hereof.
(p) “Record Date” shall have the meaning set forth in the second paragraph hereof.
(q) “Redemption Date” shall have the meaning set forth in Section 7(a) hereof.
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(r) “Redemption Price” shall have the meaning set forth in Section 23(a) hereof.
(s) “Right” shall have the meaning set forth in the second paragraph hereof.
(t) “Right Certificate” shall have the meaning set forth in Section 3(a) hereof.
(u) “Shares Acquisition Date” shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such.
(v) “Subsidiary” of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.
(w) “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.
(x) “Trading Day” shall have the meaning set forth in Section 11(d) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall, prior to the Distribution Date, also be the holders of the Common Shares of the Company) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be
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determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares of the Company for or pursuant to the terms of any such plan) of a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of Common Shares of the Company aggregating 15% or more of the then outstanding Common Shares of the Company (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares of the Company registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares of the Company. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of
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Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares of the Company outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto. Until the Distribution Date (or the earlier of the Redemption Date or the Final Expiration Date), the surrender for transfer of any certificate for Common Shares of the Company outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby.
(c) Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain rights as set forth in an Agreement between MoneyGram International, Inc. (the “Corporation”) and Wells Fargo Bank, N.A., dated as of June 30, 2004, as it may be amended from time to time (the “Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Corporation. Under certain circumstances, as set forth in the Agreement, such Rights (as defined in the Agreement) will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Corporation will mail to the holder of this certificate a copy of the Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Agreement, Rights beneficially owned by any Person (as defined in the Agreement) who becomes an Acquiring Person or an Associate or Affiliate thereof (as defined in the Agreement), or certain transferees of such Person, may become null and void.
With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares of the Company represented by such certificates
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shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby. In the event that the Company purchases or acquires any Common Shares of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares of the Company which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto, and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any applicable rule or regulation made pursuant thereto or with any applicable rule or regulation of any stock exchange or the National Association of Securities Dealers, Inc., or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the price per one one-hundredth of a Preferred Share set forth therein (the “Purchase Price”), but the number of such one one-hundredths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, any of its Vice Presidents or its Treasurer, either manually or by facsimile signature,
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shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the individual who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such individual was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have
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become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein), in whole or in part, at any time after the Distribution Date, upon
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surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on June 30, 2014 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share purchasable pursuant to the exercise of a Right shall initially be $100, and shall be subject to adjustment from time to time as provided in Section 11 or 13 hereof, and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes any such transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent of the Preferred Shares with such depositary agent) and the Company hereby directs such depositary agent to comply with such
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request; (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof; (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder; and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to such holder’s duly authorized assigns, subject to the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, and in accordance with any SEC required holding period, destroy such cancelled Right Certificates, and, in such case, shall deliver a certificate of destruction thereof to the Company.
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Section 9. Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights
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was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that, if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately
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adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 hereof, in the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of the Company (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void, and any holder of such Rights shall thereafter have no right to exercise
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such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with subparagraph (ii) above, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exercise of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“equivalent preferred shares”)) or securities convertible into Preferred Shares or equivalent preferred shares at a price
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per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and, in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
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(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then-current per share market price of the Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such then- current per share market price of the Preferred Shares on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and, in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days immediately prior to such date; provided, however, that, in the event
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that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or Securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, reported at or prior to 4:00 P.M. New York City time or, in case no such sale takes place on such day, the average of the bid and asked prices, regular way, reported as of 4:00 P.M. New York City time, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or prior to 4:00 P.M. New York City time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported as of 4:00 P.M. New York City time by NASDAQ or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction
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of business, or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.
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(f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (A) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (B) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
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(i) The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed
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and countersigned in the manner provided for herein, and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or in the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.
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(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in Section 11(b) hereof, hereafter made by the Company to holders of the Preferred Shares shall not be taxable to such stockholders.
(n) In the event that, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then, in any such case, (A) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall
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be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares and the Securities and Exchange Commission a copy of such certificate and (c) if such adjustment occurs at any time after the Distribution Date, mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a
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price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares of the Company thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless, prior thereto, the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits
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intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making
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a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).
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Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement, and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;
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(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the exe-
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cution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its
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countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions.
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(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified
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in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (which holder shall, with such notice, submit such holder’s Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the State of Minnesota (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Minnesota), in good standing, having an office in the State of Minnesota, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
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Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors of the Company to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”). The redemption of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights
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Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any adjustment in the number of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the
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only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected, and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof.
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(d) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall, at any time after the Distribution Date, propose (i) to pay any dividend payable in stock of any class to the holders of the Preferred Shares or to make any other distribution to the holders of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of the Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in
-41-
Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and, in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
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MoneyGram International, Inc. | |
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1550 Utica Avenue South | |
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Minneapolis, Minnesota 55416 | |
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Attention: Corporate Secretary |
-42-
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
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Wells Fargo Bank, N.A. | |
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P.O. Box 64854 | |
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St. Paul, Minnesota 55164 | |
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Attention: Account Manager |
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with respect to the Rights which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that, from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Section 1(a) and 3(a) hereof to not less than 10% (the “Reduced Threshold”); provided, however, that no Person who beneficially owns a number of
-43-
Common Shares equal to or greater than the Reduced Threshold shall become an Acquiring Person unless such Person shall, after the public announcement of the Reduced Threshold, increase its beneficial ownership of the then outstanding Common Shares (other than as a result of an acquisition of Common Shares by the Company) to an amount equal to or greater than the greater of (x) the Reduced Threshold or (y) the sum of (i) the lowest beneficial ownership of such Person as a percentage of the outstanding Common Shares as of any date on or after the date of the public announcement of such Reduced Threshold plus (ii) .001%.
Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
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Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state.
Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.
| Attest: | MONEYGRAM INTERNATIONAL, INC. | |||||||
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By
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/s/ Carolyn J. Anderson | By | /s/ Teresa H. Johnson | |||||
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Name: Carolyn J. Anderson | Name: Teresa H. Johnson | ||||||
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Title: Assistant Secretary | Title Vice President, General Counsel and Secretary | ||||||
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| Attest: | WELLS FARGO BANK, N.A. | |||||||
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By
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/s/ Kenneth P. Swanson | By | /s/ Jennifer L. Leno | |||||
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Name: Kenneth P. Swanson | Name: Jennifer L. Leno | ||||||
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Title: Assistant Secretary | Title Assistant Vice President | ||||||
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Exhibit 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
MONEYGRAM INTERNATIONAL, INC.
Pursuant to Section 151 of the
The undersigned, pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, do hereby certify that, pursuant to the authority expressly vested in the Board of Directors of MoneyGram International, Inc., a Delaware corporation (the “ Corporation ”), by the Corporation’s Certificate of Incorporation, the Board of Directors has duly provided for the issuance of and created a series of Preferred Stock of the Corporation, par value $0.01 per share (the “ Preferred Stock ”), and in order to fix the designation and amount and the voting powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of a series of Preferred Stock, has duly adopted this Certificate of Designations, Preferences and Rights of Preferred Stock (this “ Certificate ”).
Each share of such series of Preferred Stock shall rank equally in all respects and shall be subject to the following provisions:
(A) Series A Junior Participating Preferred Stock. The qualifications, limitation and restrictions of the Preferred Stock shall be as follows:
(i) Designation and Amount . The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” and the number of shares constituting the Series A Preferred Stock shall be two million (2,000,000) (such shares the “ Series A Preferred Stock ”).Such number of shares may be increased or decreased by resolution of the Board of Directors; provided , that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
(ii) Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (1) $1.00 or (2) subject to the provision for adjustment hereinafter set forth, one hundred (100) times the aggregate per share amount of all cash dividends, and one hundred (100) times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (2) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (C)(ii)(A) of this Certificate immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty (60) days prior to the date fixed for the payment thereof.
(iii) Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to one hundred (100) votes on all matters submitted to a vote of the stockholders of the Corporation.In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any Preferred Stock Designation, or by applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by applicable law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
(iv) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in paragraph (B) of this Certificate are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(1) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(2) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(3) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(4) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (C)(iv) of this Certificate purchase or otherwise acquire such shares at such time and in such manner.
(v) Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any Preferred Stock Designation or as otherwise required by applicable law.
(vi) Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(vii) Consolidation, Merger, etc . In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(viii) No Redemption . The shares of Series A Preferred Stock shall not be redeemable.
(ix) Rank . The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.
(x) Amendment . The Certificate of Incorporation of the Corporation shall not be amended in any manner that would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, said MoneyGram International, Inc. has caused this Certificate of Designations to be signed by its Chief Executive Officer and has caused its corporate seal to be affixed, this 30th day of June, 2004.
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MONEYGRAM INTERNATIONAL, INC.
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| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | Chief Executive Officer | |||
Exhibit 10.1
EMPLOYEE BENEFITS AGREEMENT
BY AND AMONG
VIAD CORP,
MONEYGRAM INTERNATIONAL, INC.
AND
TRAVELERS EXPRESS COMPANY, INC.
DATED AS OF JUNE 30, 2004
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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1 | |||
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1.01. Terms Defined in the Separation and Distribution Agreement
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1 | |||
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1.02. General
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2 | |||
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1.03. Plan Names
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5 | |||
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ARTICLE II ASSIGNMENT OF EMPLOYEES
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5 | |||
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2.01. Employees
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5 | |||
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2.02. Resignation of Officers and Directors
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5 | |||
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2.03. Change of Control Severance Arrangements
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6 | |||
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2.04. Severance Pay and Termination Liabilities
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6 | |||
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ARTICLE III QUALIFIED PLANS
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6 | |||
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3.01. Savings Plan and ESOP
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6 | |||
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3.02. Defined Benefit Plans
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8 | |||
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ARTICLE IV NONQUALIFIED PENSION PLANS
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9 | |||
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4.01. SERPs
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9 | |||
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4.02. Deferred Compensation Plan and Viad Corp
Supplemental TRIM Plan
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9 | |||
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4.03. Administration
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10 | |||
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ARTICLE V WELFARE BENEFITS
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11 | |||
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5.01. End of Participation in Viad Welfare Plans
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11 | |||
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5.02. MoneyGram Plans
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11 | |||
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5.03. Certain Executive Medical Benefits
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11 | |||
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ARTICLE VI OPTIONS AND OTHER INCENTIVE COMPENSATION
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12 | |||
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6.01. Stock Options
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12 | |||
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6.02. Restricted Stock
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13 | |||
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6.03. Other Terms and Conditions
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13 | |||
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6.04. Tax Deductions
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13 | |||
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6.05. Viad Corp Employee Equity Trust
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14 | |||
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6.06. Viad Corp Management Incentive Plan
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14 | |||
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ARTICLE VII DIRECTORS’ PLANS
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15 | |||
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7.01. Deferred Compensation Plan
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15 | |||
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7.02. Charitable Award Program
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15 | |||
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Page
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ARTICLE VIII MISCELLANEOUS
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8.01. Miscellaneous Plans
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16 | |||
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8.02. Post-Distribution Liabilities
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16 | |||
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8.03. Preservation of Rights to Amend or Terminate Plans
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16 | |||
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8.04. Other Liabilities
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16 | |||
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8.05. Audit and Dispute Resolution
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17 | |||
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8.06. Effect if Distribution Does Not Occur
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18 | |||
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8.07. Incorporation of Separation and Distribution Agreement
Provisions
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18 | |||
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8.08. Indemnification; Joint and Several Liability
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18 | |||
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8.09. Cost-Sharing
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18 | |||
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8.10. Certain MoneyGram Common Stock
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18 | |||
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Schedule I: Certain MoneyGram Employees
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EMPLOYEE BENEFITS AGREEMENT
THIS EMPLOYEE BENEFITS AGREEMENT, dated as of June 30, 2004, is by and among Viad Corp, a Delaware corporation (“Viad”), MoneyGram International, Inc., a Delaware corporation (“MoneyGram”), and Travelers Express Company, Inc., a Minnesota corporation (“TECI”).
W I T N E S S E T H:
WHEREAS, Viad, MoneyGram and TECI and MGI Merger Sub, Inc., have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation and Distribution Agreement”) and certain other agreements that will govern certain matters relating to the Merger and the Distribution (as those terms are defined in the Separation and Distribution Agreement) and the relationship of Viad and MoneyGram and their respective Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Separation and Distribution Agreement, Viad, MoneyGram and TECI have agreed to enter into this Agreement allocating assets, liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs among them.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound thereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. Terms Defined in the Separation and Distribution Agreement. The following terms shall have the meanings assigned to them in the Separation and Distribution Agreement (as defined in the second paragraph of this Agreement) (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
Affiliate
Code
Distribution
Distribution Date
Effective Time
Former MoneyGram Businesses
Former Viad Business
Group
IRS
Liabilities
MoneyGram Common Stock
MoneyGram Group
NYSE
Representative
Subsidiary
Viad Common Stock
Viad Group
1.02. General. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
Active Supplemental TRIM Participant: Any Viad Employee who is not, as of the Distribution Date, employed by GES Exposition Services, Inc. or Exhibitgroup/Giltspur, a division of Viad Corp.
Adjusted Viad Option: as defined in Section 6.01(a).
Administrating Party: as defined in Section 8.05(a).
Agreement: this Employee Benefits Agreement, including Schedule I hereto.
Assumed Deferred Compensation Plan Liabilities: as defined in Section 4.02.
Assumed SERP Obligations: as defined in Section 4.01.
Assumed Supplemental TRIM Liabilities: as defined in Section 4.02.
Auditing Party: as defined in Section 8.05(a).
Deferred Compensation Plan: the Viad Corp Deferred Compensation Plan.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation, and any regulations promulgated thereunder.
Inactive Supplemental TRIM Participant: Any Viad Former Employee, other than a Viad Former Employee whose most recent employment with any member of either Group and any Former Viad Business was on the payroll of GES Exposition Services, Inc. or Exhibitgroup/Giltspur, a division of Viad Corp.
MoneyGram: as defined in the first paragraph of this Agreement.
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MoneyGram Director: any individual who is a director of MoneyGram immediately after the Distribution.
MoneyGram Employee Equity Trust: as defined in Section 6.05.
MoneyGram Employee: any individual who as of the Distribution Date is an employee of any member of either Group who (1) is on the payroll of any member of the MoneyGram Group or (2) is listed on Schedule I.
MoneyGram Former Employee: any individual who is neither a MoneyGram Employee nor a Viad Employee, but (1) at any time before the Distribution Date, was employed by any member of either Group and, immediately before the termination of such employment, was on the payroll of any member of the MoneyGram Group or (2) as of the Distribution Date is, or at any time before the Distribution Date was, employed in any of the Former MoneyGram Businesses.
MoneyGram Individual: any MoneyGram Employee or MoneyGram Former Employee.
MoneyGram Plan: any Plan maintained or contributed to by any member of either Group prior to the Distribution Date primarily for the benefit of MoneyGram Individuals.
MoneyGram Post-Distribution Value: the closing per-share price at which the MoneyGram Common Stock trades on the NYSE on the day after the Distribution Date.
MoneyGram Restricted Stock: as defined in Section 6.02(a).
MoneyGram Savings Plan: as defined in Section 3.01(b).
MoneyGram Stock Units: stock units representing hypothetical shares of MoneyGram Common Stock.
New MoneyGram Option: as defined in Section 6.01(a).
Non-parties: as defined in Section 8.05(b).
Payments: as defined in Section 8.05(a).
Plan: any plan, policy, arrangement, contract or agreement providing benefits (including bonuses, deferred compensation, incentive compensation, savings, stock purchases, pensions, profit sharing or retirement or other retiree benefits, including retiree medical benefits) for any group of employees or former employees or individual employee or former employee, or the beneficiaries and/or dependents of any such employee or former employee, whether formal or informal or written or unwritten and whether or not legally binding, and including any means, whether or not legally required, pursuant to which any benefit is provided by an employer to any employee or former employee or the beneficiaries and/or dependents of any such employee or former employee.
Pre-Spin Option: as defined in Section 6.01(a).
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Separation and Distribution Agreement: as defined in the second paragraph of this Agreement.
TECI: as defined in the first paragraph of this Agreement.
Transition Period: as defined in Section 3.01(d).
Viad: as defined in the first paragraph of this Agreement.
Viad Employee: any individual who as of the Distribution Date is an employee of any member of the Viad Group, other than a MoneyGram Employee.
Viad Equity Plans: the Viad Corp 1992 Stock Incentive Plan and the 1997 Viad Corp Omnibus Incentive Plan.
Viad ESOP: the Viad Corp Employees’ Stock Ownership Plan.
Viad ESOP Loan: the loan that is outstanding under the Loan and Guarantee Agreement dated as of June 20, 1995, as amended June 30, 1995 and May 31, 2000, among The Dial Companies Employees’ Stock Ownership Plan Trust (now the trust for the Viad ESOP), The Dial Corp (now Viad) and Wachovia Bank of North Carolina, N.A.
Viad Former Employee: any individual who as of the Distribution Date is not a MoneyGram Employee, a MoneyGram Former Employee or a Viad Employee, but either (1) at any time before the Distribution Date was an employee of any member of either Group or (2) as of the Distribution Date is, or at any time before the Distribution Date was, employed in a Former Viad Business.
Viad Individual: any Viad Employee or any Viad Former Employee.
Viad Miscellaneous Plans: any Viad Plan other than (1) the Viad Savings Plan, (2) the Viad ESOP, (3) the Viad Corp Retirement Income Plan, (4) the Viad SERPs, (5) the Viad Corp Supplemental TRIM Plan, (6) the Deferred Compensation Plan, (7) the Viad Welfare Plans, (8) the Viad Corp Flexible Compensation Plan, (9) the Viad Equity Plans, (10) the Viad Corp Management Incentive Plan, (11) the Viad Corp Employee Equity Trust, (12) the Deferred Compensation Plan for Directors of Viad, (13) the Viad Corp Director’s Charitable Award Program, and (14) the Viad Corp Director’s Matching Gift Program.
Viad Option: an option to purchase shares of Viad Common Stock granted pursuant to a Viad Equity Plan, together with any stock appreciation right or limited stock appreciation right issued in connection therewith.
Viad Plan: any Plan maintained or contributed to by any member of either Group prior to the Distribution Date, other than a MoneyGram Plan.
Viad Post-Distribution Value: the closing per-share price at which the Viad Common Stock trades on the NYSE on the day after the Distribution Date.
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Viad Pre-Distribution Value: the sum of the MoneyGram Post-Distribution Value and the Viad Post-Distribution Value.
Viad Restricted Stock: shares of Viad Common Stock issued under a Viad Equity Plan subject to forfeiture in the event that certain terms and conditions are not satisfied.
Viad Retiree Life Insurance Plan: The Viad Corp Group Life Insurance Plan for Retired Employees and Long Term Disability Benefits Recipients.
Viad Retiree Medical Plan: Any of the Viad Indemnity Retiree Medical Plan, the Viad Indemnity Medical Plan (out of area) or the Viad POS Medical Plan, to the extent applicable to retired employees and their beneficiaries and dependents.
Viad Savings Plan: the Viad Corp Capital Accumulation Plan.
Viad SERPs: The Viad Corp Supplemental Pension Plan, the Premier Cruise Lines Supplemental Executive Retirement Plan, the Aircraft Services International Supplemental Executive Retirement Plan, the Greyhound Leisure Services Inc. Key Management Deferred Compensation Plan, the Restaura, Inc. Key Management Deferred Compensation Plan, the Restaura, Inc. Voluntary Retirement Plan, the ProDine, Inc./Glacier Park, Inc. Supplemental Executive Retirement Plan, and the individual pension arrangements reflected in ledger item 2650-515 on the Viad Corp general ledger.
Viad Stock Units: stock units representing hypothetical shares of Viad Common Stock.
Viad Welfare Plan: any Viad Plan that is a Welfare Plan.
Welfare Plan: any Plan that is a “welfare plan” within the meaning of Section 3(1) of ERISA, whether or not such Plan is subject to ERISA.
1.03. Plan Names. The names of specific Plans used herein are capitalized (but not defined above in this Article I).
ARTICLE II
2.01. Employees. Viad and MoneyGram shall take all steps necessary or appropriate so that to the extent practicable, all MoneyGram Employees are employed by a member of the MoneyGram Group not later than as soon as practicable after the Distribution Date; provided , however , that nothing herein shall give to any individual a right of employment, or continued employment, by any member of the MoneyGram Group or the Viad Group.
2.02. Resignation of Officers and Directors. Except as otherwise agreed by the parties hereto or as otherwise provided in the Separation and Distribution Agreement, effective not later than immediately before the Distribution Date, (1) all Viad Employees who are acting as directors or officers of any member of the MoneyGram Group shall resign from such positions with the MoneyGram Group and (2) all MoneyGram Employees who are acting as directors or officers of any member of the Viad Group shall resign from such positions with the Viad Group.
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2.03. Change of Control Severance Arrangements. Effective as of the Distribution Date, all MoneyGram Employees shall cease to be participants in the Viad Corp Executive Severance Plans.
2.04. Severance Pay and Termination Liabilities.
(a) No Severance. Viad, MoneyGram and TECI agree that, with respect to individuals who, in connection with the Distribution, cease to be employees of the Viad Group and become employees of the MoneyGram Group, such cessation shall not be deemed a severance of employment from either Group for purposes of any Plan that provides for the payment of severance, salary continuation or similar benefits.
(b) Assumption of Liabilities. Except as otherwise specifically provided herein, the Viad Group shall retain and be solely responsible for all liabilities and obligations whatsoever in connection with claims made by or on behalf of Viad Individuals, and the MoneyGram Group shall assume and be solely responsible for all liabilities and obligations whatsoever in connection with claims made by or on behalf of MoneyGram Individuals in respect of severance pay, salary continuation and similar obligations and all other liabilities of any type arising out of or relating to the termination or alleged termination of any such person’s employment either before, to the extent unpaid, or on or after the Distribution Date.
ARTICLE III
3.01. Savings Plan and ESOP.
(a) End of Participation by MoneyGram Employees. As of the Distribution Date, the MoneyGram Employees shall cease to accrue benefits under the Viad Savings Plan and the Viad ESOP, and, except to the extent expressly provided below in this Section 3.01, the MoneyGram Employees shall cease to be participants, and the MoneyGram Group shall cease to be participating employers, in the Viad Savings Plan and the Viad ESOP.
(b) MoneyGram Savings Plan. MoneyGram shall take, or cause to be taken, all action necessary and appropriate to establish a defined contribution savings plan (the “MoneyGram Savings Plan”) to accept the transfers of assets and liabilities provided for in this Section 3.01 and to provide benefits, effective as of the Distribution Date, for all MoneyGram Individuals and beneficiaries thereof who, immediately prior to the Distribution Date, were participants in or otherwise entitled to benefits under the Viad Savings Plan. The MoneyGram Savings Plan shall be substantially the same, in all material respects, as the Viad Savings Plan. Without limiting the generality of the foreoing, the MoneyGram Savings Plan initially shall offer investment choices comparable to those offered by the Viad Savings Plan. TECI and MoneyGram agree that each such MoneyGram Individual and beneficiary shall be, to the extent applicable, entitled, for all purposes under the Viad Savings Plan, to be credited with the term of service credited to him or her as of the Distribution Date under the terms of the Viad Savings Plan or the Viad ESOP, as applicable, as if such service had been rendered to the MoneyGram Group. Viad agrees to provide MoneyGram, as soon as practicable after the Distribution Date (with the cooperation of MoneyGram to the extent that relevant information is in the possession
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of the MoneyGram Group), with a list of the MoneyGram Individuals who were, to the best knowledge of Viad, participants in or otherwise entitled to benefits under the Viad Savings Plan immediately prior to the Distribution Date. Viad shall also provide MoneyGram with such additional information (in the possession of the Viad Group and not already in the possession of the MoneyGram Group) as may be reasonably requested by MoneyGram and necessary in order for the MoneyGram Group to establish and administer the MoneyGram Savings Plan effectively; provided , that such request is made by MoneyGram within 60 days after completion of the asset transfer to the MoneyGram Savings Plan required by this Section 3.01; and provided , further , that MoneyGram reimburses Viad for all costs incurred by Viad in providing such information.
(c) Spinoff. Viad agrees, as soon as practicable following the Distribution Date, to direct the trustee of the trust funding the Viad Savings Plan and the trustee of the trust funding the Viad ESOP to transfer to the trustee or other funding agent of the MoneyGram Savings Plan, in cash, securities or other property or a combination thereof, as reasonably determined by Viad, an amount equal to the account balances as of the date of transfer attributable to the MoneyGram Individuals who are participants in the Viad Savings Plan and/or the Viad ESOP and beneficiaries thereof, plus the portion of any unallocated contributions and trust earnings or losses (if any) attributable to such participants and beneficiaries; provided , that the assets of the Exempt Loan Suspense Account of the Viad ESOP (as defined in the Viad ESOP) and the liability under the Viad ESOP Loan shall be retained by the Viad ESOP. Promissory notes representing participant loans, and any Viad Common Stock and MoneyGram Common Stock, held in such accounts shall be transferred in kind, and all other assets held in such accounts shall be transferred in such manner as the responsible fiduciaries of the Viad Savings Plan and the MoneyGram Savings Plan shall determine.
(d) Cooperation and Filings. In connection with the transfer described in Section 3.01(c), Viad, MoneyGram and TECI shall cooperate in making any and all appropriate filings required under the Code or ERISA, and the regulations thereunder, and any applicable securities laws and take all such action as may be necessary and appropriate to cause such transfer to take place as soon as practicable after the Distribution Date; provided , however , that such transfer shall not take place until as soon as practicable after the later of (1) the expiration of a 30-day period following the date of filing of any required Forms 5310-A (or any successor form thereto) with the IRS and (2) the earlier of (A) the receipt of a favorable IRS determination letter with respect to the qualification of the MoneyGram Savings Plan under Section 401(a) of the Code or (B) the receipt by Viad of an opinion of counsel reasonably satisfactory in form and substance to Viad and MoneyGram to the effect that such counsel believes the MoneyGram Savings Plan is qualified under Section 401(a) of the Code. Viad, MoneyGram and TECI agree to provide to such counsel such information in the possession of the Viad Group and the MoneyGram Group, respectively, as may be reasonably requested by such counsel in connection with the issuance of such opinion. Viad and MoneyGram shall cooperate to ensure that during the period from the Distribution Date until the the asset transfers provided for in Section 3.01(c) are completed (the “Transition Period”), the participation in the Viad Savings Plan by MoneyGram Individuals continues without unnecessary disruption. Without limiting the generality of the foregoing: (i) Viad shall cause distributions in respect of terminated or retired participants who are MoneyGram Individuals to continue to be made, on behalf of the MoneyGram Group, from the Viad Savings Plan and the Viad ESOP during the Transition Period in accordance with applicable law and pursuant to plan provisions; (ii) Viad and
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MoneyGram shall cooperate and take all steps necessary or appropriate to ensure that to the extent reasonably practicable, during the Transition Period, (A) MoneyGram Individuals continue to be able to direct the investment of their accounts and (B) MoneyGram Individuals who have participant loans from the Viad Savings Plan can continue to make loan repayments through payroll deductions and otherwise in accordance with the terms of those loans, in each case in accordance with the provisions of applicable law and the Viad Savings Plan; and (iii) Viad and MoneyGram shall cooperate and take all actions necessary or appropriate to ensure that appropriate communications to participants regarding the implementation of this Section 3.01 (including with respect to any “blackout” period that may be imposed) are provided in a timely manner and as required by applicable law.
(e) Expenses. The expenses of implementing the foregoing provisions of this Section 3.01 shall be shared by MoneyGram and Viad in accordance with the next sentence; provided , that MoneyGram and Viad may, to the extent permissible, charge such expenses to the applicable trust for their respective plans; and provided , further , that to the extent such expenses that may be charged to the applicable trust are incurred before the applicable asset transfer has taken place, MoneyGram and Viad shall cooperate to enable such expenses to be charged to the trust for Viad Savings Plan, with the MoneyGram share thereof being subtracted from the amount of assets to be transferred to the trust for the MoneyGram Savings Plan. MoneyGram’s share of such expenses shall be a percentage thereof, determined by dividing (1) the value of the assets transferred to the MoneyGram Savings Plan by (2) the sum of such value and the value of the assets retained by the Viad Savings Plan (such values being determined as of the date of such transfer), and Viad’s share of such expenses shall be the remainder thereof.
(f) Liabilities. Except as specifically set forth in this Section 3.01, from and after the Distribution Date, the Viad Group shall cease to have any liability or obligation whatsoever with respect to MoneyGram Individuals and beneficiaries thereof under the Viad Savings Plan and the Viad ESOP, and the MoneyGram Group and the MoneyGram Savings Plan shall assume and be solely responsible for all liabilities and obligations whatsoever of either Group with respect to MoneyGram Individuals and beneficiaries thereof under the Viad Savings Plan and the Viad ESOP and for all liabilities and obligations whatsoever under the MoneyGram Savings Plan.
3.02. Defined Benefit Plans.
(a) Change in Sponsorship. As of the Distribution Date, MoneyGram shall assume sponsorship and administration of, and the Viad Group shall cease to be participating employers in, the Viad Corp Retirement Income Plan. As soon as practicable after the Distribution, MoneyGram, or one or more other persons to which MoneyGram may have delegated the appropriate power, shall appoint all trustees and other fiduciaries of the Viad Corp Retirement Income Plan (which may include re-appointing any current fiduciary, other than a member of the Viad Group, who is willing to continue to serve as such). From and after the Distribution Date, the MoneyGram Group shall assume all liabilities and obligations whatsoever with respect to the Viad Corp Retirement Income Plan, and the Viad Group shall cease to have any such liabilities and obligations.
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(b) Split of Master Trust. In order to effectuate the foregoing, it will be necessary for the assets of the Viad Corp Retirement Income Plan held in the master trust (the “Master Trust”) established pursuant to the Retirement Plan Master Trust Agreement dated June 27, 1985 with Mellon Bank, N.A., as trustee, to be transferred to a separate trust. Viad and MoneyGram shall cooperate and take all actions necessary or appropriate to do so, it being understood and agreed that except to the extent a fiduciary responsible for the other plans that participate in the Master Trust agree otherwise, all assets of the Master Trust that are not readily saleable or are otherwise illiquid shall be allocated to the Viad Corp Retirement Income Plan. The expenses of implementing the provisions of this Section 3.02 shall be shared by MoneyGram and Viad in accordance with the next sentence; provided , that MoneyGram and Viad may, to the extent permissible, charge such expenses to the applicable trust for their respective plans; and provided , further , that to the extent such expenses that may be charged to the applicable trust are incurred before the assets allocated to the Viad Corp Retirement Income Plan have been transferred to a separate trust, MoneyGram and Viad shall cooperate to enable such expenses to be charged to the Master Trust, with the MoneyGram share thereof being subtracted from the amount of assets to be transferred to the separate trust for the Viad Corp Retirement Income Plan. MoneyGram’s share of such expenses shall be a percentage thereof, determined by dividing (1) the value of the assets transferred to a separate trust for the Viad Corp Retirement Income Plan by (2) the sum of such value and the value of the remaining assets of the Master Trust (such values being determined as of the date of such transfer), and Viad’s share of such expenses shall be the remainder thereof.
(c) MoneyGram shall, to the extent reasonably practicable, continue to permit participant contributions by Viad Individuals to Viad Welfare Plans providing post-retirement benefits to be withheld from distributions from the Viad Corp Retirement Income Plan.
ARTICLE IV
4.01. SERPs. Effective as of the Distribution Date: TECI shall assume and be solely responsible for (A) all obligations under the Viad SERPs to MoneyGram Individuals, Viad Former Employees and beneficiaries thereof, and (B) all obligations to pay benefits to Viad Employees and beneficiaries thereof under the Viad Corp Supplemental Pension Plan, as in effect on the Distribution Date, using Final Average Earnings and Covered Compensation at termination of employment with Viad and all of its Subsidiaries or, in the case of payment before termination of employment, as of the date of the payment (in either case including Final Average Earnings and Covered Compensation based on earnings on and after the Distribution Date to the extent applicable), and Credited Service through the Distribution Date (collectively, the “Assumed SERP Obligations”). The benefits included in the Assumed SERP Obligations shall be fully vested as of the Distribution Date. For purposes of this Section 4.01, the capitalized terms “Final Average Earnings,” “Subsidiaries,” “Covered Compensation” and “Credited Service” shall have the meanings assigned to them under the Viad Corp Supplemental Pension Plan, as in effect on the Distribution Date.
4.02. Deferred Compensation Plan and Viad Corp Supplemental TRIM Plan. Effective as of the Distribution Date: (1) TECI shall establish or designate one or more nonqualified deferred compensation plans that are substantially similar in all material respects to the Deferred
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Compensation Plan and the Viad Corp Supplemental TRIM Plan to provide benefits to MoneyGram Individuals and beneficiaries thereof; (2) all MoneyGram Individuals shall cease to be entitled to accrue further benefits or make further deferrals under the Viad Corp Supplemental TRIM Plan; and (3) TECI shall assume and be solely responsible for all Assumed Deferred Compensation Plan Liabilities and all Assumed Supplemental TRIM Liabilities (as those terms are defined in the next two sentences). The term “Assumed Deferred Compensation Plan Liabilities” means all liabilities under the Deferred Compensation Plan to MoneyGram Individuals and beneficiaries thereof. The term “Assumed Supplemental TRIM Liabilities” means (A) all liabilities under the Viad Corp Supplemental TRIM Plan to MoneyGram Individuals, Inactive Supplemental TRIM Participants and beneficiaries thereof, and (B) a portion of the total benefit liabilities under the Viad Corp Supplemental TRIM Plan to each Active Supplemental TRIM Participant or beneficiary thereof whose benefits under the applicable plan become payable at any time after the Distribution Date, equal to the account balance of such Active Supplemental TRIM Participant under the Viad Corp Supplemental TRIM Plan as of the Distribution Date, as adjusted for earnings experience thereafter through the date of final payment to such Active Supplemental TRIM Participant or beneficiary thereof. The benefits included in the Assumed Deferred Compensation Plan Liabilities” are fully vested, and the benefits included in the Assumed Supplemental TRIM Obligations shall be fully vested as of the Distribution Date. Effective as of the Distribution, the portion of each account under the Deferred Compensation Plan that consists of Viad Stock Units shall be credited with a number of MoneyGram Stock Units equal to the number of shares of MoneyGram Common Stock that would have been distributed with respect to such Viad Stock Units in the Distribution, had they been actual outstanding shares of Viad Common Stock.
4.03. Administration. Except as specifically provided in the last sentence of Section 4.02, the benefits of Viad Individuals and beneficiaries thereof under the Viad SERPs, the Deferred Compensation Plan and the Viad Corp Supplemental TRIM Plan shall at all times be determined in accordance with the terms of the applicable Viad SERP, the Deferred Compensation Plan or the Viad Corp Supplemental TRIM Plan, as applicable, as the same may be amended from time to time by Viad; provided , that to the extent that any such amendment made after the date hereof results in an increase in such benefits, the entire cost of such increase shall be borne by Viad and the amounts payable by TECI hereunder shall be computed as if such amendment had not been made. Such benefits shall be administered as follows:
(a) Administration by Viad. Except as provided in Section 4.03(b), Viad or a Representative of Viad shall (i) determine the benefits of each Viad Individual or beneficiary thereof that become due under the Viad SERPs or the Viad Corp Supplemental TRIM Plan following the Distribution Date as and when they become payable, (ii) in the case of benefits of Viad Employees and beneficiaries thereof, calculate the portion thereof that is included in the Assumed SERP Obligations or the Assumed Supplemental TRIM Liabilities, as applicable, and (iii) notify TECI of the amounts that it is required to pay pursuant to this Article IV. TECI shall pay, or cause to be paid, such amounts directly to the Viad Individual or beneficiary thereof or shall reimburse Viad for such amounts (in each case, including any applicable employer payroll taxes and withholding and paying to the appropriate governmental authorities any taxes or other amounts required to be withheld therefrom), as directed by Viad or such Representative of Viad.
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(b) Administration by MoneyGram or TECI. From and after the Distribution Date, MoneyGram, TECI or a Representative of MoneyGram shall be responsible for administering the payment of benefits under the Deferred Compensation Plan. In addition, if at any time after the Distribution Date Viad becomes unable to continue, or gives MoneyGram 60 days’ advance notice that it no longer wishes to continue, carrying out its administrative obligations under Section 4.03(a) above, then MoneyGram, TECI or a Representative of MoneyGram shall take over such obligations. Thereafter, MoneyGram, TECI or a Representative of MoneyGram shall (i) determine the benefits of each Viad Individual or beneficiary thereof that become due under the Viad SERPs or the Viad Corp Supplemental TRIM Plan following the Distribution Date as and when they become payable, (ii) in the case of benefits of Viad Employees and beneficiaries thereof, calculate the portion thereof that is not included in the Assumed SERP Liabilities or the Assumed Supplemental TRIM Liabilities, as applicable, and (iii ) notify Viad of such amounts. Viad shall pay, or cause to be paid, amounts directly to the Viad Individual or beneficiary thereof or shall reimburse TECI for such amounts (in each case, including any applicable employer payroll taxes and withholding and paying to the appropriate governmental authorities any taxes or other amounts required to be withheld therefrom), as directed by MoneyGram, TECI or a Representative of MoneyGram, as applicable.
(c) Administrative Costs. Viad shall pay all costs of administration carried out by Viad under Section 4.03(a) and MoneyGram and TECI shall pay all costs of administration carried out by MoneyGram and TECI under Section 4.03(b).
ARTICLE V
5.01. End of Participation in Viad Welfare Plans. As of the Distribution Date, the participation by MoneyGram Individuals in the Viad Welfare Plans shall cease, and the MoneyGram Group shall cease to be participating employers in the Viad Welfare Plans.
5.02. MoneyGram Plans. Effective as of the Distribution Date, (a) MoneyGram shall establish Welfare Plans to provide benefits to MoneyGram Individuals, which, except as Viad and MoneyGram may otherwise agree, shall be substantially similar in all material respects to the Viad Welfare Plans (including without limitation the Viad Retiree Medical Plan and the Viad Retiree Life Insurance Plan) in which such MoneyGram Individuals participated immediately before the Distribution Date, and (b) MoneyGram shall establish Welfare Plans to provide certain benefits as specified in Section 5.03. As of the Distribution Date, MoneyGram and its Welfare Plans shall assume or retain, or cause one or more members of the MoneyGram Group to assume or retain, as the case may be, and shall be solely responsible for, or cause its insurance carriers to be responsible for, all liabilities and obligations whatsoever of either Group, whether incurred before, on or after the Distribution Date in connection with claims under any Viad Welfare Plan in respect of any MoneyGram Individual or beneficiary or dependent thereof, and the Viad Group shall cease to have any liability or obligation with respect thereto.
5.03. Certain Executive Medical Benefits. As of the Distribution Date, TECI and its Welfare Plans shall assume and be solely responsible for all liabilities and obligations whatsoever of either Group to provide benefits under the Viad Corp Limited Executive Medical Plan, including without limitation with respect to claims incurred on or after the Distribution
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Date. However, except as provided below, Viad or a Representative of Viad shall continue to administer the Viad Corp Limited Executive Medical Plan, including determining the benefits of each Viad Individual or beneficiary thereof that become due thereunder and notifying TECI of the amounts that it is required to pay pursuant to this Section 5.03. TECI shall pay, or cause to be paid, such amounts (in each case, including any applicable employer payroll taxes and withholding and paying to the appropriate governmental authorities any taxes or other amounts required to be withheld therefrom) as directed by Viad or such Representative of Viad. Notwithstanding the foregoing, if at any time after the Distribution Date Viad becomes unable to continue, or gives TECI 60 days’ advance notice that it no longer wishes to continue, carrying out its administrative obligations under this Section 5.03, then TECI or a Representative of TECI shall take over such obligations. Following the Distribution, the Viad Corp Limited Executive Medical Plan shall not be amended (i) in any manner adverse to, or terminated with respect to, any individual covered thereby immediately before the Distribution, or (ii) without the consent of MoneyGram, in any manner that would increase the liabilities of the MoneyGram Group thereunder. It is acknowledged and agreed that the current and former Chairmen of the Board of Viad and their respective eligible family members are fully vested in the contractual right to receive benefits under the Viad Corp Limited Executive Medical Plan as in effect as of the date hereof.
ARTICLE VI
6.01. Stock Options. Viad and MoneyGram shall cooperate and take all action necessary to amend (if necessary), or otherwise provide for adjustments of outstanding awards under, the Viad Equity Plans, so that:
(a) New MoneyGram Options. As of the Distribution Date, each Viad Option which immediately prior to the Distribution Date is outstanding and not exercised (a “Pre-Spin Option”) shall, without any action on the part of the holder thereof, be converted into (1) an adjusted option under the applicable Viad Equity Plan (the “Adjusted Viad Option”) to purchase shares of Viad Common Stock and (2) a new option (the “New MoneyGram Option”) to purchase shares of MoneyGram Common Stock, on the terms and conditions set forth below. The number of shares of Viad Common Stock subject to the Adjusted Viad Option and the number of shares of MoneyGram Common Stock subject to the MoneyGram Option shall each equal the number of shares of Viad Common Stock subject to the Pre-Spin Option.
(b) Determination of Exercise Prices. The per-share exercise price of the Adjusted Viad Option shall equal the product of (1) the per-share exercise price of the Pre-Spin Option times (2) a fraction, the numerator of which is the Viad Post-Distribution Value and the denominator of which is the Viad Pre-Distribution Value, rounded to four decimal points. The per-share exercise price of the New MoneyGram Option shall equal the product of (A) the per-share exercise price of the Pre-Spin Option times (2) a fraction, the numerator of which is the MoneyGram Post-Distribution Value and the denominator of which is the Viad Pre-Distribution Value, rounded to four decimal points.
(c) Delivery of Shares and Payment of Exercise Price. Viad shall be obligated to deliver any shares of Viad Common Stock that are purchased by exercise of any
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Adjusted Viad Option, and MoneyGram shall be obligated to deliver any shares of MoneyGram Common Stock that are purchased by exercise of any New MoneyGram Option, in each case whether exercised by a Viad Individual or a MoneyGram Individual. In connection with any such exercise, the exercising individual shall be required to deliver the exercise price to, and make all arrangements relating to tax withholding with, the party that is obligated to deliver the shares upon such exercise.
6.02. Restricted Stock.
(a) The Distribution. The shares of MoneyGram Common Stock distributed with respect to any shares of Viad Restricted Stock shall be “MoneyGram Restricted Stock,” subject to the same rights, obligations and restrictions as are applicable to such Viad Restricted Stock under the applicable restricted stock agreement, it being understood that in the case of a MoneyGram Employee, the fact that such individual is no longer an employee of Viad shall cause no forfeiture thereunder. “Performance” with respect to Viad Restricted Stock and MoneyGram Restricted Stock (to the extent applicable) shall continue to be measured by the performance criteria specified in the applicable grant, except as may be otherwise determined by Viad (with respect to awards held by Viad Individuals) and MoneyGram (with respect to awards held by MoneyGram Individuals). Notwithstanding the foregoing, any applicable performance criteria and other requirements for vesting of any given award of Viad Restricted Stock held by one individual, and any waiver of such criteria and/or requirements, shall also apply at all times to the MoneyGram Restricted Stock distributed with respect thereto.
(b) Forfeitures. Any shares of Viad Restricted Stock that are forfeited after the Distribution Date by a Viad Individual or a MoneyGram Individual shall revert to Viad, and any shares of MoneyGram Restricted Stock that are forfeited after the Distribution Date by a Viad Individual or a MoneyGram Individual shall revert to MoneyGram.
6.03. Other Terms and Conditions. The terms and conditions of the Adjusted Viad Options, New MoneyGram Options, Viad Restricted Stock (after the Distribution) and MoneyGram Restricted Stock shall be the same as those of the corresponding Pre-Spin Option or Viad Restricted Stock (before the Distribution), as applicable, except as provided above and except that (1) for such awards held by MoneyGram Individuals, employment with any member of the MoneyGram Group shall be treated as if it were employment with Viad, (2) the definition of “change of control” shall be amended to include (i) a change of control of Viad, in the case of New MoneyGram Options and MoneyGram Restricted Stock held by Viad Individuals, as well as all Adjusted Viad Options and all Viad Restricted Stock, and (ii) a change of control of MoneyGram, in the case of Adjusted Viad Options and Viad Restricted Stock held by MoneyGram Individuals, as well as all New MoneyGram Options and MoneyGram Restricted Stock, and (3) for all such awards that include any noncompetition or similar covenants, such covenants shall apply with respect to competition with both the Viad Group and the MoneyGram Group. No such awards shall vest as a result of the consummation of any of the transactions contemplated by the Separation and Distribution Agreement and/or this Agreement.
6.04. Tax Deductions. Viad shall claim all tax deductions for compensation arising from the exercise of Adjusted Viad Options and New MoneyGram Options by Viad Individuals or the vesting of Viad Restricted Stock and MoneyGram Restricted Stock held by Viad
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Individuals, and MoneyGram shall not claim any such deduction. MoneyGram shall claim all tax deductions for compensation arising from the exercise of Adjusted Viad Options and New MoneyGram Options by MoneyGram Individuals or the vesting of Viad Restricted Stock and MoneyGram Restricted Stock held by MoneyGram Individuals, and Viad shall not claim any such deduction. Viad and MoneyGram shall share information and otherwise cooperate with one another to implement the foregoing and to help ensure that each is able to comply with all applicable tax withholding and reporting requirements associated with Adjusted Viad Options, New MoneyGram Options, Viad Restricted Stock and MoneyGram Restricted Stock.
6.05. Viad Corp Employee Equity Trust. Viad and MoneyGram shall take all action necessary so that, effective as of the Distribution Date, MoneyGram shall establish a trust (the “MoneyGram Employee Equity Trust”) comparable to the Viad Corp Employee Equity Trust to receive and hold for the benefit of MoneyGram Individuals, and the trustee of the Viad Corp Employee Equity Trust shall transfer to the trustee of the MoneyGram Employee Equity Trust, all shares of MoneyGram Common Stock received in the Distribution in respect of such shares of Viad Common Stock. Viad shall amend the Viad Corp Employee Equity Trust to the extent necessary to effectuate this Section 6.05, including without limitation to arrange for a percentage (determined in accordance with the next sentence) of the balance of the promissory note from the Viad Corp Employee Equity Trust to Viad to be assumed by the MoneyGram Employee Equity Trust and assigned to MoneyGram, so that such portion of the note represents a liability from the MoneyGram Employee Equity Trust to MoneyGram. The percentage referred to in the preceding sentence shall be determined by dividing the MoneyGram Post-Distribution Value by the Viad Pre-Distribution Value.
6.06. Viad Corp Management Incentive Plan.
(a) Payment of Bonuses. The Viad Group shall be responsible for the payment of all liabilities and obligations for benefits with respect to Viad Individuals, and the MoneyGram Group shall be responsible for the payment of all liabilities and obligations with respect to MoneyGram Individuals, under the Viad Corp Management Incentive Plan, regardless of when payable. In addition, the MoneyGram Group shall pay the Viad Group, as promptly as practicable following the Distribution, an administration fee equal to 25% of (1) the aggregate amount of all bonuses that would be payable to MoneyGram Individuals under the Viad Corp Management Incentive Plan for 2004, if such bonuses were computed based solely upon performance through the Distribution Date, times (2) a fraction, the numerator of which is the number of days from January 1, 2004 through the Distribution Date, and the denominator of which is 366. From and after the Distribution Date, Viad and MoneyGram or TECI will, to the extent practicable, either continue the Viad Corp Management Incentive Plan or adopt a new Plan in substitution therefor and, in this connection, if necessary, adjust, in a manner equitable to participants, any incentive goals or other terms contained in the Viad Corp Management Incentive Plan or such new Plan, as they relate to periods after the Distribution Date, to reflect the Distribution.
(b) No Termination of Employment. For purposes of the Viad Corp Management Incentive Plan, individuals who, in connection with the Distribution, cease to be employees of Viad and become MoneyGram Employees shall not be deemed to have terminated
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employment for purposes of any deferral elections made by such individuals, and service with the MoneyGram Group shall be deemed continuous service with Viad.
ARTICLE VII
7.01. Deferred Compensation Plan.
(a) Allocation of Liabilities. Effective as of the Distribution Date: (1) MoneyGram shall establish a nonqualified deferred compensation plan to provide benefits to MoneyGram Directors and beneficiaries thereof; and (2) TECI shall assume and be solely responsible for all liabilities under the Deferred Compensation Plan for Directors of Viad. Effective as of the Distribution, the portion of each account under the Deferred Compensation Plan for Directors of Viad that consists of Viad Stock Units shall be credited with a number of MoneyGram Stock Units equal to the number of shares of MoneyGram Common Stock that would have been distributed with respect to such Viad Stock Units in the Distribution, had they been actual outstanding shares of Viad Common Stock.
(b) No Termination of Service. For purposes of the Deferred Compensation Plan for Directors of Viad, a MoneyGram Director shall not be deemed to have terminated his or her service as a director for purposes of any deferral elections made by such MoneyGram Director until the later of the date he or she ceases to be a director of MoneyGram and the date he or she ceases to be a director of Viad.
(c) Funding. Viad, MoneyGram and TECI shall use all reasonable efforts so that, as of the Distribution Date, either (1) TECI is substituted for Viad as the “Corporation” under the Trust Agreement establishing The Dial Corp Outside Directors’ Deferred Compensation Trust or (2) the assets held in such trust immediately before the Distribution Date are transferred to a grantor trust of which TECI is the grantor, the assets of which are to be used for payment of the liabilities assumed by TECI under Section 7.01(a). However, a failure to accomplish the foregoing shall not relieve TECI of its liabilities and obligations under Section 7.01(a).
7.02. Charitable Award Program. As of the Distribution Date, TECI shall become the sponsor of The Viad Corp Director’s Charitable Award Program, and shall assume or retain, as the case may be, and shall be solely responsible for, all liabilities and obligations whatsoever of either Group, whether or not incurred prior to the Distribution Date, in connection with The Viad Corp Director’s Charitable Award Program, and the Viad Group shall cease to have any such liability or obligation with respect thereto. Viad shall assign to TECI all life insurance policies naming Viad as beneficiary that it holds to fund benefits under The Viad Corp Director’s Charitable Award Program.
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ARTICLE VIII
8.01. Miscellaneous Plans. The Viad Group shall be solely responsible for the payment of all liabilities and obligations whatsoever with respect to any Viad Individual or beneficiary or dependent thereof that is unpaid as of and through the Distribution Date under any Viad Miscellaneous Plan and the MoneyGram Group shall assume and be solely responsible for the payment of all liabilities and obligations whatsoever with respect to any MoneyGram Individual or beneficiary or dependent thereof that is unpaid as of and through the Distribution Date under any Viad Miscellaneous Plan. The MoneyGram Group shall be solely responsible for the payment of all liabilities and obligations whatsoever under any MoneyGram Plan, whether arising before, on or after the Distribution Date.
8.02. Post-Distribution Liabilities. Except as specifically provided otherwise in this Agreement, the Viad Group shall be solely responsible for the payment of all liabilities and obligations whatsoever of either Group arising with respect to any Viad Individual or beneficiary or dependent thereof and attributable to any period subsequent to the Distribution Date, and the MoneyGram Group shall be solely responsible for the payment of all liabilities and obligations whatsoever of either Group arising with respect to any MoneyGram Individual or beneficiary or dependent thereof and attributable to any period subsequent to the Distribution Date.
8.03. Preservation of Rights to Amend or Terminate Plans. Except as specifically provided in Sections 4.03, 5.03 and 7.02 above and Section 8.07 below, no provisions of this Agreement shall be construed as a limitation on the right of Viad, MoneyGram, TECI or any member of the Viad Group or the MoneyGram Group to amend or terminate any Plan or terminate its participation in any Plan, which Viad, MoneyGram, or TECI or any member of the Viad Group or the MoneyGram Group would otherwise have under the terms of such Plan or otherwise, and no provision of this Agreement shall be construed to create a right in any employee or former employee or beneficiary or dependent of such employee or former employee under a Plan which such employee, former employee, beneficiary or dependent would not otherwise have under the terms of the Plan itself. However, if at any time after the Distribution, the Viad Group or the MoneyGram Group amends any Plan in a manner that increases the liabilities of the other Group thereunder without the latter Group’s consent, then the Group making the amendment shall be solely responsible for all liabilities resulting from such amendment, notwithstanding any other provision of this Agreement.
8.04. Other Liabilities. As of the Distribution Date: (1) MoneyGram shall assume and be solely responsible for all Liabilities whatsoever of the Viad Group with respect to claims made by the MoneyGram Individuals and MoneyGram Directors relating to any employment-related or service-related Liability not otherwise expressly provided for in this Agreement, including earned salary, wages, fees, retainers, severance payments or other compensation and accrued holiday, vacation, health, dental or retirement benefits, regardless of whether such employment-related Liability was incurred before or after the Distribution Date and (2) Viad shall retain all such Liabilities with respect to (A) Viad Individuals and (B) directors of Viad who served as such prior to the Distribution Date and who are not MoneyGram Directors. In the event of any Liabilities with respect to periods prior to the Distribution Date arising from any inquiry, audit, examination, investigation, dispute, or litigation by any Governmental Authorities
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(as defined in the Separation and Distribution Agreement) related to any Viad Plan, such Liabilities shall be allocated between the Viad Group and the MoneyGram Group in a manner consistent with Viad’s past practice prior to the Distribution Date. Notwithstanding any other provision of this Agreement, the provisions of Section 5.02 of the Separation and Distribution Agreement (relating to Pre-Merger Claims) shall apply to Liabilities relating to the administration by members of the Viad Group before the Effective Time of Plans in which any MoneyGram Individuals participated.
8.05. Audit and Dispute Resolution. The following provisions shall apply with respect to the administrative duties to be carried out from time to time by Viad, MoneyGram and/or TECI under Section 4.03 or Section 5.03 above.
(a) The party carrying out any such administrative duties (the “Administrating Party”) shall provide the other party (the “Auditing Party”) with the opportunity, upon request, to conduct reasonable audits of the manner in which the Administrating Party is carrying out its duties and the accuracy of the amounts the Auditing Party is being or has been required to pay under Sections 4.01, 4.02 or 5.03, as applicable (the “Payments”). The Auditing Party may adopt reasonable procedures and guidelines for conducting audits and the selection of audit representatives under this Section 8.05. The Auditing Party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Separation and Distribution Agreement, which are incorporated by reference herein. The Administrating Party shall provide the Auditing Party’s representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide work space to its representatives. After any audit is completed, the Administrating Party shall have the right to review a draft of the audit findings and to comment on those findings in writing within ten business days after receiving such draft.
(b) The Auditing Party’s audit rights under this Section 8.05 shall include the right to audit, or participate in an audit facilitated by the Administrating Party, of any Subsidiaries and Affiliates of the party being audited and to require the Administrating Party to request any Representative or other benefit providers and third parties with whom the Administrating Party has a relationship, or agents of such party (collectively, the “Non-parties”), to agree to such an audit to the extent relevant to the administrative duties at issue. The Administrating Party shall, upon written request from the Auditing Party, provide an individual (at the Auditing Party’s expense) to supervise any audit of a Non-party. The Auditing Party shall be responsible for supplying, at the Auditing Party’s expense, additional personnel sufficient to complete the audit in a reasonably timely manner. The responsibility of the Administrating Party shall be limited to providing, at the Auditing Party’s expense, a single individual at each audited site for purposes of facilitating the audit.
(c) If, at the conclusion of any audit conducted pursuant to this Section 8.05, the Auditing Party determines that it believes that the Administrating Party has required it, or is requiring it, to make Payments in excess of the proper amounts, the Auditing Party and the Administrating Party shall negotiate in good faith for 30 days to reach agreement about such Payments. If they are unable to reach such agreement during such period, they shall select a mutually agreeable third-party expert to determine the proper amounts of the disputed Payments,
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whose determination shall be final and binding upon all parties and whose fees and expenses shall be borne equally by Viad, on the one hand, and MoneyGram and TECI, on the other hand.
8.06. Effect if Distribution Does Not Occur. If the Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur effective as of the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed by Viad, MoneyGram and TECI.
8.07. Incorporation of Separation and Distribution Agreement Provisions. The following provisions of the Separation and Distribution Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein: Section 5.01 (relating to survival); Article VI (relating to access to information); Article X (relating to termination); and Article XI (relating to miscellaneous) other than Sections 11.02 (relating to expenses) and 11.11 (relating to corporate power); provided , that notwithstanding Section 11.06 of the Separation and Distribution Agreement, each Viad Individual, each current or former director of Viad and each beneficiary or dependent thereof who is entitled to receive any of the benefits for which TECI or MoneyGram is made responsible pursuant to Section 4.01, 4.02, 5.03, 6.01, 6.02, 6.03, 7.01 and 7.02 above shall be third-party beneficiaries of such Sections to the extent applicable, entitled to enforce against TECI or MoneyGram, as the case may be, the obligations of TECI or MoneyGram, as the case may be, thereunder to provide benefits to him or her.
8.08. Indemnification; Joint and Several Liability. The Liabilities that are assigned to MoneyGram, TECI and/or the MoneyGram Group under this Agreement shall be considered MoneyGram Liabilities subject to Sections 5.04, 5.05 and 5.06 of the Separation and Distribution Agreement. Each member of the MoneyGram Group shall have joint and several liability for all Liabilities and obligations of each other member of the MoneyGram Group hereunder. The Liabilities that are assigned to Viad and/or the Viad Group under this Agreement shall be considered Viad Liabilities subject to Sections 5.04, 5.05 and 5.06 of the Separation and Distribution Agreement. Each member of the Viad Group shall have joint and several liability for all Liabilities and obligations of each other member of the Viad Group hereunder.
8.09. Cost-Sharing. MoneyGram or TECI shall reimburse Viad for the costs of benefits and the associated administrative costs of the participation and coverage by MoneyGram Individuals and their beneficiaries up to the Distribution Date, on a basis consistent with past practice and taking into account such factors as the percentage of the underlying obligation attributable to Viad Individuals and MoneyGram Individuals, respectively; provided , that in the case of Plans that are insured, the premium costs associated therewith for periods that begin before and end on or after the Distribution Date shall be allocated between the pre-Distribution-Date period and the post-Distribution-Date period on a pro-rata basis based on the number of days in each such period.
8.10. Certain MoneyGram Common Stock. Certain shares of Viad Common Stock have been transferred from the Viad Corp Employee Equity Trust to the Viad Corp Medical Plan Trust. MoneyGram shall, upon the request of the trustee of such trust, and at the expense of MoneyGram, use all reasonable efforts to cause the shares of MoneyGram Common Stock received by such trust in the Distribution in respect of such shares of Viad Common Stock to be
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registered in accordance with applicable federal and state securities laws and listed on any applicable stock exchange, to the extent necessary for such shares of MoneyGram Common Stock to be sold in compliance with law; provided, however, that if such shares may be sold in the NYSE without such registration, or if MoneyGram purchases such shares from such trust at their then-fair market value, MoneyGram shall not be required to seek to register such shares.
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IN WITNESS WHEREOF, the parties have caused this Employee Benefits Agreement to be executed by their duly authorized representatives.
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VIAD CORP
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| By: | /s/ Scott E. Sayre | |||
| Name: | Scott E. Sayre | |||
| Title: | Vice President – General Counsel and Secretary | |||
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MONEYGRAM INTERNATIONAL, INC.
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| By: | /s/ Philip W.Milne | |||
| Name: | Philip W. Milne | |||
| Title: | President & CEO | |||
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TRAVELERS EXPRESS COMPANY, INC.
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| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | President & CEO | |||
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Exhibit 10.2
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the “Agreement”) dated as of June 30, 2004, is entered into by and between Viad Corp, a Delaware corporation (“Viad”), and MoneyGram International, Inc., a Delaware corporation (“Newco”).
WHEREAS, Viad and Newco have entered into a Separation and Distribution Agreement dated the date hereof (the “Distribution Agreement”); and
WHEREAS, pursuant to the Distribution Agreement the remaining issued and outstanding common stock of Newco will be distributed by Viad (pro rata) to the holders of its common stock (the “Spin-Off”); and
WHEREAS, the parties hereto desire to provide for the payment of tax liabilities and entitlement to tax refunds for the taxable periods ending before, on or after the date of the Spin-Off, to allocate responsibility and provide for cooperation in the preparation and filing of tax returns with respect to such taxable periods, and to provide for certain other related matters;
NOW, THEREFORE, Viad, on behalf of itself and the Viad Group (as hereinafter defined) and Newco, on behalf of itself and the Newco Group (as hereinafter defined) in consideration of the mutual covenants contained herein, agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to them in the Distribution Agreement. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined):
“Actually Realized” or “Actually Realizes” means, for purposes of determining the timing of the incurrence of any Spin-Off Tax Liability, Income Tax Liability or Other Tax Liability or the realization of a Refund (or any related Income Tax or Other Tax cost or benefit) by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Income Taxes or Other Taxes paid (or Refund realized) by such Person is increased above (or reduced below) the amount of Income Taxes or Other Taxes that such Person would have been required to pay (or Refund that such Person would have realized) but for such payment, transaction, occurrence or event.
“Affiliate” means, with respect to any Person, any other Person that, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such party, where “control”, “controlled by” and “under common control with” mean the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such party, whether through the ownership of voting securities, by voting trust, contract or similar arrangement, as trustee or executor, or otherwise.
“Aggregate Spin-Off Tax Liabilities” means the sum of the Spin-Off Tax Liabilities with respect to each taxing jurisdiction.
“Ancillary Agreements” means this Agreement, the Distribution Agreement, the Interim Services Agreement and the Employee Benefits Agreement.
“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the State of New York are authorized or obligated by law or executive order to close.
“Cash Acquisition Merger” means a merger of a newly-formed Subsidiary of Viad or Newco, as the case may be, with a corporation, limited liability company, limited partnership, general partnership or joint venture (in each case, not previously owned directly or indirectly by Viad or Newco, as the case may be) solely for cash or a note that is not an Equity Security pursuant to which Viad or Newco, as the case may be, acquires such corporation, limited liability company, limited partnership, general partnership or joint venture and no Equity Securities of Viad or any Viad Subsidiary, or Newco or any Newco Subsidiary, are issued, sold, redeemed or acquired, directly or indirectly.
“Code” means the Internal Revenue Code of 1986, as amended.
“Distribution Date” means the date on which the Spin-Off occurs.
“Equity Securities” means any stock or other equity securities treated as stock for tax purposes, or options, warrants, rights, convertible debt, or any other instrument or security that affords any Person the right, whether conditional or otherwise, to acquire stock or to be paid an amount determined by reference to the value of stock.
“Estimated Tax” or “Estimated Taxes” means the periodic (quarterly or monthly) payment of income or franchise taxes (federal, state, local or foreign) required to be made to any Tax Authority for any taxable year or period, including any payment required to be made with an extension to file any Tax Return.
“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.
“Final Determination” means the final resolution of liability for any Tax for a taxable period, (i) by IRS Form 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the IRS, or by a comparable form under the laws of any other jurisdiction; except that a Form 870-AD or comparable form that reserves (whether by its terms
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or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Tax Authority to assert a further deficiency shall not constitute a Final Determination with respect to the subject matter reserved; (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by closing agreement or accepted offer in compromise under section 7121 or 7122 of the Code, or by a comparable agreement under the laws of any other jurisdiction; (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the relevant taxing jurisdiction; or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.
“Group” means either the Newco Group or the Viad Group.
“Income Tax” (a) means (i) any foreign or any United States federal, State or local tax, charge, fee, impost, levy or other assessment that is based upon, measured by, or calculated with respect to (A) net income or profits (including, but not limited to, any capital gains, gross receipts, or minimum tax, and any tax on items of tax preference, but not including sales, use, value added, real property gains, real or personal property, transfer or similar taxes), (B) multiple bases (including, but not limited to, corporate franchise, doing business or occupation taxes), if one or more of the bases upon which such tax may be based, by which it may be measured, or with respect to which it may be calculated is described in clause (a)(i)(A) of this definition, or (C) any net worth, franchise or similar tax, in each case together with (ii) any interest and any penalties, fines, additions to tax or additional amounts imposed by any Tax Authority with respect thereto and (b) includes any transferee or successor liability in respect of an amount described in clause (a) of this definition.
“Income Tax Liabilities” means all liabilities for Income Taxes.
“IRS” means the United States Internal Revenue Service.
“Material Subsidiary” means any Subsidiary that, immediately before the relevant transaction, owns, directly or indirectly, 25 percent or more of the consolidated gross assets of the Viad Group or the Newco Group.
“Newco Board” means the Board of Directors of Newco.
“Newco Board Certification” means a certified copy of a resolution of the Newco Board in which the Newco Board, after an investigation of the facts and advice concerning the applicable law, finds and warrants to Newco that (i) following the transaction at issue, one or more Persons will not have acquired, and will not have the right to acquire, directly or indirectly, more than 25% (by vote or value) of the outstanding Equity Securities of Newco (determined immediately after such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or conversion of all such Equity Securities (if such Equity Securities
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are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Newco will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Newco is the surviving entity) and (iii) the facts and conclusions contained in the resolution will be true and correct at the time the transaction at issue closes.
“Newco Businesses” means the present, former and future subsidiaries, divisions and businesses of any member of the Newco Group which are not, or are not contemplated by the Distribution Agreement to be, part of the Viad Group immediately after the Spin-Off.
“Newco Group” means the affiliated group of corporations as defined in section 1504(a) of the Code, or similar group of entities as defined under corresponding provisions of the laws of other jurisdictions, of which Newco (or, with respect to any taxable period ending on or before the Effective Time (as defined in the Distribution Agreement), Travelers Express Company, Inc. (“TECI”)) would be the common parent if it were not a subsidiary of Viad, any corporation or other entity which is a subsidiary of Newco or TECI for the relevant taxable period or portion thereof, and, after the Spin-Off, any Affiliate of Newco or TECI.
“Other Tax Liabilities” means all liabilities for Other Taxes.
“Other Taxes” means all forms of taxation, whenever created or imposed, and whether of the United States of America or elsewhere, and whether imposed by a local, municipal, governmental, State, federation or other body, and without limiting the generality of the foregoing, shall include superfund, sales, use, ad valorem, value added, transfer, recording, withholding, payroll, employment, excise, occupation, premium or property taxes (in each case, together with any related interest, penalties and additions to tax, or additional amounts imposed by any Tax Authority thereon); provided, however, that Other Taxes shall not include any Income Taxes.
“Person” means any individual, partnership, joint venture, limited liability company, corporation, association, joint stock company, trust, unincorporated organization or similar entity or a governmental authority or any department or agency or other unit thereof.
“Qualified Tax Counsel” means independent United States tax counsel of recognized national standing that is acceptable to the party to whom the Unqualified Tax Opinion is to be provided.
“Refund” means any refund of Income Taxes or Other Taxes, including any reduction in Income Tax Liabilities or Other Tax Liabilities by means of a credit, offset or otherwise.
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“Reorganization” means the Spin-Off and the other transactions contemplated by the Distribution Agreement, including the transfer of the stock of TECI by Viad to Newco by way of the Merger (as defined in the Distribution Agreement), the transfer of certain cash to Viad by Newco and the transfer of certain assets and liabilities from Viad to TECI pursuant to the Employee Benefits Agreement (as defined in the Distribution Agreement).
“Restriction Period” means the period beginning on the date hereof and ending on the second anniversary of the Distribution Date.
“Ruling” means (a) the private letter ruling issued by the IRS to Viad in connection with the Reorganization and (b) any similar first ruling issued by any Tax Authority other than the IRS in connection with the Reorganization.
“Ruling Documents” means the Ruling, the Request for Rulings dated August 4, 2003, submitted on behalf of Viad to the IRS, the appendices, attachments and exhibits thereto, and any additional materials submitted at any time on behalf of Viad to the IRS in connection with such Request for Rulings.
“Spin-Off Tax Liabilities” means, with respect to any taxing jurisdiction, the sum of (a) any increase in Income Tax Liability or Other Tax Liability (or reduction in a Refund) Actually Realized as a result of any corporate-level gain or income recognized with respect to the failure of the Reorganization to qualify for Tax-Free Status under the income tax law of such taxing jurisdiction pursuant to any settlement, Final Determination, judgment, assessment, proposed adjustment or otherwise, (b) interest on such amounts calculated pursuant to such taxing jurisdiction’s laws regarding interest on tax liabilities at the highest Underpayment Rate for corporations in such taxing jurisdiction from the date such additional gain or income was recognized until full payment with respect thereto is made (or in the case of a reduction in a Refund, the amount of interest that would have been received on the foregone portion of the Refund but for the failure of the Reorganization to qualify for Tax-Free Status), and (c) any penalties actually paid to such taxing jurisdiction that would not have been paid but for the failure of the Reorganization to qualify for Tax-Free Status in such taxing jurisdiction.
“Supplemental Ruling” means (i) any private letter ruling issued by the IRS in connection with the Reorganization or (ii) any similar ruling issued by any Tax Authority other than the IRS in connection with the Reorganization, in each case, other than the Ruling.
“Supplemental Ruling Documents” means (i) any Supplemental Ruling, any request for a Supplemental Ruling submitted to the IRS, together with the appendices, attachments and exhibits thereto and any supplemental filings or other materials subsequently submitted to the IRS, in connection with the Reorganization or (ii) any similar filings submitted to any other Tax Authority in connection with any such request for a Supplemental Ruling.
“Tax Attribute” means any net operating loss, capital loss, or tax credit allowed by the Code or state, local or foreign Tax law, including, without limitation, alternative minimum tax credits, foreign tax credits and general business tax credits.
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“Tax Authority” means a governmental authority (foreign or domestic) or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including, without limitation, the IRS).
“Tax Benefit” means the amount of the decrease in the liability for Taxes (and, without duplication, the increase in any Tax refund) resulting from any increase or decrease in any item, including, but not limited to, any item of income or deduction, gain or loss or tax credit.
“Tax Detriment” means the amount of the increase in the liability for Taxes (and, without duplication, the reduction in any Tax refund) resulting from any increase or decrease in any item, including, but not limited to, any item of income or deduction, gain or loss, or tax credit.
“Tax Item” means any item of income, gain, loss, deduction or credit, or other attribute that may have the effect of increasing or decreasing any Tax.
“Tax-Free Status” means the qualification of each of the Reorganization (a) as a transaction described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Section 361(c) of the Code, and (c) as a transaction in which Viad, the members of the Viad Group, Newco and the members of the Newco Group recognize no income or gain other than intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.
“Tax-Related Losses” means (without duplication): (i) the Aggregate Spin-Off Tax Liabilities; (ii) all accounting, legal and other professional fees, and court costs incurred in connection with any settlement, Final Determination, judgment or other determination with respect to such Aggregate Spin-Off Tax Liabilities; and (iii) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Viad or Newco in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority payable by Viad or Newco or their respective Affiliates, in each case, resulting from the failure of the Reorganization to qualify for Tax-Free Status.
“Tax Return” or “Return” means any return, filing, questionnaire or other document filed or required to be filed, including amended returns that may be filed, for any period with any Tax Authority in connection with any Taxes (whether or not a payment is required to be made with respect to such filing).
“Taxes” means all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, federation or other body, and without limiting the generality of the foregoing, shall include income, alternative minimum, superfund, sales, use, ad valorem, gross receipts, value added,
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franchise, transfer, recording, withholding, payroll, employment, excise, occupation, premium or property taxes, together with any related interest, penalties and additions to tax, or additional amounts imposed by any Tax Authority upon the Newco Group, the Viad Group or any of their respective members or subsidiaries or divisions or branches or any combination thereof.
“Underpayment Rate” means the annual rate of interest described in Section 6621(c) of the Code for large corporate underpayments of Income Tax (or similar provision of State, local, or foreign Income Tax law, as applicable), as determined from time to time.
“Unqualified Tax Opinion” means an unqualified “will” opinion of Qualified Tax Counsel on which the party to whom such opinion is provided may rely to the effect that a transaction will not disqualify the Reorganization from Tax-Free Status, assuming that the Reorganization would have qualified for Tax-Free Status if such transaction did not occur.
“Viad Board” means the Board of Directors of Viad.
“Viad Board Certification” means a certified copy of a resolution of the Viad Board in which the Viad Board, after an investigation of the facts and advice concerning the applicable law, finds and warrants to Newco that (i) following the transaction at issue, one or more Persons will not have acquired, and will not have the right to acquire, directly or indirectly, more than 25% (by vote or value) of the outstanding Equity Securities of Viad (determined immediately after such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or conversion of all such Equity Securities (if such Equity Securities are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Viad will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Viad is the surviving entity) and (iii) the facts and conclusions contained in the resolution will be true and correct at the time the transaction at issue closes.
“Viad Businesses” means the present, former and future subsidiaries, divisions and businesses of any member of the Viad Group, other than the Newco Businesses.
“Viad Group” means the affiliated group of corporations as defined in section 1504(a) of the Code, or similar group of entities as defined under corresponding provisions of the laws of other jurisdictions, of which Viad is the common parent, and any corporation or other entity which is a member of such group for the relevant taxable period or portion thereof, but excluding any member of the Newco Group.
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ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
Section 2.01 Manner of Preparation; Elections. All Tax Returns filed after the Distribution Date, to the extent Tax Items, elections, accounting methods, conventions or Tax principles reflected on such Tax Returns could reasonably be expected to affect Tax Items, elections, accounting methods, conventions or Tax principles reflected on any Tax Return filed before the Distribution Date, shall be prepared in accordance with past practice (unless such past practice is no longer permissible under the Code or other applicable Tax law), or to the extent any such Tax Items, elections, accounting methods, conventions or Tax principles are not covered by past practice (or in the event such past practice is no longer permissible under the Code or other applicable Tax law), in accordance with reasonable Tax practices selected by Viad. All Tax Returns filed after the Distribution Date shall be filed on a timely basis by the party responsible for such filing under this Agreement. Subject to the provisions of this Agreement, all decisions relating to the preparation and filing of Tax Returns and any audit or other review of such Tax Returns shall be made in the sole discretion of the party responsible under this Agreement for such filing. Anything herein to the contrary notwithstanding, without the prior written consent of Viad, which consent shall not be unreasonably withheld, no member of the Newco Group shall carry back to any taxable period beginning before the Distribution Date any Tax Attribute arising in any taxable period beginning on or after the Distribution Date. To the extent any such carryback is not so consented to by Viad, then Viad shall be entitled to retain for itself any refund or other benefit obtained from such carryback filed by Newco or a member of the Newco Group. Newco shall promptly reimburse Viad for the amount, if any, by which any Tax Detriment incurred by the Viad Group or any member thereof as a result of such carryback exceeds the Tax Benefit(s) to the Viad Group or any member thereof as a result of such carryback, upon receipt of documentation detailing such Tax Detriment(s) within fifteen (15) days of receipt of documentation, after which any unpaid amount will accrue interest at the rate for income tax deficiencies specified in Section 3.01. Section 6.04 of the Employee Benefits Agreement (entitled “Tax Deductions”) is hereby incorporated by reference, and all Tax Returns shall be filed in a manner consistent therewith.
Section 2.02 Preparation and Filing of, and Elections with respect to, Pre-Spin-Off Tax Returns. (a) Consolidated Federal Income Tax Returns. All consolidated federal income Tax Returns which include a member of the Viad Group and a member of the Newco Group that are required to be filed for periods beginning before the Distribution Date shall be prepared and filed by Viad. Newco shall, for each of such aforesaid taxable periods for which it or any member of the Newco Group is includible in the consolidated federal income Tax Return of Viad, provide Viad with a true, complete, and correct (i) pro forma consolidated federal income Tax Return (without regard to the alternative minimum tax) for those members of the Newco Group includible in Viad’s consolidated federal income Tax Return for such taxable period, treating Newco as the common parent of such deemed consolidated group, together with an accompanying computation of the pro forma consolidated federal income Tax liability (without regard to the alternative minimum tax) of such deemed consolidated group, (ii) separate federal income Tax Returns (without regard to the alternative minimum tax) for Newco and each member of the Newco Group together with accompanying computations of the separate federal income Tax liabilities (without regard to the alternative minimum tax) of Newco and each
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member of the Newco Group and (iii) a reconciliation of book income to federal taxable income for Newco and each member of the Newco Group. Such Tax Returns and reconciliation shall be subject to review and reasonable approval by Viad and Newco shall reflect in them any reasonable comments of Viad. Newco shall provide Viad with such Returns and computations on or before the first (1 st ) day of the eighth (8 th ) month following the end of the period to which such Returns and computations relate, but in any event Newco shall provide such Returns and computations no later than the fifteenth (15 th ) day of the eighth (8 th ) month following the end of the period to which such Returns and computations relate unless another date is agreed to in writing by both parties. Viad shall notify Newco of the intended filing date of its then due consolidated federal income Tax Return and Newco shall pay Viad at least one (1) day prior to such filing date the amount of total federal income Tax liability shown on the above-referenced pro forma consolidated federal income Tax Returns (reflecting Viad’s comments) for the members of the Newco Group includible in Viad’s consolidated federal income Tax Return, reduced by all Estimated Tax payments theretofore made by Newco or any Newco Group member to Viad on account of such Tax liability, or if such Estimated Tax payments in the aggregate exceed the federal income Tax liability of Newco and each member of the Newco Group, Viad shall pay such excess to Newco within thirty (30) days of the filing by Viad of the consolidated federal income Tax Return with respect to which such overpayment relates. Additionally, Newco shall pay Viad at least one (1) day prior to such filing date an amount (calculated in the manner described in Section 2.01(d)) equal to the value of the Tax Attributes, if any, apportioned or allocated to Newco as a result of the Tax filing. Anything herein to the contrary notwithstanding, Newco for itself and each member of the Newco Group shall calculate and shall remit to Viad at least two (2) day prior to the due date of each Viad Estimated Tax payment the Estimated Tax liability attributable to Newco and each member of the Newco Group on a consolidated basis for the period to which such Estimated Tax payment relates; provided, however, that such calculation shall be subject to review and approval by Viad.
(b) Combined or consolidated state or local income or franchise Tax Returns. All combined or consolidated state or local income or franchise Tax Returns which include a member of the Viad Group and a member of the Newco Group that are required to be filed for periods beginning before the Distribution Date shall be prepared and filed by Viad. Newco shall, for each of such aforesaid taxable periods for which it or any member of the Newco Group is includible in any combined or consolidated state or local income or franchise Tax Return of Viad, provide Viad with true, complete, and correct state and local Tax Return data required or requested by Viad, including any information necessary to (i) prepare pro forma combined or consolidated state or local income or franchise Tax Returns (without regard to any alternative minimum tax), as applicable, for those members of the Newco Group includible in Viad’s combined or consolidated state or local income or franchise Tax Return for such taxable period, treating Newco as the common parent of such deemed combined or consolidated group, (ii) compute the pro forma combined or consolidated state or local income or franchise Tax liability (without regard to the alternative minimum tax) of such deemed combined or consolidated group, (iii) prepare separate state or local income or franchise Tax Returns for Newco and each member of the Newco Group, (iv) compute the separate state or local income or franchise Tax liabilities of Newco and each member of the Newco Group and (v) reconcile book income to state or local taxable income for Newco and each member of the Newco Group. Such Tax Return data shall be subject to review and reasonable approval by Viad and Newco shall reflect
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in it any reasonable comments of Viad. Newco shall provide Viad with such Tax Return data on or before the first (1 st ) day of the eighth (8 th ) month following the end of the period to which such Tax Return data relates, but in any event Newco shall provide such Tax Return data no later than the fifteenth (15 th ) day of the eighth (8 th ) month following the end of the period to which such Tax Return data relates unless another date is agreed to in writing by both parties. Viad shall notify Newco of the intended filing date of Viad’s then due combined or consolidated state or local income or franchise Tax Return and Newco shall pay Viad at least one (1) day prior to such filing date the amount of total state or local income or franchise Tax liability attributable to the members of the Newco Group for the period to which such Tax Return relates, reduced by all Estimated Tax payments theretofore made by Newco or any Newco Group member to Viad on account of such Tax liability, or if such Estimated Tax payments in the aggregate exceed the state or local income or franchise Tax liability of Newco and each member of the Newco Group, Viad shall pay such excess to Newco within thirty (30) days of the filing by Viad of the combined or consolidated state or local income or franchise Tax Return with respect to which such overpayment relates. Anything herein to the contrary notwithstanding, Newco for itself and each member of the Newco Group shall calculate and shall remit to Viad at least two (2) day prior to the due date of each Viad Estimated Tax payment the Estimated Tax liability attributable to Newco and each member of the Newco Group on a combined or consolidated basis for the period to which such Estimated Tax payment relates; provided, however, that such calculation shall be subject to review and approval by Viad. The tax savings, if any, resulting from filing combined or consolidated state or local income or franchise Tax Returns for the short period ending on the Distribution Date will be allocated to Newco in a manner consistent with the most recent period (except that Viad will not hold back 20% of Newco’s allocated savings for future audits, as it has done in the past). If there should be adjustments to any combined or consolidated state or local income or franchise Tax Returns, or to a consolidated federal income Tax Return as a result of an audit, or any other settlement with a Tax Authority, the additional Tax or Refund will be settled between Viad and Newco in accordance with Article III.
(c) Other Tax Returns. All Tax Returns (other than Tax Returns described in Sections 2.02(a) and (b)) which include or are filed with respect to a member of the Viad Group or the Newco Group that are required to be filed for periods beginning before the Distribution Date shall be filed by the member of the Viad Group or the Newco Group, as the case may be, which filed the corresponding Tax Return for the most recent period for which such Tax Return has been filed, or, if no such corresponding Tax Return has been filed, by the appropriate member in accordance with applicable law or custom. In the case of such Tax Returns filed by a member of the Viad Group, Newco shall be liable for and pay to Viad the portion of the Tax liability on such Tax Returns attributable to Newco Group members, at the time and in the amount determined in accordance with past practice. In the case of such Returns filed by a member of the Newco Group, Viad shall be liable for and pay to Newco the portion of the Tax liability on such Returns attributable to Viad Group members, at the time and in the amount determined in accordance with past practice. For the avoidance of doubt, any Tax Return that includes only members of the Newco Group (a “Separate Return”) and any Taxes with respect to such Separate Return shall be the responsibility of the Newco Group, and Newco shall indemnify Viad with respect to such Tax Returns and Taxes.
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(d) Apportionment of Tax Attributes. Credits arising in connection with any alternative minimum tax liability (“Alternative Minimum Tax Credits”) shall be apportioned based on alternative minimum taxable income (as defined in Section 55(b)(2) of the Code) and consistent with the attached allocation schedule of credits arising prior to 2004. Any unused credits described in Section 38 of the Code (“General Business Credits”) shall be allocated to the entity that generated such credits, taking into account current year utilization following the ordering rules of Section 38(d) of the Code. In order to reflect the fact that under the historic intercompany tax sharing arrangement between Viad and TECI (i) tax sharing payments from TECI to Viad have been made without regard to Section 55 of the Code, as a result of which such tax sharing payments from TECI to Viad have been less than such payments would have otherwise been and (ii) Viad has previously paid TECI in respect of General Business Credits which Viad has been unable to use as a result of being subject to tax under Section 55 of the Code, TECI shall, in respect of any Alternative Minimum Tax Credits and General Business Credits apportioned to a separate return year of Newco, make a tax sharing payment prior to the Distribution Date to Viad in an amount equal to the amount so apportioned; provided, however, that (i) the amount required to be paid pursuant to this Section 2.02(d) shall be recalculated at any time that facts or circumstances arise or come to light which affect the amount required to be paid pursuant to this Section 2.02(d) (including, without limitation, the filing of a Tax Return or any adjustment made by any Taxing Authority as described in Article III) and (ii) if such facts or circumstances arise or come to light after any payment by TECI to Viad pursuant to this Section 2.02(d) which, if known when such payment was made would have increased or reduced the amount of such payment, then (A) if the amount of the payment made by TECI to Viad pursuant to this Section 2.02(d) exceeds the amount that would have been paid by TECI pursuant to this Section 2.02(d) had all of the facts and circumstances been know at the time such payment was made, Viad shall be required to remit to TECI in cash an amount equal to such excess and (B) if the amount that would have been paid by TECI pursuant to this Section 2.02(d) had all of the facts and circumstances been known at the time such payment was made exceeds the amount of the payment made by TECI to Viad pursuant to this Section 2.02(d), TECI shall be required to remit to Viad in cash an amount equal to such excess; provided further, however, that if, as a result of a Tax proceeding, an expense borne by Newco and deducted by Newco on a Tax Return is required to be deducted instead by Viad, Newco shall not be required to pay Viad, or cause Viad to be paid, for additional Tax Attributes apportioned to Newco as a result of such adjustment.
Section 2.03 Filing of Post-Spin-Off Tax Returns. All Tax Returns and Taxes for periods beginning on or after the Distribution Date shall be the responsibility of the Viad Group if such Tax Returns or Taxes relate to Viad Businesses, and shall be the responsibility of the Newco Group if such Tax Returns or Taxes relate to Newco Businesses.
Section 2.04 Certification. Each Tax Return and computation of tax liability, and all Tax Return data, required to be provided to Viad by Newco and each member of the Newco Group pursuant to Section 2.02 hereof shall be accompanied by a statement signed by the Vice President – Taxes of Newco to the effect that such officer has reviewed for completeness and accuracy the Tax Return, computation of the Tax liability, Tax Return data and documentation in support thereof and has determined that such Tax Return, computation and Tax Return data properly reflect the taxable income (or loss), Tax liability and credits of the entity or
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entities, as the case may be, to which such Tax Return, computation and Tax Return data relate for the period covered thereby.
ARTICLE III
DEFICIENCIES AND REFUNDS OF TAXES
Section 3.01 Payment of Deficiencies by Newco. (a) Consolidated Federal Income Tax Returns. If any adjustment is made by the IRS with respect to any consolidated federal income Tax Return which includes a member of the Viad Group and a member of the Newco Group that is required to be filed for a taxable period beginning before the Distribution Date, then to the extent that such adjustment either increases the taxable income, reduces the taxable loss, decreases the tax credits or otherwise adjusts any Tax Item reflected on such Tax Return, the Tax liability of the Newco Group shall be redetermined in accordance with the principles of this Agreement (including, without limitation, Article II for Tax Returns filed prior to, on or after the date hereof) taking into account such adjustment. If such redetermination results in a greater Tax liability for any period for the Newco Group, Newco and each other member of the Newco Group shall be liable for such increases in Taxes (except to the extent there is an offsetting Tax Benefit to Viad, in which case the Tax Benefit will be netted against the increase in Tax if such Tax Benefit is realized in the same year and otherwise will be paid by Viad to Newco if, as and when realized by Viad). If any member of the Newco Group shall have any liability as a result of this Section 3.01(a), Newco shall pay to Viad, hold Viad harmless and indemnify Viad for any such Tax liability, for any costs and attorneys fees spent to contest such Tax liability, and the amount thereof shall be paid by Newco to Viad within thirty (30) days of the receipt by Newco of written notice of such liability, together with a computation of the amount due and supporting documentation in such detail as Newco may reasonably request to verify the computation of the amount due. Any such required payment not made within such thirty (30) day period shall thereafter bear interest until paid at the then most recently published Underpayment Rate. For taxable periods beginning on or after the Distribution Date, in the event that Newco or any member of the Newco Group pays a liability which creates a Tax Benefit for Viad, which Tax Benefit would not have arisen but for the payment of such liability, such Tax Benefit will be paid by Viad to Newco if, as and when realized by Viad; provided, however, that if Viad shall pay Newco for such Tax Benefit and subsequently determine that is has lost the benefit of all or a portion of such Tax Benefit, Newco shall promptly remit to Viad the amount certified by Viad to be the amount necessary to restore Viad to the position Viad would have been in if no payment had been made by Viad to Newco pursuant to this sentence.
(b) Combined or Consolidated State or Local Income or Franchise Tax Returns. If any adjustment is made by any Tax Authority with respect to any state or local income or franchise Tax Return which includes a member of the Viad Group and a member of the Newco Group that is required to be filed for a taxable period beginning before the Distribution Date, then Newco and each member of the Newco Group, on the one hand, and Viad, on the other hand, shall share any resulting increase in Tax liability for such taxable period in the percentages set forth on Schedule A. If any member of the Newco Group shall have any liability as a result of this Section 3.01(b), Newco shall pay to Viad, hold Viad harmless and indemnify Viad for any such Tax liability, costs and attorneys fees spent to contest such Tax liability, and the amount thereof shall be paid by Newco to Viad within thirty (30) days of the
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receipt by Newco of written notice of such liability, together with a computation of the amount due and supporting documentation in such detail as Newco may reasonably request to verify the computation of the amount due. Any such required payment not made within such thirty (30) day period shall thereafter bear interest until paid at the then most recently published Underpayment Rate.
(c) Other Tax Returns. If any adjustment is made by any Tax Authority with respect to any Tax Return (other than those included in Section 3.01(a) and (b)) of Viad (or any member of the Viad Group) in which any member of the Newco Group is included for taxable periods beginning before the Distribution Date, then to the extent that such adjustment either increases the taxable income, reduces the taxable loss, decreases the tax credits or otherwise adjusts any Tax Item reflected on such Tax Return, the Tax liability of the Newco Group shall be redetermined in accordance with the principles of this Agreement (including, without limitation, Article II) taking into account such adjustment. If such redetermination results in a greater Tax liability for any period for Newco or any member of the Newco Group, Newco and each other member of the Newco Group shall be liable for such increases in Taxes (unless there is an offsetting Tax Benefit to Viad, in which case the Tax Benefit will be netted against the increase in Tax if such Tax Benefit is realized in the same year and otherwise will be paid if, as and when realized). If any member of the Newco Group shall have any liability as a result of this Section 3.01(c), Newco shall pay to Viad, hold Viad harmless and indemnify Viad for any such Tax liability, costs and attorneys fees, and the amount thereof shall be paid by Newco to Viad within thirty (30) days of the receipt by Newco of written notice of such liability, together with a computation of the amount due and supporting documentation in such detail as Newco may reasonably request to verify the computation of the amount due. Any such required payment not made within such thirty (30) day period shall thereafter bear interest until paid at the then most recently published Underpayment Rate.
Section 3.02 Payment of Refunds to Newco. If any adjustment is made by any Tax Authority with respect to any Tax Return of Viad (or any member of the Viad Group) in which any member of the Newco Group is included for any taxable period beginning before the Distribution Date, then to the extent that such adjustment either (a) decreases the Tax liability attributable to any member of the Newco Group and results in a Tax Benefit, that would not have arisen but for such adjustment, to Viad or any member of the Viad Group or (b) is attributable to a member of the Newco Group and results in a reduced Tax liability, that would not have arisen but for such adjustment, for Viad or any member of the Viad Group (calculated consistently with the methodology and principles set forth in Section 3.01), then Viad shall remit to Newco any refunds of Taxes received by or credited to it as a result of such adjustments attributable to a member of the Newco Group. Viad shall pay any amounts due from it to Newco as a result of this Section 3.02 within ten (10) days of its receipt of the relevant refund or credit with respect thereto from the IRS or any state or other governmental unit, as the case may be. Any such required payment not made within such ten (10) day period shall thereafter bear interest until paid at the then most recently published Underpayment Rate. Such payments shall be accompanied by a computation of the amount due and supporting documentation in such detail as Newco may reasonably request to verify the computation of the amount due. Anything herein to the contrary notwithstanding, except as provided in this Section 3.02, no member of the Newco Group shall be entitled to any payment or benefit as a result of the receipt of any Tax
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refund received by any member of the Viad Group except as set forth in Section 2.02 to the extent such refund is attributable to the overpayment of Estimated Taxes by the Newco Group or any member thereof.
ARTICLE IV
TAX AUDITS AND OTHER MATTERS
Section 4.01 Tax Audits and Controversies. (a) Federal, State, or Local Income or Franchise Taxes. Except as otherwise provided in this Section 4.01, Viad shall have the exclusive authority and obligation to represent each member of the Newco Group before the IRS or any other Tax Authority or before any court with respect to any matter affecting the federal, state or local income or franchise Tax liability reflected on a Tax Return which includes a member of the Viad Group and a member of the Newco Group for any Tax period beginning before the Distribution Date, in each such case allowing representatives of the Newco Group, including, without limitation, outside counsel and consultants, to participate in good faith in all respects in all such Tax proceedings affecting any member of the Newco Group. Such representation by Viad shall include, but shall not be limited to exclusive control over (i) any response to any examination of federal, state or local income or franchise Tax Returns and (ii) any contest or litigation through a Final Determination of any issue included in any Tax Return that includes a member of the Viad Group, including but not limited to (a) whether and in what forum to conduct such contest, and (b) whether and on what basis to settle such contest; except that Viad shall not settle any claim, suit, action or proceeding in respect of which indemnity for federal, state or local income or franchise Taxes may be sought hereunder against Newco or any member of the Newco Group without Newco’s consent, which consent shall not be unreasonably withheld. Viad shall give timely notice to Newco of any inquiry, the assertion of any claim or the commencement of any suit, action or proceeding in respect of which indemnity for federal, state or local income or franchise Taxes may be sought under this Agreement against Newco or any member of the Newco Group and will give Newco such information with respect thereto as Newco may reasonably request. Anything in this Section 4.01 or elsewhere in this Agreement to the contrary notwithstanding, if Newco contests or litigates any federal, state or local income or franchise tax issue in any forum, Newco shall pay and shall indemnify and hold harmless each member of the Viad Group from any and all costs, expenses and/or liabilities of any type or nature, including, without limitation, any federal income tax liability (including interest and penalties thereon), that are incurred by or imposed upon Viad or any member of the Viad Group which Viad or such Viad Group member would not otherwise have incurred.
(b) Other Taxes. Except as otherwise provided in this Section 4.01, the party responsible for filing any Tax Return (other than federal, state or local income or franchise Tax Returns) pursuant to Section 2.02(c) hereof shall, at its own expense, have the exclusive authority to represent each member of the Viad Group and of the Newco Group before any Tax Authority or before any court with respect to any matter affecting the Tax liability of any member of either the Viad Group or the Newco Group for any Tax period beginning before the Distribution Date in each case (i) allowing representatives of the other group to participate in good faith in all respects in all such Tax proceedings affecting any member of the other group, and (ii) acting in the best interests of both the Viad Group and the Newco Group. Such representation shall include, but shall not be limited to exclusive control over (i) any response to
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any examination by a Tax Authority of such Tax Returns and (ii) any contest through a Final Determination of any issue included in any Tax Return that includes a member of the Newco Group or the Viad Group, including, but not limited to (a) whether and in what forum to conduct such contest, and (b) whether and on what basis to settle such contest; except that Viad or any member of the Viad Group shall not settle any claim, suit, action or proceeding in respect of which indemnity for such Taxes may be sought hereunder against Newco or any member of the Newco Group without Newco’s consent, which consent shall not be unreasonably withheld; and except that Newco or any member of the Newco Group shall not settle any claim, suit, action or proceeding in respect of which indemnity for such Taxes may be sought hereunder against Viad or any member of the Viad Group without Viad’s consent, which consent shall not be unreasonably withheld.
Section 4.02 Retention of Books and Records. Newco and Viad each agree to retain and preserve in accessible and reproducible form all Tax Returns, related schedules and workpapers, and all accounting and computer records (in whatever media) and other documents relating thereto (collectively, the “Tax Documents”) existing on the date hereof or created through or with respect to taxable periods ending on or before the Distribution Date, until the later of (a) the expiration of the statute of limitations (including extensions) of the taxable years to which such Tax Returns and Tax Documents relate or (b) December 31, 2010. No Tax Documents shall be destroyed or otherwise disposed of by either Viad or Newco (or any member of their respective Groups) until the party intending to make such disposition has given the other party at least thirty (30) days’ advance notice thereof, whereupon the party receiving such notice shall have the right, at its own expense, to take possession of such Tax Documents.
Section 4.03 Cooperation regarding Return Filings, Examinations and Controversies. (a) Newco’s Obligations. In addition to any obligations imposed pursuant to the Distribution Agreement, Newco and each other member of the Newco Group shall fully cooperate with Viad and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving any Tax Return filed or required to be filed by or for any member of the Viad Group for any taxable period beginning before the Distribution Date. Such cooperation shall include, but not be limited to, making available to Viad during normal business hours, and within thirty (30) days of any request therefor, all Tax Documents, books, records and information, and the assistance of all officers and employees, necessary or useful in connection with any Tax inquiry, audit, examination, investigation, dispute, litigation or any other matter. Newco agrees on behalf of itself and each member of the Newco Group to execute and deliver to Viad, when so requested by Viad, any power of attorney required to allow Viad and its counsel to represent Newco or such other Newco Group member in any controversy which Viad shall have the right to control pursuant to the terms of Section 4.01 of this Agreement.
(b) Viad’s Obligation. Except as otherwise provided in this Article IV, Viad shall fully cooperate with Newco and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving, any Tax Return filed or required to be filed pursuant to Section 2.02(c) by or for any member of the Newco Group. Such cooperation shall include, but not be limited to, making available to Newco, during normal business hours, and
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within thirty (30) days of any request therefor, all books, records and information, and the assistance of all officers and employees, necessary or useful in connection with any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter. Viad agrees on behalf of itself and each member of the Viad Group to execute and deliver to Newco, when so requested by Newco, any power of attorney required to allow Newco and its counsel to represent Viad or such other Viad Group member in any controversy which Newco shall have the right to control pursuant to the terms of Section 4.01(b) of this Agreement.
Section 4.04 Survival of Agreement. This Agreement and all covenants contained herein shall survive for the applicable statute of limitations and any extensions thereof and any Final Determination applicable to all periods beginning before the Distribution Date.
Section 4.05 Escheat. Notwithstanding any other provision of this Agreement, Viad shall have no liability in connection with, and Newco shall be responsible for and shall indemnify and hold Viad and any successor entities thereto or Affiliates thereof harmless against, any claims made on or after the Distribution Date for or with respect to abandoned, unclaimed or escheatable property, whether or not such claims arise from events or activities taken prior to, on or after the Distribution Date, to the extent such claims relate or are attributable to Newco or any Newco Business.
Section 4.06 Confidentiality. Subject to any contrary requirement of law and the right of each party to enforce its rights hereunder in any legal action, each party agrees that it shall keep strictly confidential, and shall cause its employees and agents to keep strictly confidential, any information which it or any of its employees or agents may acquire pursuant to, or in the course of performing its obligations under, any provision of this Agreement.
ARTICLE V
SPIN-OFF
Section 5.01 Viad Representations. (a) Ruling Documents. Viad hereby represents and warrants that (i) it has examined the Ruling Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of Viad, its Subsidiaries, the Viad Business, or the Viad Group) and (ii) to the extent in reference to Viad, its Subsidiaries, the Viad Business, or the Viad Group, the facts presented and the representations made therein are true, correct and complete.
(b) Tax-Free Status. Viad hereby represents and warrants that it has no plan or intention of taking any action, or failing or omitting to take any action or knows of any circumstance, that could reasonably be expected to (i) cause the Reorganization not to have Tax-Free Status or (ii) cause any representation or factual statement made in this Agreement, the Distribution Agreement, the Ruling Documents, any Supplemental Ruling Documents or any of the Ancillary Agreements to be untrue in a manner that would have an adverse effect on the Tax-Free Status of the Reorganization.
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(c) Plan or Series of Related Transactions. Viad hereby represents and warrants that, to the best knowledge of Viad and the management of the Viad Group, after due inquiry, the Reorganization is not part of a plan (or series of related transactions) pursuant to which a Person will acquire stock representing a Fifty-Percent or Greater Interest in Viad or any successor to Viad.
Section 5.02 Newco Representations. (a) Ruling Documents. Newco hereby represents and warrants that (i) it has examined the Ruling Documents (including, without limitation, the representations to the extent that they relate to the plans, proposals, intentions, and policies of Newco, its Subsidiaries, the Newco Business, or the Newco Group) and (ii) to the extent in reference to Newco, its Subsidiaries, the Newco Business, or the Newco Group, the facts presented and the representations made therein are true, correct and complete.
(b) Tax-Free Status. Newco hereby represents and warrants that it has no plan or intention of taking any action, or failing or omitting to take any action or knows of any circumstance, that could reasonably be expected to (i) cause the Reorganization not to have Tax-Free Status or (ii) cause any representation or factual statement made in this Agreement, the Distribution Agreement, the Ruling Documents, any Supplemental Ruling Documents or any of the Ancillary Agreements to be untrue in a manner that would have an adverse effect on the Tax-Free Status of the Reorganization.
(c) Plan or Series of Related Transactions. Newco hereby represents and warrants that, to the best knowledge of Newco and the management of the Newco Group, after due inquiry, the Reorganization is not part of a plan (or series of related transactions) pursuant to which a Person will acquire stock representing a Fifty-Percent or Greater Interest in Newco or any successor to Newco.
Section 5.03 Viad Covenants. (a) Actions Consistent with Representations and Covenants. Viad shall not take any action or permit any member of the Viad Group to take any action, and Viad shall not fail to take any action or permit any member of the Viad Group to fail to take any action, where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in this Agreement, the Distribution Agreement, the Ruling Documents, any Supplemental Ruling Documents or any of the Ancillary Agreements in a manner that would have an adverse effect on the Tax-Free Status of the Reorganization.
(b) Preservation of Tax-Free Status; Viad Business. Viad shall not (i) take any action (including, but not limited to, any cessation, transfer or disposition of all or any portion of any Viad Business; payment of extraordinary dividends to shareholders; and acquisitions or issuances of stock) or permit any member of the Viad Group to take any such action, and Viad shall not fail to take any such action or permit any member of the Viad Group to fail to take any such action and (ii) until the first day after the Restriction Period, engage in any transaction that would result in it or any member of the Viad Group ceasing to be a company engaged in any Viad Business (including, without limitation, any cessation, transfer or
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disposition of any Viad Business), in each case, where such action or failure to act would have an adverse effect on the Tax-Free Status of the Reorganization.
(c) Sales, Issuances and Redemptions of Equity Securities. Until the first day after the Restriction Period, none of Viad or any of its Subsidiaries shall, or shall agree to, sell or otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity Securities of Viad, directly or indirectly; provided, however, that (i) Viad and the members of the Viad Group may repurchase such Equity Securities to the extent that such repurchases meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, and (ii) Viad may issue such Equity Securities to the extent such issuances satisfy Safe Harbor VI (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor VII (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7T(d).
(d) Tender Offers; Other Business Transactions. Until the first day after the Restriction Period, none of Viad or any member of the Viad Group shall (i) solicit any Person to make a tender offer for, or otherwise acquire or sell, the Equity Securities of Viad, (ii) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Securities of Viad or (iii) approve or otherwise permit any proposed business combination or any transaction which, in the case of clauses (i), (ii) or (iii), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, results in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VI (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor VII (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7T(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in Viad (or any successor thereto). In addition, none of Viad or any member of the Viad Group shall at any time, whether before or subsequent to the expiration of the Restriction Period, engage in any action described in clauses (i), (ii) or (iii) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in part) prior to the first anniversary of the Spin-Off, even if at the time of the Spin-Off or thereafter such action is subject to various conditions.
(e) Dispositions of Assets. Until the first day after the Restriction Period, none of Viad or any member of the Viad Group shall sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 60 percent of the gross assets of Viad, nor shall Viad or any member of the Viad Group sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 60 percent of the consolidated gross assets of the Viad Group. The foregoing sentence shall not apply to sales, transfers, or dispositions of assets in the ordinary course of business. The percentages of gross assets or consolidated gross assets of Viad or the Viad Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of Viad and the members of the Viad Group as of the Distribution Date. For
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purposes of this Section 5.03(e), a merger of Viad or one of its Subsidiaries with and into any Person shall constitute a disposition of all of the assets of Viad or such Subsidiary.
(f) Liquidations, Mergers, Reorganizations. Until the first day after the Restriction Period, neither Viad nor any of its Material Subsidiaries shall, or shall agree to, voluntarily dissolve or liquidate or engage in any transaction involving a merger (except for a Cash Acquisition Merger), consolidation or other reorganization; provided, however, mergers of direct or indirect wholly-owned Subsidiaries of Viad solely with other direct or indirect wholly-owned Subsidiaries of Viad are not subject to this Section 5.03(f) to the extent not inconsistent with the Tax-Free Status of the Reorganization.
Section 5.04 Newco Covenants. (a) Actions Consistent with Representations and Covenants. Newco shall not take any action or permit any member of the Newco Group to take any action, and Newco shall not fail to take any action or permit any member of the Newco Group to fail to take any action, where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in this Agreement, the Distribution Agreement, the Ruling Documents, any Supplemental Ruling Documents or any of the Ancillary Agreements in a manner that would have an adverse effect on the Tax-Free Status of the Reorganization.
(b) Preservation of Tax-Free Status; Newco Business. Newco shall not (i) take any action (including, but not limited to, any cessation, transfer or disposition of all or any portion of any Newco Business; payment of extraordinary dividends to shareholders; and acquisitions or issuances of stock) or permit any member of the Newco Group to take any such action, and Newco shall not fail to take any such action or permit any member of the Newco Group to fail to take any such action and (ii) until the first day after the Restriction Period, engage in any transaction that would result in it or any member of the Newco Group ceasing to be a company engaged in any Newco Business (including, without limitation, any cessation, transfer or disposition of any Newco Business), in each case, where such action or failure to act would have an adverse effect on the Tax-Free Status of the Reorganization.
(c) Sales, Issuances and Redemptions of Equity Securities. Until the first day after the Restriction Period, none of Newco or any of its Subsidiaries shall, or shall agree to, sell or otherwise issue to any Person, or redeem or otherwise acquire from any Person, any Equity Securities of Newco, directly or indirectly; provided, however, that (i) the adoption by Newco of a shareholder rights plan shall not constitute a sale or issuance of such Equity Securities, (ii) Newco and the members of the Newco Group may repurchase such Equity Securities to the extent that such repurchases meet the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, and (iii) Newco may issue such Equity Securities to the extent such issuances satisfy Safe Harbor VI (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor VII (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7T(d).
(d) Tender Offers; Other Business Transactions. Until the first day after the Restriction Period, none of Newco or any member of the Newco Group shall (i) solicit any
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Person to make a tender offer for, or otherwise acquire or sell, the Equity Securities of Newco, (ii) participate in or support any unsolicited tender offer for, or other acquisition, issuance or disposition of, the Equity Securities of Newco or (iii) approve or otherwise permit any proposed business combination or any transaction which, in the case of clauses (i), (ii) or (iii), individually or in the aggregate, together with any transaction occurring within the four-year period beginning on the date which is two years before the Distribution Date and any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, results in one or more Persons acquiring (except for acquisitions that otherwise satisfy Safe Harbor VI (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor VII (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7T(d)) directly or indirectly stock representing a 40% or greater interest, by vote or value, in Newco (or any successor thereto). In addition, none of Newco or any member of the Newco Group shall at any time, whether before or subsequent to the expiration of the Restriction Period, engage in any action described in clauses (i), (ii) or (iii) of the preceding sentence if it is pursuant to an arrangement negotiated (in whole or in part) prior to the first anniversary of the Spin-Off, even if at the time of the Spin-Off or thereafter such action is subject to various conditions.
(e) Dispositions of Assets. Until the first day after the Restriction Period, none of Newco or any member of the Newco Group shall sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 60 percent of the gross assets of Newco, nor shall Newco or any member of the Newco Group sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of a Subsidiary and any transaction treated for tax purposes as a sale, transfer or disposition) that, in the aggregate, constitute more than 60 percent of the consolidated gross assets of the Newco Group. The foregoing sentence shall not apply to sales, transfers, or dispositions of assets in the ordinary course of business. The percentages of gross assets or consolidated gross assets of Newco or the Newco Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of Newco and the members of the Newco Group as of the Distribution Date. For purposes of this Section 5.04(e), a merger of Newco or one of its Subsidiaries with and into any Person shall constitute a disposition of all of the assets of Newco or such Subsidiary.
(f) Liquidations, Mergers, Reorganizations. Until the first day after the Restriction Period, neither Newco nor any of its Material Subsidiaries shall, or shall agree to, voluntarily dissolve or liquidate or engage in any transaction involving a merger (except for a Cash Acquisition Merger), consolidation or other reorganization; provided, however, mergers of direct or indirect wholly-owned Subsidiaries of Newco solely with other direct or indirect wholly-owned Subsidiaries of Newco are not subject to this Section 5.04(f) to the extent not inconsistent with the Tax-Free Status of the Reorganization.
Section 5.05 Viad Permitted Transactions. (a) Notwithstanding the restrictions otherwise imposed by Sections 5.03(c) through 5.03(f), during the Restriction Period, Viad may (i) approve, participate in, support or otherwise permit a proposed business combination or
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transaction that would otherwise breach the covenant set forth in Section 5.03(d), (ii) sell or otherwise dispose of the assets of Viad or any member of the Viad Group in a transaction that would otherwise breach the covenant set forth in Section 5.03(e), (iii) merge Viad or any member of the Viad Group with another entity without regard to which party is the surviving entity in a transaction that would otherwise breach the covenant set forth in Section 5.03(f) or (iv) issue, sell, redeem or otherwise acquire (or cause a member of the Viad Group to issue, sell, redeem or otherwise acquire) Equity Securities of Viad in a transaction that would otherwise breach the covenant set forth in Section 5.03(c), if and only if such transaction would not violate Section 5.03(a) or Section 5.03(b) and one of the following Sections 5.05(b), 5.05(c) or 5.05(d) is satisfied.
(b) Supplemental Ruling. Prior to entering into any agreement contemplating a transaction described in clauses (i), (ii), (iii) or (iv) of Section 5.05(a) and prior to consummating any such transaction, Viad shall request a Supplemental Ruling in accordance with Section 5.7(a) of this Agreement to the effect that such transaction will not affect the Tax-Free Status of the Reorganization and Viad shall have received such a Supplemental Ruling in form and substance satisfactory to Newco in its sole and absolute discretion.
(c) Tax Opinion. Prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.05(a) (expressly excluding for this purpose transactions described in clause (ii) of Section 5.05(a)) and prior to consummating any such transaction, the following conditions are satisfied: (i) following the transaction at issue, one or more Persons will not have acquired, and will not have the right to acquire, directly or indirectly, 40% or greater (by vote or value) of the outstanding Equity Securities of Viad (determined immediately following such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or conversion of all such Equity Securities (if such Equity Securities are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Viad will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Viad is the surviving entity) and (iii) prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.05(a) and prior to consummating any such transaction, Viad shall provide Newco with an Unqualified Tax Opinion in form and substance acceptable to Newco in its sole and absolute discretion (and in determining whether an opinion is acceptable, Newco may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion).
(d) Board Certification. Prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.05(a) (expressly excluding for this purpose transactions described in clause (ii) of Section 5.05(a)) and prior to consummating any such transaction, the following conditions are satisfied: (i) following the transaction at issue, one or more Persons will not have acquired, and
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will not have the right to acquire, directly or indirectly, more than 25% (by vote or value) of the outstanding Equity Securities of Viad (determined immediately following such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or conversion of all such Equity Securities (if such Equity Securities are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Viad will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Viad is the surviving entity) and (iii) prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.05(a) and prior to consummating any such transaction, Viad delivers to Newco a Viad Board Certification.
Section 5.06 Newco Permitted Transactions. (a) Notwithstanding the restrictions otherwise imposed by Sections 5.04(c) through 5.04(f), during the Restriction Period, Newco may (i) approve, participate in, support or otherwise permit a proposed business combination or transaction that would otherwise breach the covenant set forth in Section 5.04(d), (ii) sell or otherwise dispose of the assets of Newco or any member of the Newco Group in a transaction that would otherwise breach the covenant set forth in Section 5.04(e), (iii) merge Newco or any member of the Newco Group with another entity without regard to which party is the surviving entity in a transaction that would otherwise breach the covenant set forth in Section 5.04(f) or (iv) issue, sell, redeem or otherwise acquire (or cause a member of the Newco Group to issue, sell, redeem or otherwise acquire) Equity Securities of Newco in a transaction that would otherwise breach the covenant set forth in Section 5.04(c), if and only if such transaction would not violate Section 5.04(a) or Section 5.04(b) and one of the following Sections 5.06(b), 5.06(c) or 5.06(d) is satisfied.
(b) Supplemental Ruling. Prior to entering into any agreement contemplating a transaction described in clauses (i), (ii), (iii) or (iv) of Section 5.06(a) and prior to consummating any such transaction, Newco shall request that Viad obtain a Supplemental Ruling in accordance with Section 5.7(b) of this Agreement to the effect that such transaction will not affect the Tax-Free Status of the Reorganization and Viad shall have received such a Supplemental Ruling in form and substance satisfactory to Viad in its sole and absolute discretion.
(c) Tax Opinion. Prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.06(a) (expressly excluding for this purpose transactions described in clause (ii) of Section 5.06(a)) and prior to consummating any such transaction, the following conditions are satisfied: (i) following the transaction at issue, one or more Persons will not have acquired, and will not have the right to acquire, directly or indirectly, 40% or greater (by vote or value) of the outstanding Equity Securities of Newco (determined immediately following such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or
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conversion of all such Equity Securities (if such Equity Securities are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Newco will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Newco is the surviving entity) and (iii) prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.06(a) and prior to consummating any such transaction, Newco shall provide Viad with an Unqualified Tax Opinion in form and substance acceptable to Viad in its sole and absolute discretion (and in determining whether an opinion is acceptable, Viad may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion).
(d) Board Certification. Prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.06(a) (expressly excluding for this purpose transactions described in clause (ii) of Section 5.06(a)) and prior to consummating any such transaction, the following conditions are satisfied: (i) following the transaction at issue, one or more Persons will not have acquired, and will not have the right to acquire, directly or indirectly, more than 25% (by vote or value) of the outstanding Equity Securities of Newco (determined immediately following such transaction) taking into account all relevant issuances, redemptions or other acquisitions of (and agreements to issue, redeem or otherwise acquire) Equity Securities (and assuming the exercise or conversion of all such Equity Securities (if such Equity Securities are options or warrants or similar exercisable or convertible securities) and the closing of all such agreements) from the point in time two years prior to the Spin-Off to the date immediately following such transaction and pursuant to any other transaction which is part of a plan or series of related transactions (within the meaning of Section 355(e) of the Code) that includes the Spin-Off, (ii) Newco will be the surviving entity if such transaction is a merger (and the transaction is not a reverse subsidiary merger in which Newco is the surviving entity) and (iii) prior to entering into any agreement contemplating a transaction described in clause (iv) (including transactions described in clause (iii) and (iv)) of Section 5.06(a) and prior to consummating any such transaction, Newco delivers to Viad a Newco Board Certification.
Section 5.07 Supplemental Rulings and Restrictions on Newco. (a) Supplemental Ruling at Viad’s Request. Viad shall have the right to obtain a Supplemental Ruling in its sole and absolute discretion. If Viad determines to obtain a Supplemental Ruling, Newco shall (and shall cause each member of the Newco Group to) cooperate with Viad and take any and all actions reasonably requested by Viad in connection with obtaining the Supplemental Ruling (including, without limitation, by making any representation or covenant or providing any materials or information requested by any Tax Authority; provided that Newco shall not be required to make (or cause any member of the Newco Group to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). Viad shall reimburse Newco for all reasonable costs and expenses incurred by the Newco Group in obtaining a Supplemental Ruling requested by Viad within 10 Business Days after receiving an invoice from Newco therefor. In connection with obtaining a
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Supplemental Ruling pursuant to this Section 5.07(a), (i) Viad shall keep Newco informed in a timely manner of all material actions taken or proposed to be taken by Viad in connection therewith; (ii) Viad shall (x) reasonably in advance of the submission of any Ruling Documents or Supplemental Ruling Documents, provide Newco with a draft copy thereof, (y) reasonably consider Newco’s comments on such draft copy, and (z) provide Newco with a final copy; and (iii) Viad shall provide Newco with notice reasonably in advance of, and Newco shall have the right to attend, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Supplemental Ruling.
(b) Supplemental Rulings at Newco’s Request. Viad agrees that at the reasonable request of Newco pursuant to Section 5.06(b), Viad shall (and shall cause each member of the Viad Group to) cooperate with Newco and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Supplemental Ruling from the IRS and/or any other applicable Tax Authority for the purpose of confirming compliance on the part of Newco or any member of the Newco Group with its obligations under Section 5.04 of this Agreement. Further, in no event shall Viad be required to file any Supplemental Ruling under this Section 5.07(b) unless Newco represents that (i) it has read the request for the Supplemental Ruling and any materials, appendices and exhibits submitted or filed therewith, and (ii) all information and representations, if any, relating to any member of the Newco Group, contained in the Supplemental Ruling Documents are true, correct and complete in all material respects. Newco shall reimburse Viad for all reasonable costs and expenses incurred by the Viad Group in obtaining a Supplemental Ruling requested by Newco within 10 Business Days after receiving an invoice from Viad therefor. Newco hereby agrees that Viad shall have sole and exclusive control over the process of obtaining a Supplemental Ruling, and that only Viad shall apply for a Supplemental Ruling. In connection with obtaining a Supplemental Ruling pursuant to this Section 5.07(b), (i) Viad shall keep Newco informed in a timely manner of all material actions taken or proposed to be taken by Viad in connection therewith; (ii) Viad shall (x) reasonably in advance of the submission of any Ruling Documents or Supplemental Ruling Documents, provide Newco with a draft copy thereof, (y) reasonably consider Newco’s comments on such draft copy, and (z) provide Newco with a final copy; and (iii) Viad shall provide Newco with notice reasonably in advance of, and Newco shall have the right to attend, any formally scheduled meetings with any Tax Authority (subject to the approval of the Tax Authority) that relate to such Supplemental Ruling.
(c) Prohibition on Newco. Newco hereby agrees that neither it nor any member of the Newco Group shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) concerning the Reorganization (or the impact of any transaction on the Reorganization).
Section 5.08 Viad Liability for Undertaking Certain Actions. Notwithstanding anything in this Agreement to the contrary, Viad and each member of the Viad Group shall be responsible for one hundred percent (100%) of any and all Tax-Related Losses that are attributable to, or result from: (a) any act or failure to act by Viad or any member of the Viad Group, which action or failure to act breaches any of the covenants described in Section 5.03 of this Agreement (without regard to the exceptions or provisos set forth in such provisions), expressly including, for this purpose, any Permitted Transaction and any act or failure to act that
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breaches Section 5.03(a) or 5.03(b), regardless of whether such act or failure to act is permitted by Section 5.03(c) through 5.03(f); (b) any acquisition of Equity Securities of Viad or any member of the Viad Group by any Person or Persons (including, without limitation, as a result of an issuance of Viad Equity Securities or a merger of another entity with and into Viad or any member of the Viad Group) or any acquisition of assets of Viad or any member of the Viad Group (including, without limitation, as a result of a merger) by any Person or Persons; and (c) any Tax Authority withdrawing all or any portion of the Ruling or any Supplemental Ruling issued to Viad in connection with the Reorganization because of a breach by Viad or any member of the Viad Group of a representation made in this Agreement (or made in connection with the Ruling or any Supplemental Ruling).
Section 5.09 Newco Liability for Undertaking Certain Actions. Notwithstanding anything in this Agreement to the contrary, Newco and each member of the Newco Group shall be responsible for one hundred percent (100%) of any and all Tax-Related Losses that are attributable to, or result from: (a) any act or failure to act by Newco or any member of the Newco Group, which action or failure to act breaches any of the covenants described in Section 5.04 of this Agreement (without regard to the exceptions or provisos set forth in such provisions), expressly including, for this purpose, any Permitted Transaction and any act or failure to act that breaches Section 5.04(a) or 5.04(b), regardless of whether such act or failure to act is permitted by Section 5.04(c) through 5.04(f); (b) any acquisition of Equity Securities of Newco or any member of the Newco Group by any Person or Persons (including, without limitation, as a result of an issuance of Newco Equity Securities or a merger of another entity with and into Newco or any member of the Newco Group) or any acquisition of assets of Newco or any member of the Newco Group (including, without limitation, as a result of a merger) by any Person or Persons; and (c) any Tax Authority withdrawing all or any portion of the Ruling or any Supplemental Ruling issued to Viad in connection with the Reorganization because of a breach by Newco or any member of the Newco Group of a representation made in this Agreement (or made in connection with the Ruling or any Supplemental Ruling).
Section 5.10 Cooperation. (a) Without limiting the prohibition set forth in Section 5.07(c), until the first day after the Restriction Period, Newco shall furnish Viad with a copy of any ruling request that any member of the Newco Group may file with the IRS or any other Tax Authority and any opinion received that in any respect relates to, or otherwise reasonably could be expected to have any effect on, the Tax-Free Status of the Reorganization. Until the first day after the Restriction Period, Viad shall furnish Newco with a copy of any ruling request that any member of the Viad Group may file with the IRS or any other Tax Authority and any opinion received that in any respect relates to, or otherwise reasonably could be expected to have any effect on, the Tax-Free Status of the Reorganization.
(b) Viad shall reasonably cooperate with Newco in connection with any request by Newco for an Unqualified Tax Opinion pursuant to Section 5.06(c), and Newco shall reasonably cooperate with Viad in connection with any request by Viad for an Unqualified Tax Opinion pursuant to Section 5.05(c).
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(c) Until the first day after the Restriction Period, (i) Newco will provide adequate advance notice to Viad in accordance with the terms of Section 5.10(d) of any action described in Sections 5.04(a) through 5.04(f) within a period of time sufficient to enable Viad to seek injunctive relief pursuant to 5.11 in a court of competent jurisdiction, and (ii) Viad will provide adequate advance notice to Newco in accordance with the terms of Section 5.10(d) of any action described in Sections 5.03(a) through 5.03(f) within a period of time sufficient to enable Newco to seek injunctive relief pursuant to 5.11 in a court of competent jurisdiction.
(d) Each notice required by Section 5.10(c)(i) shall set forth the terms and conditions of any such proposed transaction, including, without limitation, (i) the nature of any related action proposed to be taken by the board of directors of Newco, (ii) the approximate number of Equity Securities of Newco or any member of the Newco Group (if any) proposed to be sold or otherwise issued, (iii) the approximate value of Newco’s assets (or assets of any member of the Newco Group) proposed to be transferred, and (iv) the proposed timetable for such transaction, all with sufficient particularity to enable Viad to seek such injunctive relief. Promptly, but in any event within 30 days, after Viad receives such written notice from Newco, Viad shall notify Newco in writing of Viad’s decision to seek injunctive relief pursuant to Section 5.11. Each notice required by Section 5.10(c)(ii) shall set forth the terms and conditions of any such proposed transaction, including, without limitation, (i) the nature of any related action proposed to be taken by the board of directors of Viad, (ii) the approximate number of Equity Securities of Viad or any member of the Viad Group (if any) proposed to be sold or otherwise issued, (iii) the approximate value of Viad’s assets (or assets of any member of the Viad Group) proposed to be transferred, and (iv) the proposed timetable for such transaction, all with sufficient particularity to enable Newco to seek such injunctive relief. Promptly, but in any event within 30 days, after Newco receives such written notice from Viad, Newco shall notify Viad in writing of Newco’s decision to seek injunctive relief pursuant to Section 5.11.
(e) From and after the date Viad first requests a Supplemental Ruling pursuant to Section 5.07 until the first day after the two-year anniversary of the date that Viad receives such Supplemental Ruling (pursuant to Section 5.07(a) or 5.07(b)), (i) neither Newco nor any member of the Newco Group shall take (or refrain from taking) any action to the extent that such action or inaction would have caused a representation given by Newco in connection with any such request for a Supplemental Ruling to have been untrue as of the relevant representation date, had Newco or any member of the Newco Group intended to take (or refrain from taking) such action on the relevant representation date and (ii) neither Viad nor any member of the Viad Group shall take (or refrain from taking) any action to the extent that such action or inaction would have caused a representation given by Viad in connection with any such request for a Supplemental Ruling to have been untrue as of the relevant representation date, had Viad or any member of the Viad Group intended to take (or refrain from taking) such action on the relevant representation date.
Section 5.11 Enforcement. The parties hereto acknowledge that irreparable harm would occur in the event that any of the provisions of this Article V were not performed in accordance with their specific terms or were otherwise breached. The parties hereto agree that, in order to preserve the Tax-Free Status of the Reorganization, injunctive relief is appropriate to
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prevent any violation of the foregoing covenants; provided, however, that injunctive relief shall not be the exclusive legal or equitable remedy for any such violation.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable, the enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
Section 6.02 Modification of Agreement. No modification, amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by each of the parties hereto and then such modification, amendment or waiver shall be effective only in the specific instance and for the purpose for which given.
Section 6.03 Conflict with the Distribution Agreement. Anything in this Agreement or the Distribution Agreement to the contrary notwithstanding, to the extent that there shall be a conflict between the provisions of this Agreement and the Distribution Agreement, the provisions of this Agreement shall control.
Section 6.04 Notices. All notices or other communications required or permitted under this Agreement shall be delivered by hand, mailed by certified or registered mail, postage prepaid and return receipt requested, or sent by cable, telegram, telex or telecopy (confirmed by regular, first-class mail), to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and shall be deemed given on the date on which such notice is received:
(b) In the case of Viad, to
Viad
Corp
Viad
Tower
Phoenix,
Arizona 85077-0949
Attention:
Executive Director - Taxes
With a copy to:
Viad
Corp
Viad
Tower
Phoenix,
Arizona 85077
Attention:
Vice President and General Counsel
(c) In the case of Newco, to
MoneyGram
International, Inc.
1550
Utica Avenue South
Minneapolis,
Minnesota 55416-5301
Attention:
Vice President – Taxes
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With a copy to:
MoneyGram
International, Inc.
1550
Utica Avenue South
Minneapolis,
Minnesota 55416-5301
Attention:
General Counsel
Section 6.05 Application to Present and Future Subsidiaries. This Agreement is being entered into by Viad and Newco on behalf of themselves and each member of the Viad Group and the Newco Group, respectively. This Agreement shall constitute a direct obligation of each such member and shall be deemed to have been readopted and affirmed on behalf of any corporation which becomes a member of the Viad Group or the Newco Group in the future. Viad and Newco hereby guarantee the performance of all actions, agreements and obligations provided for under this Agreement of each member of the Viad Group and the Newco Group, respectively. Viad and Newco shall, upon the written request of the other, cause any of their respective group members formally to execute this Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the successors, assigns and persons controlling any of the corporations bound hereby.
Section 6.06 Term. This Agreement shall commence on the date of execution indicated above and shall continue in effect until otherwise agreed to in writing by Viad and Newco, or their successors.
Section 6.07 Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part or to affect the meaning or interpretation of this Agreement.
Section 6.08 Singular and Plural. As used herein for all purposes throughout this Agreement, the singular shall include the plural and vice versa.
Section 6.09 Governing Law. This Agreement shall be governed by the laws of the State of Delaware.
Section 6.10 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all on the day and year first above written.
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VIAD CORP,
a Delaware corporation |
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| By: | /s/ Scott E. Sayre | |||
| Name: | Scott E. Sayre | |||
| Title: | Vice President – General Counsel and Secretary | |||
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MONEYGRAM INTERNATIONAL, INC.,
a Delaware corporation |
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| By: | /s/ Philip W. Milne | |||
| Name: | Philip W. Milne | |||
| Title: | President & CEO | |||
[Schedule A – Allocation of Pre Distribution Tax Liabilities/Refunds
Allocation Schedule of Tax Credits]
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Exhibit 10.3
INTERIM SERVICES AGREEMENT
This Interim Services Agreement is made as of the 30 th day of June, 2004, between Viad Corp, a Delaware corporation (“Viad”) and MoneyGram International, Inc., a Delaware corporation (“MoneyGram”), wherein it is agreed:
| 1. | Purposes. |
1.1 The Board of Directors of Viad has determined that it is in the best interest of Viad to separate Viad’s existing businesses into two independent businesses, the convention and event services business and the payment services business.
1.2 In order to effectuate the foregoing, Viad, MoneyGram and Travelers Express Company, Inc., a Minnesota corporation (“TECI”) and MGI Merger Sub, Inc. have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation and Distribution Agreement”), pursuant to which, and on the terms and subject to the conditions set forth therein, among other things (1) MGI Merger Sub, Inc., a wholly owned subsidiary of MoneyGram, will merge with and into TECI with TECI as the surviving corporation, and as a result of that merger, all outstanding shares of capital stock of TECI being cancelled and TECI becoming a wholly owned subsidiary of MoneyGram and (2) following the merger, Viad will distribute to the holders of Viad Common Stock, the issued and outstanding shares of MoneyGram Common Stock then owned directly or indirectly by Viad (the “Distribution”).
1.3 Prior to the Distribution Date, Viad or its subsidiaries provided certain services to TECI and its subsidiaries, and also received certain services from TECI and its subsidiaries.
1.4 After the Distribution Date, MoneyGram will require for a limited period of time that Viad or its subsidiaries continue providing certain services to MoneyGram and its subsidiaries until MoneyGram and its subsidiaries are able to otherwise contract or arrange for such services.
1.5 After the Distribution Date, Viad will require for a limited period of time that MoneyGram and its subsidiaries continue providing certain services to Viad and its subsidiaries until Viad and its subsidiaries are able to otherwise contract or arrange for such services.
1.6 All capitalized terms not defined herein shall have the meaning ascribed thereto in the Separation and Distribution Agreement.
| 2. | Term. |
2.1 Subject to the provisions of Section 5 hereof and the following sentence, this agreement, including the Schedules hereto (the “Agreement”), shall be effective on the Distribution Date and shall continue until the earlier of (a) two years following the Distribution Date, and (b) termination of all Services (as herein defined) pursuant to Section 5 hereof (“Term”). Viad’s provision of those Services listed on Schedule 2 (the “Schedule 2 Services”) may not be terminated by MoneyGram earlier than the expiration of the two-year Term, without the prior written consent of Viad (which may be granted or withheld at the sole discretion of Viad).
| 3 | Agreement to Perform Selected Services. |
3.1 On the terms and subject to the conditions hereof, Viad and MoneyGram hereby agree that Viad shall offer and provide to MoneyGram and its subsidiaries during the Term those services described on Schedule 1 and 2 hereto, and MoneyGram shall offer and provide to Viad and its subsidiaries during the Term the services described on Schedule 3 hereto (collectively, the “Services”). Such Services are grouped by subject matter on Schedules 1 and 3 and each such grouping, as identified by its associated annual cost, shall be referred to herein as a “Category” or “Subcategory” as the case may be . The Schedule 2 Services are grouped by subject matter with a total cost shown for all such services. The annual cost for any Category of Service or Schedule 2 Services may be increased (at a rate not to exceed ten percent (10%) per year) based on documented changes in the cost to provide such service. Such cost adjustment will be effective upon thirty (30) days notice to the party receiving the service. Services heretofore provided to the other by Viad or, its subsidiaries or MoneyGram, or its subsidiaries, as the case may be, shall be provided on a basis consistent with prior practice. Services to be provided hereunder that were not heretofore provided by Viad or MoneyGram, as the case may be, shall be provided on a reasonably timely basis. Charges for Services shall be as set forth in Section 4 hereof.
3.2 The Services to be provided hereunder shall include those Services provided by Viad or its subsidiaries to MoneyGram and its subsidiaries, or provided by MoneyGram to Viad and its subsidiaries, on the Distribution Date or at any time during the calendar year immediately preceding the Distribution Date, in each case as described on Schedule 1, 2 and 3 hereto, respectively. If Viad or MoneyGram, as the case may be, desires to obtain any services not listed on the Schedules, it shall notify the other in writing of those Services it desires to use. The party receiving such notice may, at its discretion, elect to provide or decline to provide such service. Said party shall promptly notify the other party of its decision and, if the decision is to provide the service, the annual cost of providing such service.
3.3 The parties shall retain the discretion to reasonably allocate the time, place and manner of the performance of the Services by their respective employees consistent with their past practices and procedures for allocating employee resources prior to the Distribution Date. A party shall not be required to provide a Service that that party has ceased to provide to itself. With respect to the National Vendor Contracts set forth on Schedule 2, the parties understand and agree that each is responsible for the payment of its portion of the service fees charged by a given vendor in the course of providing the services described under the applicable National Vendor Contract. Notwithstanding anything to the contrary contained in this Agreement, MoneyGram hereby indemnifies Viad from any costs, claims, losses or damages arising out of the acts or omissions of MoneyGram, including but not limited to MoneyGram’s failure to timely pay its portion of the service fees or MoneyGram’s decreasing its volume levels from current levels under or related to any or all of the National Vendor Contracts. Viad agrees to indemnify MoneyGram where MoneyGram is the principal party of record under a National Vendor Contract from any costs, claims, losses or damages arising out of the acts or omissions of Viad in-
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cluding but not limited to Viad’s failure to timely pay its portion of the service fees or Viad’s decreasing its volume levels from current levels under or related to any or all of the National Vendor Contracts. The foregoing indemnifications exclude any liability for lost profits or other incidental, special or consequential damages. Neither party can guarantee that any given National Vendor Contract will continue in effect for the two-year period on Schedule 2 and each party hereby releases the other from any loss or liability in connection with the termination of any given National Vendor Contract prior to such two-year period. The parties agree that where one is a party of record under a National Vendor Contract, it shall enforce the contract for the benefit of the other and that the other party shall have the right to participate in any negotiations for amendments or extensions of such contracts. The terms and conditions of this Section 3.3 shall continue to apply to those National Vendor Contracts listed on Schedule 2 for the term provided in each such contract. Nothing in this Agreement shall be construed to require that any Service be performed by any specific employee of either party. In no event shall the “Services” hereunder be construed so as to obligate either party to engage in the practice of law within the meaning of any applicable law, nor to render any services to the extent doing so would violate any applicable law or contract.
| 4. | Charges for Services; Payment. |
4.1 It is understood and agreed that the annual cost for Services as reflected on the Schedules was determined and allocated hereunder according to methods consistent with past practices and procedures observed by Viad and its subsidiaries concerning intercompany services and accounts.
4.2 MoneyGram shall, as of the Distribution Date, pay to the other for the provision of Services, the initial monthly amount of one-twelfth of the annual cost set forth for all services listed on the Schedules. For example, under Category of Service I of Schedule 1, “Taxation”, MoneyGram would pay to Viad on the Distribution Date one-twelfth of $290,000 or $24,167 and so forth for each Category or Subcategory on Schedules 1 and the Schedule 2 Services. MoneyGram shall continue in such fashion to pay one-twelfth of the annual cost for each Category of Service on Schedules 1 and 2 on or before the first of the month (or the next business day if the first of the month is a Saturday, Sunday or national holiday) thereafter for the duration of this Agreement or until MoneyGram terminates a Category or Subcategory pursuant to Section 5, hereto, and subject to the limitation on termination of Schedule 2.
4.3 MoneyGram or Viad, as the case may be, shall reimburse the other for reasonable travel and business expenses incurred in connection with the performance hereunder upon presentation of supporting documentation of such expenses to the party on whose behalf the expense was incurred.
4.4 Nothing in this Agreement shall be construed to require that either party engage any legal counsel, actuarial firm, consultant or other outside advisor or service provider on behalf of the other party. If it becomes necessary that any such outside advisor or service provider be engaged by a party in connection with the provision of Services under Schedule 1, the costs of such outside advisor or service provider shall be in addition to
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the cost for Services set forth on the Schedules, except as otherwise expressly provided herein.
| 5. | Reductions in Services; Termination. |
The parties recognize that during the Term hereof the requirements of each party for certain Services will decrease (with the exception of the Schedule 2 Services, which shall be for a term of two years) and that each party intends to phase out any Services when no longer required. Accordingly, at any time after the expiration of one year from the Distribution Date, except for the Schedule 2 Services, either party hereto may request termination of any Category or Subcategory as to which a separate charge is stated by giving the other party not less than 90 days’ advance notice in writing of any anticipated termination of any Services and, to the extent practicable, the parties will agree to an orderly reduction or phase-out of such Services. Notwithstanding anything to the contrary set forth herein, the termination or discontinuance by MoneyGram of Category VII on Schedule 1 or any Subcategory of Category VII, the Internal Audit Function, must first be approved by the MoneyGram Board of Directors. Once a Category Subcategory is discontinued, Viad or MoneyGram, as the case may be, shall not be obligated to later reinstate such Category of Service.
Following the termination or discontinuance of any Category or Subcategory or a Schedule 2 Service as provided herein, to the extent either party is thereafter requested to provide any terminated or discontinued Service, including any transition-related assistance necessary for any other organization to perform the terminated or discontinued Service, and the applicable party hereto consents to perform such Service, the party performing such Service shall be entitled to compensation reflecting incurred costs.
| 6. | Mutual Covenants. |
Viad and MoneyGram agree that the charges for Services hereunder are and shall be determined in a fair and equitable manner consistent with past practices and procedures of Viad in determining charges for similar services prior to the Distribution Date. Each party agrees to maintain the confidentiality of information received by it in the course of the performance of this Agreement, subject to such disclosure required by law.
6A. Cooperation.
During the Term hereof, the parties agree to make good faith efforts to cooperate with respect to negotiating future vendor contracts similar to the National Vendor Contracts listed on Schedule 2. The parties agree to give each other notice of potential vendor contracts and engage in reasonable efforts to involve the other party in such negotiations to obtain pricing discounts for volume purchases. Neither party shall be required to take any action pursuant to this provision which would cause a detriment to the party’s business.
| 7. | Force Majeure. |
If either party is unable to perform any of its duties or fulfill any of its covenants or obligations hereunder as a result of causes beyond its control and without its fault or negligence, in-
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cluding but not limited to acts of God or government, fire, flood, war, governmental controls, and labor strife, then such party shall not be deemed to be in default hereof during the continuance of such events which rendered it unable to perform, such party shall have such additional time thereafter as is reasonably necessary to enable it to resume performance of its duties and obligations hereunder; and the party entitled to such Service shall not be required to pay the other party for any Service to the extent that such other party is unable to perform.
| 8. | Severability. |
The invalidity of any provision hereof as determined by a court of competent jurisdiction in no way shall affect the validity of any other provision hereof. If a provision is determined to be invalid, the parties hereto shall negotiate in good faith in an effort to agree upon a suitable and equitable alternative provision to effect the original intent of the parties hereto.
| 9. | Time of the Essence. |
The parties hereto agree that with respect to the performance of all terms and covenants hereof and satisfaction of all conditions herein, time is of the essence.
| 10. | Captions. |
Section captions are not a part hereof and are merely for the convenience of the parties hereto.
| 11. | Binding Effect; Choice of Law. |
This Agreement shall be binding on and inure to the benefit of the parties hereto, their successors and assigns. This Agreement shall be governed by the laws of the State of Delaware applicable to contracts made and wholly-performed within such state, without reference to the conflict or choice of law provisions thereof.
| 12. | Assignment. |
Neither party hereto shall assign or subcontract this Agreement or any Services to be provided hereunder without the prior written consent of the other, which consent shall not be withheld unreasonably; provided, however, that in the event that Viad or MoneyGram, as the case may be, does not consent for any reason to the assignment or subcontract of a Service to a third party, then the other party shall not assign or subcontract such Service to such third party for a period of 90 days from the date of such requested consent, but after the expiration of such 90-day period, Viad or MoneyGram, as the case may be, may assign or subcontract such Service to such party. Notwithstanding the foregoing, consent shall not be required for an assignment or subcontract of any Service provided hereunder by either party to a corporate affiliate of such party or to any third party vendor or third party recordkeeper who had been providing all or a material portion of the Services to or on behalf of Viad or MoneyGram, as the case may be, prior to the Distribution Date nor shall consent be required if one party elects to assign or subcontract a Service pursuant to an internal decision to outsource that Service for itself except for a Schedule 2 Service If Viad elects to assign or subcontract any Schedule 2 Service and if MoneyGram does not agree to such assignment or subcontract, then the Service shall be converted to a Schedule 1
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Service at a fee equal to the amount that would be payable to the third party under such assignment or subcontract and the total cost under the Schedule 2 fee shall be reduced in such amount as the parties shall negotiate in good faith.
| 13. | Amendment. |
This Agreement may not be amended without the express written agreement of each party hereto.
| 14. | Notices. |
All notices hereunder must be in writing and delivered personally or sent by United States mail, postage prepaid, addressed as follows, except that any party by written notice given as aforesaid, may change its address for subsequent notices to be given hereunder.
If to Viad:
Viad Corp
Viad
Tower M.S. 1012
Phoenix,
Arizona 85077
Attention:
General Counsel
If to MoneyGram:
MoneyGram International, Inc.
1550
Utica Avenue South
St.
Louis Park, Minnesota 55416
Attention:
General Counsel
| 15. | Liability for Nonperformance. |
Neither party hereto nor any subsidiaries of such party shall have any liability to the other party hereto for failure to perform its obligations hereunder unless such failure arises out of, directly or indirectly, the intentional misconduct or gross negligence on the part of the nonperforming party. Neither party hereto shall be required to perform any Service (or any part of any Service) to the extent that performance of such Service (or such part of such Service) would violate any law (including any state law prohibition on the performance of legal services), rule, regulation or third-party contract. The liability of any party for nonperformance of any Service shall be limited to a refund of amounts received by that party from the other party with respect to that Service and in no event shall either party be liable for consequential damages. Any party receiving Services shall defend, indemnify and hold harmless the party providing such Services from any and all claims of any third parties arising out of the performance of those Services (except to the extent that liability arises as a result of intentional misconduct or gross negligence on the part of the party performing such Services). Such indemnity shall include reimbursement for reasonable out of pocket expenses, including reasonable legal fees.
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| 16. | Independent Entities. |
In carrying out the provisions hereof, MoneyGram and Viad are and shall be deemed to be for all purposes, separate and independent entities. MoneyGram and Viad shall select their employees and agents, and such employees and agents shall be under the exclusive and complete supervision and control of MoneyGram or Viad, as the case may be. MoneyGram and Viad each hereby acknowledge responsibility for full payment of wages and other compensation to all employees and agents engaged by either in the performance of their respective Services hereunder. It is the express intent of the parties hereto that the relationship of MoneyGram to Viad and Viad to MoneyGram shall be solely that of separate and independent companies and not that of a joint venture, partnership or any other joint relationship.
| 17. | Nonfiduciary Status. |
In carrying out the provisions hereof, neither party hereto shall be a fiduciary (as defined in Section 3(21) of ERISA) with respect to any employee benefit plan, program or arrangement maintained by or on behalf of the other party. Each party hereto shall provide Services pursuant to the terms and subject to the conditions hereof in accordance with the directions, guidelines and/or procedures established by Viad or MoneyGram, as the case may be, or the plan administrator (as defined in Section 3(16) of ERISA) of each party’s employee benefit plans or arrangements.
| 18. | Third Party Beneficiaries. |
The provisions hereof are solely for the benefit of the parties hereto and are not intended to confer upon any Person except the parties hereto any rights or remedies hereunder. There are no third party beneficiaries hereof, and this Agreement shall not provide any Person except the parties hereto with any remedy, claim, liability, reimbursement, action or other right in excess of those existing without reference hereto.
| 19. | Construction. |
For purposes hereof, references to MoneyGram, with respect to events or periods prior to the Distribution Date, shall mean and include, where appropriate, Viad’s payment services business unit as it existed prior to such date.
| 20. | Dispute Resolution. |
If any dispute arises under or relates to this Agreement either party may submit the matter in dispute to binding arbitration by referring the matter to the Phoenix, Arizona office of the American Arbitration Association (“AAA”) (or if there is no Phoenix office at that time such other office applicable to a dispute in Arizona) for the purpose of providing three names of potential arbitrators from which the parties will select an arbitrator. If the parties are unable to agree on an arbitrator then the parties will alternately strike names from the list until one name is left, who shall then be the arbitrator. The party who did not request the arbitration shall be entitled to the first strike. Except as the parties may agree otherwise at the time of the Arbitration, the Arbitration shall be conducted pursuant to the AAA’s then current rules for binding arbitration. The arbitration hearing shall be conducted within 60 days from the date of the arbitrator’s
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selection. The hearing shall be conducted in Phoenix, Arizona unless the parties mutually agree to an alternate location. The parties shall share equally in the costs and expenses of the arbitration. Each party shall bear its own costs for case preparation and presentation, including any attorney fees and travel costs. Except for any matter for which equitable or injunctive relief would be appropriate under the circumstances, binding arbitration shall be the parties’ only remedy at law and the decision of the arbitrator shall be final.
| 21. | Survival. |
The indemnification provisions of Sections 3.3 and 15 shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed in multiple counterparts on the date set forth above, each of which shall, for all purposes, be deemed an original and all of which shall evidence but one agreement between the parties hereto.
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VIAD CORP,
a Delaware corporation |
MONEYGRAM INTERNATIONAL, INC.
a Delaware corporation |
|
|
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|
By: /s/ Scott E. Sayre
|
By: /s/ Philip W. Milne | |
|
|
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|
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Name: Scott E. Sayre
|
Name: Philip W. Milne | |
|
Title: Vice President – General Counsel
|
Title: President & CEO | |
|
and Secretary
|
[Schedule 1 – Services of Viad to MoneyGram
Schedule 2 – Services of Viad to MoneyGram
Schedule 3 – Services of MoneyGram to Viad]
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Exhibit 10.4
MONEYGRAM INTERNATIONAL, INC.
2004 OMNIBUS INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to give the Company a significant advantage in attracting, retaining and motivating officers, employees and directors and to provide the Company and its subsidiaries with the ability to provide incentives more directly linked to the profitability of the Company’s businesses and increases in stockholder value. It is the current intent of the Committee that the Plan shall replace the 1992 Stock Incentive Plan for purposes of new Awards and that the MoneyGram Management Incentive Plan, the MoneyGram Performance Unit Incentive Plan, and the MoneyGram Performance-Based Stock Plan continue under the auspices of Sections 7 and 8 hereof subject to the discretion of the Committee under the terms and conditions of this Plan.
For purposes of the Plan, the following terms are defined as set forth below:
(a) “AFFILIATE” means a corporation or other entity controlled by the Company and designated by the Committee as such.
(b) “AWARD” means an award of Stock Appreciation Rights, Stock Options, Restricted Stock or Performance-Based Awards.
(c) “AWARD CYCLE” will mean a period of consecutive fiscal years or portions thereof designated by the Committee over which Awards of Restricted Stock or Performance-Based Awards are to be earned.
(d) “BOARD” means the Board of Directors of the Company.
(e) “CAUSE” means (1) the conviction of a participant for committing a felony under federal law or the law of the state in which such action occurred, (2) dishonesty in the course of fulfilling a participant’s employment duties or (3) willful and deliberate failure on the part of a participant to perform his employment duties in any material respect, or such other events as will be determined by the Committee. The Committee will have the sole discretion to determine whether “Cause” exists, and its determination will be final.
(f) “CHANGE IN CONTROL” and “CHANGE IN CONTROL PRICE” have the meanings set forth in Sections 9(b) and (c), respectively.
(g) “CODE” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
(h) “COMMISSION” means the Securities and Exchange Commission or any successor agency.
(i) “COMMITTEE” means the Committee referred to in Section 2.
(j) “COMMON STOCK” means common stock, par value $1.50 per share, of the Company.
(k) “COMPANY” means MoneyGram International, Inc., a Delaware corporation.
(l) “COMPANY UNIT” means any subsidiary, group of subsidiaries, line of business or division of the Company, as designated by the Committee.
(m) “DISABILITY” means permanent and total disability as determined under procedures established by the Committee for purposes of the Plan.
(n) “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.
(o) “FAIR MARKET VALUE” means, as of any given date, the mean between the highest and lowest reported sales prices of the Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national exchange on which the Stock is listed or on the Nasdaq Stock Market. If there is no regular public trading market for such Stock, the Fair Market Value of the Stock will be determined by the Committee in good faith. In connection with the administration of specific sections of the Plan, and in connection with the grant of particular Awards, the Committee may adopt alternative definitions of “Fair Market Value” as appropriate.
(p) “INCENTIVE STOCK OPTION” means any Stock Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
(q) “MIP” means the Company’s Management Incentive Plan providing annual cash bonus awards to participating employees based upon predetermined goals and objectives.
(r) “NET INCOME” means the consolidated net income of the Company determined in accordance with GAAP before extraordinary, unusual and other non-recurring items.
(s) “NON-EMPLOYEE DIRECTOR” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3), as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission.
(t) “NON-QUALIFIED STOCK OPTION” means any Stock Option that is not an Incentive Stock Option.
(u) “PERFORMANCE GOALS” means the performance goals established by the Committee in connection with the grant of Restricted Stock or Performance-Based Awards. In the case of Qualified Performance-Based Awards, such goals (1) will be based on the attainment of specified levels of one or more of the following measures with respect to the Company or any Company Unit, as applicable: economic value added, sales or revenues, costs or expenses, net profit after tax, gross profit, operating profit, base earnings, return on actual or pro forma equity or net assets or capital, net capital employed, earnings per share, earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net income, stockholder return including performance (total stockholder return) relative to the S&P 500,
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MidCap 400 or similar index or performance (total stockholder return) relative to the proxy comparator group, in both cases as determined pursuant to Rule 402(l) of Regulation S-K promulgated under the Exchange Act, cash generation, cash flow, unit volume and change in working capital and (2) will be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations.
(v) “PERFORMANCE-BASED AWARD” means an Award made pursuant to Section 8.
(w) “PERFORMANCE-BASED RESTRICTED STOCK AWARD” has the meaning set forth in Section 7(c)(1) hereof.
(x) “PLAN” means the 2004MoneyGram Omnibus Incentive Plan, as set forth herein and as hereafter amended from time to time.
(y) “PREFERRED STOCK” means preferred stock, par value $0.01, of the Company.
(z) “QUALIFIED PERFORMANCE-BASED AWARDS” means an Award of Restricted Stock or a Performance-Based Award designated as such by the Committee at the time of grant, based upon a determination that (1) the recipient is or may be a “covered employee” within the meaning of Section 162(m)(3) of the Code in the year in which the Company would expect to be able to claim a tax deduction with respect to such Restricted Stock or Performance-Based Award and (2) the Committee wishes such Award to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C).
(aa) “RESTRICTED STOCK” means an award granted under Section 7.
(bb) “RETIREMENT,” except as otherwise determined by the Committee, means voluntary separation of employment, voluntary termination of employment or voluntary resignation from employment (a) at or after attaining age 55 on pension or vested to receive pension under a pension plan of the Corporation upon election, or (b) upon or after attaining age 55 and not less than five years’ continuous service with the Corporation or an affiliate of the Corporation, whether or not vested for pension. Retirement shall be deemed to occur at the close of business on the last day of the employee’s participation on the payroll of the Corporation whether receiving compensation for active employment, accrued vacation, salary continuation (regular way or lump sum) or like employment programs.
(cc) “RULE 16b-3” means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time.
(dd) “STOCK” means the Common Stock or Preferred Stock.
(ee) “STOCK APPRECIATION RIGHT” means a right granted under Section 6.
(ff) “STOCK OPTION” means an option granted under Section 5.
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(gg) “TERMINATION OF EMPLOYMENT” means the termination of the participant’s employment with the Company and any subsidiary or Affiliate. A participant employed by a subsidiary or an Affiliate will also be deemed to incur a Termination of Employment if the subsidiary or Affiliate ceases to be such a subsidiary or Affiliate, as the case may be, and the participant does not immediately thereafter become an employee of the Company or another subsidiary or Affiliate. Transfers among the Company and its subsidiaries and Affiliates, as well as temporary absences from employment because of illness, vacation or leave of absence, will not be considered a Termination of Employment.
In addition, certain other terms used herein have definitions given to them in the first place in which they are used.
SECTION 2. ADMINISTRATION.
The Plan will be administered by the Human Resources Committee of the Board pursuant to authority delegated by the Board in accordance with the Company’s By-Laws. If at any time there is no such Human Resources Committee or such Human Resources Committee shall fail to be composed of at least two directors each of whom is a Non-Employee Director and is an “outside director” under Section 162(m)(4) of the Code, the Plan will be administered by a Committee selected by the Board and composed of not less than two individuals, each of whom is such a Non-Employee Director and such an “outside director.”
The Committee will have plenary authority to grant Awards pursuant to the terms of the Plan to officers, employees and directors of the Company and its subsidiaries and Affiliates, but the Committee may not grant MIP Awards larger than the limits provided in Section 3.
Among other things, the Committee will have the authority, subject to the terms of the Plan:
(a) to select the officers, employees and directors to whom Awards may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and Performance-Based Awards or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock or the amount of cash to be covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder (including, but not limited to, the option price (subject to Section 5(a)), any vesting condition, restriction or limitation (which may be related to the performance of the participant, the Company or any subsidiary, Affiliate or Company Unit) and any rule concerning vesting acceleration or waiver of forfeiture regarding any Award and any shares of Stock relating thereto, based on such factors as the Committee will determine) provided, however, that the Committee will have no power to accelerate the vesting, or waive the forfeiture, regarding any Award and any shares of Stock relating thereto, except in connection with a “change of control” of the Company, the sale of a subsidiary or majority-owned affiliate of the Company (and then only with respect to participants
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employed by each such subsidiary or affiliate), the death or disability of a participant or termination of employment of a participant, and, further provided, however, that the Committee will have no power to accelerate the vesting, or waive the forfeiture, of any Qualified Performance-Based Awards;
(e) to modify, amend or adjust the terms and conditions, at any time or from time to time, of any Award, including but not limited to Performance Goals; provided, however, that the Committee may not adjust upwards the amount payable with respect to any Qualified Performance-Based Award or waive or alter the Performance Goals associated therewith and provided, further, however, that the Committee may not reprice Stock Options except for an amount of Stock Options representing not more than 10% of then outstanding Stock Options;
(f) to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award will be deferred; and
(g) to determine under what circumstances a Stock Option may be settled in cash or Stock under Section 5(j).
The Committee will have the authority to adopt, alter or repeal such administrative rules, guidelines and practices governing the Plan as it from time to time deems advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office, except that the members thereof may (1) delegate to designated officers or employees of the Company such of its powers and authorities under the Plan as it deems appropriate (provided that no such delegation may be made that would cause Awards or other transactions under the Plan to fail to be exempt from Section 16(b) of the Exchange Act or that would cause Qualified Performance-Based Awards to cease to so qualify) and (2) authorize any one or more members or any designated officer or employee of the Company to execute and deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award will be made in the sole discretion of the Committee or such delegates at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer(s) or employee(s) pursuant to the provision of the Plan will be final and binding on all persons, including the Company and Plan participants.
Notwithstanding anything to the contrary in the Plan, the Committee will have the authority to modify, amend or adjust the terms and conditions of any Award as appropriate in the event of or in connection with any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation or any change in the capital structure of the Company.
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SECTION 3. STOCK SUBJECT TO PLAN AND LIMITS ON AWARDS.
(a) Subject to adjustment as provided herein, the number of shares of Common Stock of the Company available for grant under the Plan in each calendar year (including partial calendar years) during which the Plan is in effect shall be equal to two percent (2.0%) of the total number of shares of Common Stock of the Company outstanding as of the first day of each such year for which the Plan is in effect; provided that any shares available for grant in a particular calendar year (or partial calendar year) which are not, in fact, granted in such year shall be added to the shares available for grant in any subsequent calendar year; and provided, further, that the number of shares of Common Stock available for grant in 2004 shall be two percent (2%) of the total number of shares of Common Stock outstanding as of , 2004.
(b) Subject to adjustment as provided herein, the number of shares of Stock covered by Awards granted to any one participant will not exceed 500,000 shares for any consecutive twelve-month period and the aggregate dollar amount for Awards denominated solely in cash will not exceed $5.0 million for any such period.
(c) In addition, and subject to adjustment as provided herein, no more than 7.5 million shares of Common Stock will be cumulatively available for the grant of Incentive Stock Options over the life of the Plan.
(d) Shares subject to an option or award under the Plan may be authorized and unissued shares or may be “treasury shares.” In the event of any merger, reorganization, consolidation, recapitalization, spin-off, stock dividend, stock split, extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, such substitution or adjustments will be made in the aggregate number and kind of shares reserved for issuance under the Plan, in the aggregate limit on grants to individuals, in the number, kind, and option price of shares subject to outstanding Stock Options and Stock Appreciation Rights, in the number and kind of shares subject to other outstanding Awards granted under the Plan and/or such other equitable substitutions or adjustments as may be determined to be appropriate by the Committee or the Board, in its sole discretion; provided, however, that the number of shares subject to any Award will always be a whole number.
(e) Awards under the MIP may not exceed in the case of (i) the Company’s Chief Executive Officer, one and one-half percent (1.5%) of net income as defined; (ii) a president of any of the Company’s operating companies, whether or not incorporated, six-tenths of one percent (0.6%) of net income as defined; and (iii) all other executive officers of the Company individually, one-half of one percent (0.5%) of net income as defined.
SECTION 4. ELIGIBILITY.
Officers, employees and directors of the Company, its subsidiaries and Affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries and Affiliates are eligible to be granted Awards under the Plan.
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SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types: Incentive Stock Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan will be in such form as the Committee may from time to time approve.
The Committee will have the authority to grant any optionee Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights). Incentive Stock Options may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it will be deemed to be a Non-Qualified Stock Option.
Stock Options will be evidenced by option agreements, the terms and provisions of which may differ. An option agreement will indicate on its face whether it is an agreement for an Incentive Stock Option or a Non-Qualified Stock Option. The grant of a Stock Option will occur on the date the Committee by resolution selects an individual to be a participant in any grant of a Stock Option, determines the number of shares of Stock to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option. The Company will notify a participant of any grant of a Stock Option, and a written option agreement or agreements will be duly executed and delivered by the Company to the participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options will be interpreted, amended or altered nor will any discretion or authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of the Code or, without the consent of the optionee affected, to disqualify any Incentive Stock Option under such Section 422.
Stock Options granted under the Plan will be subject to the following terms and conditions and will contain such additional terms and conditions as the Committee will deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable under a Stock Option will be determined by the Committee and set forth in the option agreement, and will not be less than the Fair Market Value of the Stock subject to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option will be fixed by the Committee, but no Incentive Stock Option may be exercisable more than 10 years after the date the Incentive Stock Option is granted.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options will be exercisable at such time or times and subject to such terms and conditions as will be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may, subject to the provisions of Section 2(d) hereof, at any time waive such installment exercise provisions, in whole or in part, based on such factors as the
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Committee may determine. In addition, the Committee may, subject to the provisions of Section 2(d) hereof, at any time accelerate the exercisability of any Stock Option.
(d) METHOD OF EXERCISE. Subject to the provisions of this Section 5, Stock Options may be exercised, in whole or in part, at any time during the option term by giving written notice of exercise to the Company specifying the number of shares of Stock subject to the Stock Option to be purchased.
Such notice must be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Company may accept. An option agreement may provide that, if approved by the Committee, payment in full or in part or payment of tax liability, if any, relating to such exercise may also be made in the form of unrestricted Stock already owned by the optionee of the same class as the Stock subject to the Stock Option and, in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock subject to an Award hereunder which is of the same class as the Stock subject to the Stock Option (in both cases based on the Fair Market Value of the Stock on the date the Stock Option is exercised); provided, however, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned shares of Stock of the same class as the Stock subject to the Stock Option may be authorized only at the time the Stock Option is granted. In addition, an option agreement may provide that, in the discretion of the Committee, payment for any shares subject to a Stock Option or tax liability associated therewith may also be made by instruction to the Committee to withhold a number of such shares having a Fair Market Value on the date of exercise equal to the aggregate exercise price of such Stock Option.
If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock, the number of shares of Stock to be received upon such exercise equal to the number of shares of Restricted Stock used for payment of the option exercise price will be subject to the same forfeiture restrictions to which such Restricted Stock was subject, unless otherwise determined by the Committee.
No shares of Stock will be issued until full payment therefor has been made. Subject to any forfeiture restrictions that may apply if a Stock Option is exercised using Restricted Stock, an optionee will have all of the rights of a stockholder of the Company holding the class or series of Stock that is subject to such Stock Option (including, if applicable, the right to vote the shares and the right to receive dividends), when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 12(a).
(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option will be transferable by the optionee other than (A) by will or by the laws of descent and distribution or (B) in the case of a Non-Qualified Stock Option, pursuant to a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder). All Stock Options will be exercisable, during the optionee’s lifetime, only by the optionee or by the guardian or legal representative of the optionee, it being understood that the terms “holder” and “optionee” include the guardian and legal representative of the optionee named in the option agreement and any person to whom a Stock Option is
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transferred by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.
(2) Notwithstanding Section 5(e)(1) above, the Committee may grant Stock Options that are transferable, or amend outstanding Stock Options to make them transferable, by the optionee (any such Stock Option so granted or amended a “Transferable Option”) to one or more members of the optionee’s immediate family, to partnerships of which the only partners are members of the optionee’s immediate family, or to trusts established by the optionee for the benefit of one or more members of the optionee’s immediate family.
For this purpose the term “immediate family” means the optionee’s spouse, children or grandchildren. Consideration may not be paid for the transfer of a Transferable Option. A transferee described in this Section 5(e)(2) shall be subject to all terms and conditions applicable to the Transferable Option prior to its transfer. The option agreement with respect to a Transferable Option shall set forth its transfer restrictions, such option agreement shall be approved by the Committee, and only Stock Options granted pursuant to a stock option agreement expressly permitting transfer pursuant to this Section 5(e)(2) shall be so transferable.
(f) TERMINATION BY DEATH. If an optionee’s employment terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent then exercisable, or on such accelerated basis as the Committee may determine, for a period of one year (or such other period as the Committee may specify in the option agreement) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter.
(g) TERMINATION BY REASON OF DISABILITY. If an optionee’s employment terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for a period of three years (or such shorter period as the Committee may specify in the option agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such three-year period (or such shorter period), any unexercised Stock Option held by such optionee will, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee’s employment terminates by reason of Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for a period of five years (or such shorter period as the Committee may specify in the option agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period
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is the shorter; provided, however, that if the optionee dies within such five-year period (or such shorter period), any unexercised Stock Option held by such optionee will, notwithstanding such five-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee, if an optionee incurs a Termination of Employment for any reason other than death, Disability or Retirement or Cause, any Stock Option held by such optionee will thereupon terminate, except that such Stock Option, to the extent then exercisable, or subject to the provisions of Section 2(d) hereof, on such accelerated basis as the Committee may determine, may be exercised for the lesser of three months from the date of such Termination of Employment or the balance of such Stock Option’s term; provided, however, that if the optionee dies within such three-month period, any unexercised Stock Option held by such optionee will, notwithstanding the expiration of such three-month period, continue to be exercisable to the extent to which it was exercisable at the 12 time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of Termination of Employment, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(j) CASHING OUT OF STOCK OPTION. On receipt of written notice of exercise, the Committee may elect to cash out all or part of the shares of Stock for which a Stock Option is being exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Stock over the option price times the number of shares of Stock for which the Option is being exercised on the effective date of such cash-out.
(k) CHANGE IN CONTROL CASH-OUT. Subject to Section 12(h), but notwithstanding any other provision of the Plan, during the 60-day period from and after a Change in Control (the “Exercise Period”), unless the Committee determines otherwise at the time of grant, an optionee will have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Stock being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change in Control Price per share of Stock on the date of such election will exceed the exercise price per share of Stock under the Stock Option (the “Spread”) multiplied by the number of shares of Stock granted under the Stock Option as to which the right granted under this Section 5(k) will have been exercised.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-
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Qualified Stock Option, such rights may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of grant of such Stock Option. A Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance with Section 6(b) by surrendering the applicable portion of the related Stock Option in accordance with procedures established by the Committee. Upon such exercise and surrender, the optionee will be entitled to receive an amount determined in the manner prescribed in Section 6(b). Stock Options which have been so surrendered will no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights will be subject to such terms and conditions as will be determined by the Committee, including the following:
(1) Stock Appreciation Rights will be exercisable only at such time or times and to the extent that the Stock Options to which they relate are exercisable in accordance with the provisions of Section 5 and this Section 6;
(2) Upon the exercise of a Stock Appreciation Right, an optionee will be entitled to receive an amount in cash, shares of Stock or both equal in value to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right has been exercised, with the Committee having the right to determine the form of payment;
(3) Stock Appreciation Rights will be transferable only to permitted transferees of the underlying Stock Option in accordance with Section 5(e).
SECTION 7. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan. The Committee will determine the individuals to whom and the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any participant, the conditions for vesting, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards, in addition to those contained in Section 7(c).
(b) AWARDS AND CERTIFICATES. Shares of Restricted Stock will be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Except as otherwise set forth in a Restricted Stock Agreement, any certificate issued in respect of shares of Restricted Stock will be registered in the name of such participant and will bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
| “The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 2004 Incentive Plan and a Restricted |
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| Stock Agreement. Copies of such Plan and Agreement are on file at the offices of MoneyGram International, Inc., Minneapolis, Minnesota.” |
The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon have lapsed and that, as a condition of any Award of Restricted Stock, the participant has delivered a stock power, endorsed in blank, relating to the Stock covered by such Award.
(c) TERMS AND CONDITIONS. Shares of Restricted Stock will be subject to the following terms and conditions:
(1) The Committee may, prior to or at the time of grant, designate an Award of Restricted Stock as a Qualified Performance-Based Award, in which event it will condition the grant or vesting, as applicable, of such Restricted Stock upon the attainment of Performance Goals. If the Committee does not designate an Award of Restricted Stock as a Qualified Performance-Based Award, it may also condition the grant or vesting thereof upon the attainment of Performance Goals or such other performance-based criteria as the Committee shall establish (such an Award, a “Performance-Based Restricted Stock Award”). Regardless of whether an Award of Restricted Stock is a Qualified Performance-Based Award or a Performance-Based Restricted Stock Award, the Committee may also condition the grant or vesting upon the continued service of the participant. The provisions of Restricted Stock Awards (including the conditions for grant or vesting and any applicable Performance Goals) need not be the same with respect to each recipient. The Committee may at any time, in its sole discretion, subject to the provisions of Section 7(c)(10), accelerate or waive, in whole or in part, any of the foregoing restrictions; provided, however, that in the case of Restricted Stock that is a Qualified Performance-Based Award, the applicable Performance Goals have been satisfied.
(2) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to in Section 7(c)(8), during the period set by the Committee, commencing with the date of such Award for which such participant’s continued service is required (the “Restriction Period”) and until the later of (A) the expiration of the Restriction Period and (B) the date the applicable Performance Goals (if any) are satisfied, the participant will not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock.
(3) Except as provided in this paragraph (3) and Sections 7(c)(1) and (2) and the Restricted Stock Agreement, the participant will have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any dividends. If so determined by the Committee in the applicable Restricted Stock Agreement and subject to Section 12(f) of the Plan, (A) dividends consisting of cash, stock or other property (other than Stock) on the class or series of Stock 15 that is the subject of the Restricted Stock shall be automatically deferred and reinvested in additional Restricted Stock (in the case of stock or other property, based on the fair market value thereof, and the Fair Market Value of
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the Stock, in each case as of the record date for the dividend) held subject to the vesting of the underlying Restricted Stock, or held subject to meeting any Performance Goals applicable to the underlying Restricted Stock, and (B) dividends payable in Stock shall be paid in the form of Restricted Stock of the same class as the Stock with which such dividend was paid and shall be held subject to the vesting of the underlying Restricted Stock, or held subject to meeting any Performance Goals applicable to the underlying Restricted Stock.
(4) Except to the extent otherwise provided in the applicable Restricted Stock Agreement, Section 7(c)(1), 7(c)(2), 7(c)(5) or 9(a)(2), upon a participant’s Termination of Employment for any reason during the Restriction Period or before any applicable Performance Goals are met, all shares still subject to restriction will be forfeited by the participant.
(5) Except to the extent otherwise provided in Section 9(a)(2) and Sections 7(c)(9) and (10), in the event that a participant retires or such participant’s employment is involuntarily terminated (other than for Cause), the Committee will have the discretion to waive in whole or in part any or all remaining restrictions (other than, in the case of Restricted Stock which is a Qualified Performance-Based Award, satisfaction of the applicable Performance Goals unless the participant’s employment is terminated by reason of death or Disability) with respect to any or all of such participant’s shares of Restricted Stock.
(6) Except as otherwise provided herein or as required by law, if and when any applicable Performance Goals are satisfied and the Restriction Period expires without a prior forfeiture of the Restricted Stock, unlegended certificates for such shares will be delivered to the participant upon surrender of legended certificates.
(7) Awards of Restricted Stock, the vesting of which is not conditioned upon the attainment of Performance Goals or other performance-based criteria, is limited to twenty percent (20%) of the number of shares of Common Stock of the Corporation available for grant under the Plan in each calendar year.
(8) Each Award will be confirmed by, and be subject to the terms of, a Restricted Stock Agreement.
(9) There will be no vesting acceleration, or waiver of forfeiture regarding any Award and any shares of Stock relating thereto, except in connection with a “change of control” of the Company, the sale of a subsidiary or majority-owned affiliate of the Company (and then only with respect to participants employed by 16 each subsidiary or affiliate), the death or disability of a participant, or termination of employment of a participant.
SECTION 8. PERFORMANCE-BASED AWARDS.
(a) ADMINISTRATION. Performance-Based Awards may be awarded either alone or in addition to other Awards granted under the Plan. Subject to the terms and conditions of the Plan, the Committee shall determine the officers and employees to whom and the time or times
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at which Performance-Based Awards will be awarded, the number or amount of Performance-Based Awards to be awarded to any participant, whether such Performance-Based Award shall be denominated in a number of shares of Stock, an amount of cash, or some combination thereof, the duration of the Award Cycle and any other terms and conditions of the Award, in addition to those contained in Section 8(b).
(b) TERMS AND CONDITIONS. Performance-Based Awards will be subject to the following terms and conditions:
(1) The Committee may, prior to or at the time of the grant, designate Performance-Based Awards as Qualified Performance-Based Awards, in which event it will condition the settlement thereof upon the attainment of Performance Goals. If the Committee does not designate Performance-Based Awards as Qualified Performance-Based Awards, it may also condition the settlement thereof upon the attainment of Performance Goals or such other performance-based criteria as the Committee shall establish. Regardless of whether Performance-Based Awards are Qualified Performance-Based Awards, the Committee may also condition the settlement thereof upon the continued service of the participant. The provisions of such Performance-Based Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient. Subject to the provisions of the Plan and the Performance-Based Award Agreement referred to in Section 8(b)(5), Performance-Based Awards may not be sold, assigned, transferred, pledged or otherwise encumbered during the Award Cycle.
(2) Unless otherwise provided by the Committee (A) from time to time pursuant to the administration of particular Award programs under this Section 8, such as the MoneyGram Management Incentive Plan, the MoneyGram Performance Unit Incentive Plan or the MoneyGram Performance-Based Stock Plan or (B) in any agreement relating to an Award, and except as provided in Section 8(b)(3), upon a participant’s Termination of Employment for any reason prior to the payment of an Award under this Section 8, all rights to receive cash or Stock in settlement of the Award shall be forfeited by the participant.
(3) In the event that a participant’s employment is terminated (other than for Cause), or in the event a participant retires, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations (other than, in the case of Awards that are Qualified Performance-Based Awards, satisfaction of the applicable Performance Goals unless the participant’s employment is terminated by reason of death or Disability) with respect to any or all of such participant’s Awards.
(4) At the expiration of the Award Cycle, the Committee will evaluate the Company’s performance in light of any Performance Goals for such Award, and will determine the extent to which a Performance-Based Award granted to the participant has been earned, and the Committee will then cause to be delivered to the participant, as specified in the grant of such Award: (A) a number of shares of Stock equal to the number of shares determined by the Committee to have been earned or (B) cash equal to
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the amount determined by the Committee to have been earned or (C) a combination of shares of Stock and cash if so specified in the Award.
(5) No Performance-Based Award may be assigned, transferred, or otherwise encumbered except, in the event of the death of a participant, by will or the laws of descent and distribution.
(6) Each Award will be confirmed by, and be subject to, the terms of a Performance-Based Award Agreement.
(7) Performance-Based Awards will be subject to a minimum one-year performance period.
SECTION 9. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control:
(1) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested will become fully exercisable and vested to the full extent of the original grant;
(2) The restrictions and conditions to vesting applicable to any Restricted Stock will lapse, and such Restricted Stock will become free of all restrictions and become fully vested and transferable to the full extent of the original grant;
(3) Performance-Based Awards will be considered to be earned and payable to the extent, if any, and in an amount, if any, and otherwise, in accordance with the provisions of the agreement relating to such Awards.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a “Change in Control” will mean the happening of any of the following events:
(1) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, the following: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (3) of this Section 9(b); or
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(2) A change in the composition of the Board such that the individuals who, as of July 1, 2004, constitute the Board (such Board will be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 9(b), that any individual who becomes a member of the Board subsequent to July 1, 2004, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) will be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office 19 occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a member of the Incumbent Board; or
(3) The approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (“Corporate Transaction”) (or, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the earlier of the obtaining of such consent or the consummation of the Corporate Transaction); excluding, however, such a Corporate Transaction pursuant to which (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or
(4) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
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(c) CHANGE IN CONTROL PRICE. For purposes of the Plan, “Change in Control Price” means the higher of (1) the highest reported sales price, regular way, of a share of Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on The Nasdaq Stock Market during the 60-day period prior to and including the date of a Change in Control or (2) if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change in Control Price will be in all cases the Fair Market Value of the Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration will be determined in the sole discretion of the Board.
SECTION 10. TERM, AMENDMENT AND TERMINATION.
The Plan will terminate June 11, 2014, but may be terminated sooner at any time by the Board. Awards outstanding as of the date of any such termination will not be affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment, alteration or discontinuation will be made which would (a) impair the rights of an optionee under a Stock Option or a recipient of a Stock Appreciation Right, Restricted Stock Award or Performance-Based Award theretofore granted without the optionee’s or recipient’s consent, except such an amendment which is necessary to cause any Award or transaction under the Plan to qualify, or to continue to qualify, for the exemption provided by Rule 16b-3, or (b) disqualify any Award or transaction under the Plan from the exemption provided by Rule 16b-3. In addition, no such amendment may be made without the approval of the Company’s stockholders to the extent such approval is required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award theretofore granted, prospectively or retroactively, but no such amendment will (1) impair the rights of any holder without the holder’s consent except such an amendment which is necessary to cause any Award or transaction under the Plan to qualify, or to continue to qualify, for the exemption provided by Rule 16b-3 or (2) amend any Qualified Performance-Based Award in such a way as to cause it to cease to qualify for the exemption set forth in Section 162(m)(4)(C). The Committee may also substitute new Stock Options for previously granted Stock Options, including previously granted Stock Options having higher option prices; provided, however, that the Committee may take such action only with respect to Stock Options representing not more than 10% of then outstanding Stock Options.
Subject to the above provisions, the Board will have authority to amend the Plan to take into account changes in law and tax and accounting rules, as well as other developments and to grant Awards which qualify for beneficial treatment under such rules without stockholder approval.
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SECTION 11. UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.
SECTION 12. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring any shares without a view to the distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under the Plan will be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for shares of Stock under the Plan prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be the principal market for the Stock;
(2) Any registration or other qualification of such shares of the Company under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.
(b) Nothing contained in the Plan will prevent the Company or any subsidiary or Affiliate from adopting other or additional compensation arrangements for its employees.
(c) The adoption of the Plan will not confer upon any employee any right to continued employment nor will it interfere in any way with the right of the Company or any subsidiary or Affiliate to terminate the employment of any employee at any time.
(d) No later than the date as of which an amount first becomes includible in the gross income of the participant for Federal income tax purposes with respect to any Award under the
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Plan, the participant will pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Company, withholding obligations may be settled with Stock, including Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan will be conditional on such payment or arrangements, and the Company and its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settlement of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection with any grant made under the Plan that the shares of Stock received as a result of such grant will be subject to a right of first refusal pursuant to which the participant will be required to offer to the Company any shares that the participant wishes to sell at the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee may specify at the time of grant.
(f) The reinvestment of dividends in additional Restricted Stock at the time of any dividend payment will only be permissible if sufficient shares of Stock are available under Section 3 for such reinvestment (taking into account then outstanding Stock Options and other Awards).
(g) The Committee will establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant’s death are to be paid or by whom any rights of the participant, after the participant’s death, may be exercised.
(h) Notwithstanding any other provision of the Plan or any agreement relating to any Award hereunder, if any right granted pursuant to this Plan would make a Change in Control transaction ineligible for pooling-of-interests-accounting under APB No. 16 that, but for the nature of such grant, would otherwise be eligible for such accounting treatment, the Committee will have the ability, in its sole discretion, to substitute for the cash payable pursuant to such grant Common Stock with a Fair Market Value equal to the cash that would otherwise be payable hereunder.
(i) The Plan and all Awards made and actions taken thereunder will be governed by and construed in accordance with the laws of the State of Delaware.
SECTION 13. EFFECTIVE DATE OF PLAN.
The Plan will be effective as of June 30, 2004.
SECTION 14. DIRECTOR STOCK OPTIONS.
(a) Each director of the Company who is not otherwise an employee of the Company or any of its subsidiaries or Affiliates, will (1) on the date of his or her first election as a director of the Company (such initial grant being an “Initial Grant”), and (2) annually on the third Thursday of February, during such director’s term (the “Annual Grant”), automatically be
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granted Non-Qualified Stock Options to purchase Common Stock having an exercise price per share of Common Stock equal to 100% of Fair Market Value per share of Common Stock at the date of grant of such Non-Qualified Stock Option. The number of shares subject to each such Initial Grant, and each such Annual Grant, will be 5,000 shares. A non-employee director who is first elected as a director of the Company during the course of a year (i.e., on a date other than the date of the Annual Grant) will, in addition to the Initial Grant, receive upon election a grant of Non-Qualified Stock Options prorated to reflect the number of months served in the initial year of service, with the number of shares of Common Stock subject to such Stock Option being equal to (1) the number of shares subject to the Initial Grant multiplied by (2) a fraction the numerator of which will be the number of months from the date of such election through the date of the next Annual Grant and the denominator of which will be twelve (12).
(b) An automatic director Stock Option will be granted hereunder only if as of each date of grant the director (1) is not otherwise an employee of the Company or any of its subsidiaries or Affiliates, (2) has not been an employee of the Company or any of its subsidiaries or Affiliates for any part of the preceding fiscal year, and (3) has served on the Board continuously since the commencement of his term.
(c) Except as expressly provided in this Section 14, any Stock Option granted hereunder will be subject to the terms and conditions of the Plan as if the grant were made pursuant to Section 5 hereof including, without limitation, the rights set forth in Section 5(j) hereof.
SECTION 15. AWARDS IN CONNECTION WITH SPINOFF
In addition to the Awards provided for above in this Plan, there shall be granted under this Plan (a) the New MoneyGram Options to acquire Common Stock (the “Spin Options”) required pursuant to Section 6.01 of the Employee Benefits Agreement dated as of June 30, 2004, by and among Viad Corp, the Company, and Travelers Express Company, Inc. (the “EBA”), and (b) the MoneyGram Restricted Stock required pursuant to Section 6.02 of the EBA (the “Spinoff Restricted Stock”). Notwithstanding any other provision of this Plan: (i) the Spin Options and the Spin Restricted Stock shall have the terms and conditions required by the EBA; (ii) the shares subject to the Spin Options and the Spin Restricted Stock shall not be subtracted from the shares available under the Plan pursuant to Section 3(a); (iii) the Spin Options and the Spin Restricted Stock shall not be subject to, nor shall they be taken into account in applying, the limits set forth in Sections 3(b) and (c); and (iv) if any Spin Option is forfeited or expires without having been exercised in exchange for Common Stock, or any Spin Restricted stock is forfeited, the shares subject to that Spin Option or Spin Restricted stock shall not be available for new grants under this Plan.
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Exhibit 10.6
MONEYGRAM INTERNATIONAL, INC.
MANAGEMENT INCENTIVE PLAN
Pursuant to the 2004 MoneyGram International, Inc. Omnibus Incentive Plan
June 30, 2004
I. PURPOSE:
The purpose of the MoneyGram International, Inc. Management Incentive Plan (Plan) is to provide key executives of MoneyGram International, Inc. (Moneygram) and its subsidiaries with an incentive to achieve goals as set forth under this Plan for each calendar year (Plan Year) for their respective companies and to provide effective management and leadership to that end.
II. PHILOSOPHY:
The Plan will provide key executives incentive bonuses based upon appropriately weighted pre-defined income and other performance measurements.
III. SUBSIDIARIES, SUBSIDIARY GROUPS AND DIVISIONS:
A. Each subsidiary, subsidiary group, line of business or division listed below is a “Company” for the purposes of this Plan:
Name of Company
MoneyGram may, by action of its Board of Directors or its Human Resources Committee, add or remove business units on the list of participant companies from time to time.
B. FUNDING LIMIT:
A “funding limit” shall be established annually for each Company participant who has been designated an Executive Officer as defined under Section 16(b) of the Securities Exchange Act. The funding limit shall be an amount determined by multiplying the actual net income of the Company for the Plan Year by the percent of such income approved by the Human Resources Committee of the MoneyGram International, Inc. Board of Directors (Committee) for such funding limit. The executive cannot be paid a larger bonus than the funding limit provided by this clause, but may be paid less in the discretion of the Committee based on the Performance Goals set forth below and other such factors which the Committee may consider.
C. PERFORMANCE GOALS:
1. OPERATING OR PRE-TAX INCOME (as calculated for external reporting purposes):
An appropriate “operating income” or “pre-tax income” target for the plan year for each Company may be recommended by the Chief Executive Officer of MoneyGram to the Committee for approval taking into account overall corporate objectives, historical income and Plan Year financial plan income (on the same basis as determined below) and, if appropriate, other circumstances.
Operating or pre-tax income to be used in calculating the bonus pool of each Company shall mean operating income before minority interest, interest expense and taxes, after deduction of corporate overhead, or pre-tax income after minority interest, in each case adjusted to appropriately exclude the effects of gains and losses from the sale or other disposition of capital assets other than vehicles. In addition, an adjustment to actual operating or pre-tax income will be made for any increase or decrease in cost to a subsidiary in connection with a change in the actual formula allocation of corporate overhead over amounts included in the Plan for the year.
Special treatment of any other significant unusual or non-recurring items (for purposes of determining actual or target operating or pre-tax income) arising after a Company’s targets are set may be recommended by the Chief Executive Officer of MoneyGram to the Committee for approval, including, for example, appropriate adjustment of operating or pre-tax income target or actuals to reflect planned effects of an acquisition approved after target has been set. Other examples include unusual items or effects of a change in accounting principle.
Incentives to be paid under this Plan must be deducted from the subsidiary corporation’s earnings by the end of the year. Goals must be achieved after deducting from actual results all incentive compensation applicable to the year, including those incentives earned under this Plan.
2. VALUE ADDED MEASUREMENT:
An appropriate “Value Added” target for the plan year for certain companies may be recommended by the Chief Executive Officer of MoneyGram International, Inc. to the Committee for approval. This measurement is intended to place increased emphasis on securing an adequate return to MoneyGram on all capital employed in the business. MoneyGram Value Added (MVA) compares net operating income to the return required on capital invested in the business.
In calculating the bonus pool of each applicable Company, MVA shall mean Net Operating Profit After Taxes (NOPAT is defined as sales minus operating expenses minus taxes) minus a Capital Charge calculated by multiplying a Cost of Capital times the actual Capital (Capital is defined as total assets less current and other liabilities exclusive of debt). Certain adjustments are necessary to determine NOPAT and Capital.
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3. CASH FLOW:
An appropriate “Cash Flow” target for the plan year for certain companies may be recommended by the Chief Executive Officer of MoneyGram International, Inc. to the Committee for approval. This measurement is intended to place increased emphasis on delivering available cash to MoneyGram.
Operating Cash Flow is defined as the net change in cash resulting from the operations of the Company. Cash flows from operations exclude the impact of investing activities (acquiring and disposing of investments and productive long-lived assets) and financing activities (borrowing and repaying debt, payment of dividends, and treasury stock repurchases).
4. OTHER PERFORMANCE MEASUREMENTS:
An appropriate number of performance measurements other than operating or pre-tax income, MVA and cash flow may be established for each Company, to place increased emphasis on areas of importance to achieving overall corporate objectives, with the Chief Executive Officer of MoneyGram to recommend to the Committee the measures to be used and, at the end of the year, the level of achievement against each.
5. REVENUE:
The bonus pool earned will be subject to a further calculation whereby the total bonus pool otherwise accruable will be adjusted by 95% (threshold) up to 105% (maximum), depending on the achievement against the revenue target.
6. ESTABLISHING TARGETS:
The targets for revenue, operating or pre-tax income, MVA, cash flow and for the categories of discretionary performance measurements to be employed will be established by the Committee no later than 90 days after the beginning of the Plan Year after receiving the recommendations of the Chief Executive Officer of MoneyGram International, Inc.
D. PARTICIPANT ELIGIBILITY:
The Committee will select the Executive Officers as defined under Section 16(b) of the Securities Exchange Act eligible for participation no later than 90 days after the beginning of the Plan Year. Other personnel will be eligible for participation as designated by each Company President or Chief Executive Officer and recommended to the Chief Executive Officer of MoneyGram International, Inc. for approval, limited only to those executives who occupy a position in which they can significantly affect operating results as pre-defined by appropriate and consistent criteria, i.e., base salary not less than $49,000 per year, or base salary not less than 50% of the Company’s Chief Executive Officer, or position not more than the third organizational level below the Company Chief Executive Officer or another applicable criteria.
NOTE: Individuals not qualifying under the criteria established for the Plan Year who were included in the previous year will be grandfathered (continue as qualified participants until retirement, reassignment, or termination of employment) if designated by the Company President
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or Chief Executive Officer, and approved by the Chief Executive Officer of MoneyGram International, Inc.
E. TARGET BONUSES:
Target bonuses will be approved by the Committee for each Executive Officer in writing within the following parameters no later than 90 days after the beginning of the Plan Year and will be expressed as a percentage of salary paid during the year.
Target bonuses for other eligible personnel will be established in writing within the following parameters subject to approval by the Chief Executive Officer of MoneyGram International, Inc.
Actual bonus awards will be dependent on Company performance versus the
targets established. A threshold performance will be required before any bonus
award is earned under the net income goal. Awards will also be capped when
stretch performance levels are achieved.
As a Percentage of Salary
Subsidiary Positions (1)
Threshold(2)
Target
Cap
25.0
%
50.0
%
100.0
%
22.5
%
45.0
%
90.0
%
20.0
%
40.0
%
80.0
%
17.5
%
35.0
%
70.0
%
15.0
%
30.0
%
60.0
%
12.5
%
25.0
%
50.0
%(3)
10.0
%
20.0
%
40.0
%(3)
7.5
%
15.0
%
30.0
%(3)
5.0
%
10.0
%
20.0
%(3)
| (1) | Target Bonus and Cap, as determined by the Committee, is dependent upon organization reporting relationships. | |
| (2) | Reflects minimum achievement of all performance targets. Threshold could be lower if minimum achievement of only one performance target is met. | |
| (3) | For certain positions, Target Bonus is the maximum formula award that may be earned. |
F. BONUS POOL TARGET:
1. The “Bonus Pool Target” will be initially established no later than 90 days after the beginning of the Plan Year and will be adjusted to equal the sum of the target bonuses of all designated participants in each Company based upon actual Plan Year salaries, as outlined in paragraph D above, plus 15% for Special Achievement Awards.
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2. The bonus pool will accrue in accordance with the Bonus Pool Accrual Formula recommended by the Chief Executive Officer of MoneyGram International, Inc. and approved by the Committee.
3. Bonus pool accruals not paid out shall not be carried forward to any succeeding year.
G. INDIVIDUAL BONUS AWARDS:
1. Indicated bonus awards will be equal to the product of the target bonus percentage times the weighted average percentage of bonus pool accrued as determined in paragraph F above times the individual’s actual base salary earnings during the Plan Year, subject to adjustments as follows:
a) discretionary upward or downward adjustment of formula bonus awards by the Committee after considering the recommendation of the Company President with the approval of the Chief Executive Officer of MoneyGram International, Inc. for those executives not affected by Section 162(m) of the Internal Revenue Code, and
b) discretionary downward adjustment of awards by the Committee for those Executive Officers affected by Section 162(m) of the Internal Revenue Code, and
c) no individual award may exceed the individual’s capped target award or the funding limit with respect to Executive Officers, and the aggregate recommended bonuses may not exceed the bonus pool accrued for other than Special Achievement Awards.
2. Bonuses awarded to the participating management staff of subsidiary groups may be paid from funds accrued based upon the target bonus for such participant(s) times the weighted average performance of the Companies in the subsidiary group, subject to adjustments as above.
IV. MONEYGRAM INTERNATIONAL, INC. CORPORATE STAFF :
A. FUNDING LIMIT:
A “funding limit” shall be established annually for each Corporate participant who has been designated an Executive Officer as defined under Section 16(b) of the Securities Exchange Act. The funding limit will be an amount determined by multiplying the actual net income from continuing operations of MoneyGram International, Inc. (as used in the income per share calculation described herein) for the Plan Year by the percent of such income approved by the Committee for such funding limit. The executive cannot be paid a larger bonus than the funding limit provided by this clause, but may be paid less in the discretion of the Committee based on the Performance Goals set forth below and such other factors which the Committee may consider.
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B. PERFORMANCE GOALS:
1. INCOME PER SHARE:
An appropriate “income per share” from continuing operations target for MoneyGram International, Inc. may be recommended by the Chief Executive Officer of MoneyGram International, Inc. to the Committee for approval after considering historical income per share from continuing operations, Plan Year financial plan income, overall corporate objectives, and, if appropriate, other circumstances.
Income per share from continuing operations is determined before unusual or extraordinary items, effects of changes in accounting principles or a change in federal income tax rates after the target has been set. Reclassification of a major business unit to discontinued operations status after targets have been set would also require adjustment because of the effect on continuing operations results. While gains on disposition of a business would normally not be included in determining actual Plan Year net income or income per share, in the event of the sale of a subsidiary or major business unit, a portion of gain would be included equal to the difference between the sold unit’s planned net income for the year and actual results to date of sale plus calculated interest savings on proceeds for the balance of the year, so that actual results are not penalized for selling a business.
Incentives to be paid under this Plan must be deducted from MoneyGram’s earnings by the end of the year. Goals must be achieved after deducting from actual results all incentive compensation applicable to the year, including those incentives earned under this Plan.
2. OPERATING INCOME:
An appropriate “operating income” may be recommended by the Chief Executive Officer of MoneyGram International, Inc. to the Committee for approval.
Operating income is defined as operating income before minority interest, interest expense, interest income, and taxes, excluding unallocated corporate overhead expenses, unusual, non-cash charges (such as goodwill impairments and restructuring charges), and spin-off related costs.
3. VALUE ADDED MEASUREMENT:
An appropriate “Value Added” target for the plan year for Corporate may be recommended by the Chief Executive Officer of MoneyGram for approval by the Human Resources Committee. This measurement is intended to place increased emphasis on securing an adequate return to MoneyGram on all capital employed in the business. MoneyGram Value Added (MVA) compares operating income to the return required on capital invested in the business.
In calculating the bonus pool for Corporate, MVA shall mean Net Operating Profit After Taxes (NOPAT is defined as sales minus operating expenses minus taxes) minus a Capital Charge calculated by multiplying a Cost of Capital times the actual Capital (Capital is defined as
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total assets less current and other liabilities exclusive of debt). Certain adjustments are necessary to determine NOPAT and Capital.
4. CASH FLOW:
An appropriate “Cash Flow” target for the plan year for certain companies may be recommended by the Chief Executive Officer of MoneyGram International, Inc. to the Committee for approval. This measurement is intended to place increased emphasis on delivering available cash to MoneyGram.
Operating Cash Flow is defined as the net change in cash resulting from the operations of the Company. Cash flows from operations exclude the impact of investing activities (acquiring and disposing of investments and productive long-lived assets) and financing activities (borrowing and repaying debt, payment of dividends, and treasury stock repurchases).
5. OTHER PERFORMANCE MEASUREMENTS:
An appropriate number of performance measurements other than income per share will be established for Corporate, with the Chief Executive Officer of MoneyGram to recommend to the Committee the level of achievement against each of the measures.
6. REVENUE:
The bonus pool earned will be subject to a further calculation whereby the total bonus pool otherwise accruable will be adjusted by 95% (threshold) up to 105% (maximum) depending on the achievement against the revenue target.
7. ESTABLISHING TARGETS:
The actual targets for revenue, income per share, cash flow, operating income, MVA and for the performance measurements to be used will be established by the Committee no later than 90 days after the beginning of the Plan Year after receiving the recommendations of the Chief Executive Officer of MoneyGram International, Inc.
C. PARTICIPANT ELIGIBILITY:
The Committee will select the Executive Officers as defined under Section 16(b) of the Securities Exchange Act eligible for participation no later than 90 days after the beginning of the Plan Year. Other personnel will be eligible for participation as recommended by the appropriate staff Vice President and as approved by the Chief Executive Officer of MoneyGram International, Inc., limited only to those executives who occupy a position in which they can significantly affect operating results as defined by the following criteria:
a) Salary grade
b) Not more than Organizational Level Four below the Chief Executive Officer.
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NOTE: Individuals not qualifying under the criteria established for the Plan Year who were included in the previous year will be grandfathered (continue as qualified participants until retirement, reassignment, or termination of employment) if designated by the appropriate Vice President and approved by the Chief Executive Officer of MoneyGram International, Inc.
D. TARGET BONUSES:
Target bonuses will be approved by the Committee for each Executive Officer in writing within the following parameters no later than 90 days after the beginning of the Plan Year and will be expressed as a percentage of salary. Target bonuses for other eligible personnel will be established in writing within the following parameters subject to approval by the Chief Executive Officer of MoneyGram International, Inc.
Actual bonus awards will be dependent on Company performance versus the
targets established. A threshold performance will be required before any bonus
award is earned under the income per share goal. Awards also will be capped
when stretch performance levels are achieved.
As a Percentage of Salary
Corporate Positions(1)
Threshold(2)
Target
Cap
45.0
%
90.0
%
180.0
%
25.0
%
50.0
%
100.0
%
22.5
%
45.0
%
90.0
%
20.0
%
40.0
%
80.0
%
20.0
%
40.0
%
80.0
%
17.5
%
35.0
%
70.0
%
15.0
%
30.0
%
60.0
%
15.0
%
30.0
%
60.0
%(3)
12.5
%
25.0
%
50.0
%(3)
10.0
%
20.0
%
40.0
%(3)
10.0
%
20.0
%
40.0
%(3)
7.5
%
15.0
%
30.0
%(3)
| (1) | Target Bonus and Cap, as determined by the Committee, is dependent upon organization reporting relationships. | |
| (2) | Reflects minimum of achievement of all performance targets. Threshold could be lower if minimum achievement of only one performance target is met. | |
| (3) | For most positions below the Director level, Target Bonus is the maximum formula award that may be earned. |
E. BONUS POOL TARGET:
1. The “Bonus Pool Target” will be established no later than 90 days after the beginning of the Plan Year and will be adjusted to equal the sum of the target bonuses of all
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qualified participants based upon actual Plan Year base salaries, as outlined in paragraph C above, plus 15% for Special Achievement Awards.
2. The bonus pool will accrue in accordance with the Bonus Pool Accrual Formula recommended by the Chief Executive Officer of MoneyGram International, Inc. and approved by the Committee.
3. Bonus pool accruals not paid out shall not be carried forward to any succeeding year.
F. INDIVIDUAL BONUS AWARDS:
Indicated bonus awards will be equal to the product of the target bonus percentage times the weighted average percentage of bonus pool accrued as determined in paragraph D above times the individual’s actual Plan Year base salary earnings, subject to adjustments as follows:
a) discretionary upward or downward adjustment of formula awards by the Committee after considering the recommendations of the Chief Executive Officer of MoneyGram International, Inc. for those executives not affected by Section 162(m) of the Internal Revenue Code,
b) discretionary downward adjustment of awards by the Committee for those Executive Officers affected by Section 162(m) of the Internal Revenue Code, and
c) no individual award may exceed the individual’s capped target award or the funding limit with respect to Executive Officers and the aggregate recommended bonuses may not exceed the bonus pool for other than Special Achievement Awards.
V. REPAYMENT PROVISIONS :
A. NON-COMPETE:
Unless a Change of Control (as defined in the MoneyGram International, Inc. Omnibus Incentive Plan, as amended) shall have occurred after the date hereof:
1. In order to better protect the goodwill of MoneyGram and its Affiliates (as defined in the Plan) and to prevent the disclosure of MoneyGram’s or its Affiliates’ trade secrets and confidential information and thereby help insure the long-term success of the business, each participant in this Plan, without prior written consent of MoneyGram, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, agent, consultant, owner of more than five (5) percent of any enterprise or otherwise, for a period of two (2) years following the date of such participant’s termination of employment with MoneyGram or any of its Affiliates, in connection with the manufacture, development, advertising, promotion, design, or sale of any service or product which is the same as or similar to or competitive with any services or products of MoneyGram or its Affiliates (including both existing services or products as well as services or products known to such participant, as a consequence of such participant’s employment with MoneyGram or one of its Affiliates, to be in development):
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a) with respect to which such participant’s work has been directly concerned at any time during the two (2) years preceding termination of employment with MoneyGram or one of its Affiliates, or
b) with respect to which during that period of time such participant, as a consequence of participant’s job performance and duties, acquired knowledge of trade secrets or other confidential information of MoneyGram or its Affiliates.
2. For purposes of the provisions of paragraph V A, it shall be conclusively presumed that a participant in this Plan has knowledge of information he or she was directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.
3. If, at any time within two (2) years following the date of a participant’s termination of employment with MoneyGram or any of its Affiliates, such participant engages in any conduct agreed to be avoided in accordance with paragraph V A, then all bonuses paid under this Plan to such participant during the last 12 months of employment shall be returned or otherwise repaid by such participant to MoneyGram. Participants in this Plan consent to the deduction from any amounts MoneyGram or any of its Affiliates owes to such participants to the extent of the amounts such participants owe MoneyGram hereunder.
B. MISCONDUCT:
Unless a Change of Control shall have occurred after the date hereof, all bonuses paid for 2003 and thereafter under this Plan to any participant shall be returned or otherwise repaid by such participant to MoneyGram, if MoneyGram reasonably determines that during a participant’s employment with MoneyGram or any of its Affiliates:
a) such participant knowingly participated in misconduct that causes a misstatement of the financial statements of MoneyGram or any of its Affiliates or misconduct which represents a material violation of any code of ethics of MoneyGram applicable to such participant or of the compliance program or similar program of MoneyGram; or
b) such participant was aware of and failed to report, as required by any code of ethics of MoneyGram applicable to such participant or by the Always Honest compliance program or similar program of MoneyGram, misconduct that causes a misstatement of the financial statements of MoneyGram or any of its Affiliates or misconduct which represents a material knowing violation of any code of ethics of MoneyGram applicable to such participant or of the Always Honest compliance program or similar program of MoneyGram.
Participants in this Plan consent to the deduction from any amounts MoneyGram or any of its Affiliates owes to such participants to the extent of the amounts such participants owe MoneyGram hereunder.
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C. ACTS CONTRARY TO MONEYGRAM:
Unless a Change of Control shall have occurred after the date hereof, if MoneyGram reasonably determines that at any time within two (2) 11 years after the award of any bonus under this Plan to a participant that such participant has acted significantly contrary to the best interests of MoneyGram, including, but not limited to, any direct or indirect intentional disparagement of MoneyGram, then any bonus paid under this Plan to such participant during the prior 2-year period shall be returned or otherwise repaid by the participant to MoneyGram. Participants in this Plan consent to the deduction from any amounts MoneyGram or any of its Affiliates owes to such participants to the extent of the amounts such participants owe MoneyGram hereunder.
D. The Corporation’s reasonable determination required under paragraphs V B and V C shall be made by the Human Resources Committee of the Corporation’s Board of Directors, in the case of executive officers of the Corporation, and by the Chief Executive Officer and Corporate Compliance Officer of the Corporation, in the case of all other officers and employees.
VI. SPECIAL ACHIEVEMENT AWARDS :
Special bonuses of up to 15% of base salary for exceptional performance to employees (primarily exempt employees) who are not participants in this Plan, including newly hired employees, may be recommended at the discretion of the Chief Executive Officer to the Committee from the separate funds for discretionary awards provided for under paragraphs III F and IV E.
VII. APPROVAL AND DISTRIBUTION :
The individual incentive bonus amounts and the terms of payment thereof will be fixed following the close of the Plan Year by the Committee.
VIII. COMPENSATION ADVISORY COMMITTEE :
The Compensation Advisory Committee is appointed by the Chief Executive Officer of MoneyGram International, Inc. to assist the Committee in the implementation and administration of this Plan. The Compensation Advisory Committee shall propose administrative guidelines to the Committee to govern interpretations of this Plan and to resolve ambiguities, if any, but the Compensation Advisory Committee will not have the power to terminate, alter, amend, or modify this Plan or any actions hereunder in any way at any time.
IX. SPECIAL COMPENSATION STATUS :
All bonuses paid under this Plan shall be deemed to be special compensation and, therefore, unless otherwise provided for in another plan or agreement, will not be included in determining the earnings of the recipients for the purposes of any pension, group insurance or other plan or agreement of a Company or of MoneyGram International, Inc. Participants in this Plan shall not be eligible for any contractual or other short-term (sales, productivity, etc.) incentive plan except in those cases where participation is weighted between this Plan and any such other short-term incentive plan.
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X. DEFERRALS :
Participants subject to taxation of income by the United States may submit to the Committee, prior to November 15 of the year in which the bonus is being earned a written request that all or a portion, but not less than a specified minimum, of their bonus awards to be determined, if any, be irrevocably deferred substantially in accordance with the terms and conditions of a deferred compensation plan approved by the Board of Directors of MoneyGram International, Inc. or, if applicable, one of its subsidiaries if such plan has been adopted. Participants subject to taxation of income by other jurisdictions may submit to the Committee a written request that all or a portion of their bonus awards be deferred in accordance with the terms and conditions of a plan which is adopted by the Board of Directors of a participant’s Company. Upon the receipt of any such request, the Committee thereunder shall determine whether such request should be honored in whole or part and shall forthwith advise each participant of its determination on such request.
XI. PLAN TERMINATION :
This Plan shall continue in effect until such time as it may be canceled or otherwise terminated by action of the Board of Directors of MoneyGram International, Inc. and will not become effective with respect to any Company unless and until its Board of Directors adopts a specific plan for such Company. While it is contemplated that incentive awards from the Plan will be made, the Board of Directors of MoneyGram International, Inc., or any other Company hereunder, may terminate, amend, alter, or modify this Plan at any time and from time to time. Participation in the Plan shall create no right to participate in any future year’s Plan.
XII. EMPLOYEE RIGHTS :
No participant in this Plan shall be deemed to have a right to any part or share of this Plan, except as provided in Paragraph XIII. This Plan does not create for any employee or participant any right to be retained in service by any Company, nor affect the right of any such Company to discharge any employee or participant from employment. Except as provided for in administrative guidelines, a participant who is not an employee of MoneyGram International, Inc. or one of its subsidiaries on the date bonuses are paid will not receive a bonus payment.
XIII. EFFECT OF CHANGE OF CONTROL :
Notwithstanding anything to the contrary in this Plan, in the event of a Change of Control (as defined in the 2004 MoneyGram International, Inc. Omnibus Incentive Plan) each participant in the Plan shall be entitled to a prorata bonus award calculated on the basis of achievement of performance goals through the date of the Change of Control.
XIV. EFFECTIVE DATE :
The Plan shall be effective June 30, 2004.
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Exhibit 10.7
MONEYGRAM INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN
AS STATED July 1, 2004
1. PURPOSE OF THE PLAN.
The purpose of the Deferred Compensation Plan (the “Plan”) is to provide a select group of management or highly compensated employees of MoneyGram International, Inc. (the “Corporation”), and its subsidiaries with an opportunity to defer the receipt of incentive compensation awarded to them under the Management Incentive Plan and certain other incentive plans of MoneyGram International, Inc. and its subsidiaries (the “Incentive Plans”) or such other substitute plans as may be adopted by the Corporation (“successor plans”) and thereby enhance the long-range benefits and purposes of the incentive awards. Each plan year shall extend from January 1 through December 31 of each calendar year, except that the first plan year shall begin on July 1, 2004 and shall end on December 31, 2004.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee appointed by the Chief Executive Officer of the Corporation (hereinafter the “Compensation Advisory Committee” or the “Committee”). Subject to the express provisions of the Plan, and the Incentive Plans or successor plans, the Committee shall have the authority to adopt, amend and rescind such rules and regulations, and to make such determinations and interpretations relating to the Plan, which it deems necessary or advisable for the administration of the Plan, but it shall not have the power to amend, suspend or terminate the Plan. All such rules, regulations, determinations and interpretations shall be conclusive and binding on all parties.
3. PARTICIPATION IN THE PLAN.
(a) Participation in the Plan shall be restricted to a select group of management or highly compensated employees of the Corporation or one of its subsidiaries who are participants in certain Incentive Plans, including the Management Incentive Plan, and any other bonus or bonuses or similar or successor plans, who have been selected in writing by the Chief Executive Officer of the Corporation to participate in the Plan, and whose timely written requests to defer the receipt of all or a portion of any incentive compensation which may be awarded to them, are honored in whole or in part by the Committee. Any individual whose request for deferral is not accepted or honored by the Committee, whether for failure of timely submission or for any other reason, shall not become a participant in the Plan, and the Committee’s determination in this regard shall be conclusive and binding.
(b) Participants may defer incentive compensation into a cash account and, if designated by the Committee, into a stock unit account.
(c) If a participant in the Plan shall 1) sever, voluntarily or involuntarily, his or her employment with the Corporation or one of its subsidiaries other than as a result of disability or retirement, 2) engage in any activity in competition with the Corporation or any of its subsidiaries during or following such employment, or 3) remain in the employ of a corporation which for any reason ceases to be a subsidiary of the Corporation, the Committee may at any time thereafter direct, in its sole and exclusive discretion, that his participation in the Plan shall terminate, and that he or she be paid in a lump sum the aggregate amount credited to his or her deferred incentive cash account as of the date such participation is terminated and that he or she be paid shares of MoneyGram International, Inc. Common Stock (“Common Stock”) equal to the aggregate number of stock units credited to his or her deferred stock unit account as of the date such participation is terminated (with any fractional unit being settled by cash payment). The Committee is authorized to establish and implement a policy and procedures for administration of this paragraph, including, but not limited to, a policy regarding small account balance cash-outs.
(d) The Corporation and each participating subsidiary shall be solely liable for payment of any benefits and, except as may be otherwise determined by the Committee, for maintenance of deferred incentive accounts pursuant to paragraph 7, with respect to its own employees who participate in the Plan. In the event a participant leaves the employ of the Corporation or a participating subsidiary (“former employer”) and is subsequently employed by another employer, the Corporation or another subsidiary of the Corporation (“new employer”), the former employer may agree to transfer and the new employer may agree to assume the benefit liability reflected in such participant’s deferred incentive account, without the consent of such participant and subject to the approval of the Committee, in its sole discretion. In the event of such a transfer and assumption of liability, the former employer shall have no further liability for any benefit under the Plan to its former employee or otherwise with respect to such transferred account.
4. REQUESTS FOR DEFERRAL.
All requests for deferral of incentive awards must be made in writing prior to November 15 of the year in which the bonus is being earned and shall be in such form and shall contain such terms and conditions as the Committee may determine. Each such request shall specify the dollar amount or the percentage to be deferred of incentive award which would otherwise be received in the following calendar year, but the deferral amount must be in an amount equal to or greater than the lesser of $10,000 or 25% of the incentive award. Each such request shall also specify 1) the date (no later than the employee’s actual retirement date) when payment of the aggregate amount credited to the deferred incentive account is to commence, 2) whether such payment is then to be made in a lump sum or in quarterly or annual installments, 3) if payment is to be made in installments, the period of time (not in excess of ten years) over which the installments are to be paid, and 4) if the participant is permitted to defer incentive compensation into a stock unit account, the portion of the deferred incentive compensation which shall be treated as a cash account under
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paragraph 7(b) and the portion which shall be treated as a stock unit account under paragraph 7(c). If the participant has requested that a portion of the deferred incentive compensation be placed in a stock unit account, such request shall also include acknowledgment that such stock unit account will be settled in Common Stock of the Corporation, and that such stock unit account cannot be converted to a cash account in the future. The Committee shall, under no circumstances, accept any request for deferral of less than $1,000 of an incentive award or any request which is not in writing or which is not timely submitted.
5. DEFERRAL AND PAYMENT OF INCENTIVE AWARDS.
The Committee shall, prior to December 15 of the year in which the bonus is being earned, notify each individual who has submitted a request for deferral of an incentive award whether or not such request has been accepted and honored. If the request has been honored in whole or in part, the Committee shall advise the participant of the dollar amount or percentage of his or her incentive compensation which the Committee has determined to be deferred. The Committee shall further advise the participant of its determination as to the date when payment of the aggregate amount credited to the participant’s deferred incentive account is to commence, whether payment of the amount so credited as of that date will then be made in a lump sum or in quarterly or annual installments, if payment is to be made in installments, the period of time over which the installments will be paid, and if the participant is permitted to defer incentive compensation into a stock unit account, whether the deferred incentive account shall be treated as a cash account or a stock unit account or split between cash and stock units. Upon subsequently being advised of the existence of special circumstances which are beyond the participant’s control and which impose an unforeseen severe financial hardship on the participant or his or her beneficiary, the Committee may, in its sole and exclusive discretion, modify the deferral arrangement established for that participant to the extent necessary to remedy such financial hardship.
If the participant has elected to defer incentive compensation in the form of cash, the Corporation shall distribute a sum in cash to such participant, pursuant to his or her election provided for in paragraph 4. If the participant has elected to defer incentive compensation in the form of stock units, the Corporation shall distribute to such participant, pursuant to his or her election provided for in paragraph 4, shares of Common Stock of the Corporation equal to the number of stock units being settled in such installment (with any fractional unit being settled by cash payment).
6. CONVERSION OF CASH ACCOUNT BALANCE.
Each participant who is permitted to defer incentive compensation into a stock unit account may, not more than once a year or such other period as is determined by the Committee, by written notice delivered to the Committee, convert the aggregate balance or any portion thereof in his or her deferred compensation cash account (either before or after installment payments from the account may have commenced) from an account in the form of cash to an account in the form of stock units in an amount equal
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to the cash balance or specified portion thereof divided by the closing price of the Common Stock of the Corporation (as reported for the New York Stock Exchange-Composite Transactions) on the last trading day of the quarter in which such notice is given, said account to then accrue dividend equivalents as set forth in paragraph 7(c) below; provided however, that no such notice of conversion (“Conversion Notice”) (a) may be given within six months following the date of an election by such participant, if an Executive Officer of the Corporation, with respect to any plan of the Corporation, that effected a Discretionary Transaction (as defined in Rule 16b-3(f) under the Securities Exchange Act of 1934) that was a disposition or (b) may be given after an individual ceases to be an employee of the Corporation . The stock unit account will be settled in Common Stock of the Corporation and such stock unit account cannot be converted to a cash account in the future.
7. DEFERRED INCENTIVE ACCOUNT.
(a) A deferred incentive account shall be maintained by his or her employer for each participant in the Plan, and there shall be credited to each participant’s account, on the date incentive compensation is paid, the incentive award, or portion thereof, which would have been paid to such participant on said date if the receipt thereof had not been deferred. If the account is to be a stock unit account, the incentive compensation award shall be converted into stock units by dividing the closing price of the Corporation’s Common Stock (as reported for the New York Stock Exchange Composite Transactions) on the day such incentive award is payable into such incentive award.
(b) If the participant has elected to defer incentive compensation in the form of cash, there shall be credited on the last day of the quarter to each participant’s account, an interest credit on his or her deferred incentive award at the interest rates determined by the Committee to be payable during each calendar year, or portion thereof, prior to the termination of such participant’s deferral period or, if the amount then credited to his or her deferred incentive account is to be paid in installments, prior to the termination of such installment period. Interest will be paid on a prorated basis for amounts withdrawn from the account during the quarter, with the remaining balance accruing interest for the duration of the quarter. The interest credit for the following quarter shall be a rate equal to the yield as of March 31, June 30, September 30, and December 31 on Merrill Lynch Taxable Bond Index — Long Term Medium Quality (A3) Industrial Bonds, unless and until otherwise determined.
(c) If a participant has elected to defer incentive compensation in the form of stock units, then, in the event of a dividend paid in cash, stock of the Corporation (other than Common Stock) or property, additional credits (dividend equivalents) shall be made to the participant’s stock unit account consisting of a number of stock units equal to the amount of such dividend per share (or the fair market value, on the date of payment, of dividends paid in stock or property), multiplied by the aggregate number of stock units credited to such participant’s deferred compensation account on the record date for the payment of such dividend, divided by the last closing price of the
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Corporation’s Common Stock (as reported for the New York State Exchange-Composite transactions) prior to the date such dividend is payable to stockholders. After payment of deferred compensation commences, dividend equivalents shall accrue on the unpaid balance thereof in the same manner until all such deferred compensation has been paid.
(d) In the event of a dividend of Common Stock declared and paid by the Corporation, an additional credit shall be made to the participant’s stock unit account of a number of stock units equal to the number of shares of the Corporation’s Common Stock which the participant would have received as a stock dividend had he or she been the owner on the record date for the payment of such stock dividend of the number of shares of Common Stock equal to the number of units in such stock unit account on such date. After payment of deferred compensation commences, additional credits for stock dividends shall accrue on the unpaid balance thereof in the same manner until all such deferred compensation has been paid.
(e) The Plan shall at all times be unfunded. The Corporation shall not be required to segregate physically any amounts of money or otherwise provide funding or security for any amounts credited to the deferred incentive accounts of participants in the Plan.
8. CHANGE OF CONTROL OR CHANGE IN CAPITALIZATION.
(a) If a tender offer or exchange offer for shares of Common Stock of the Corporation (other than such an offer by the Corporation) is commenced, or if the stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation (“Change of Control”), a lump sum cash payment shall be made to each participant participating in the Plan of the aggregate current balance of his or her deferred compensation cash account accrued on the date of the Change of Control, notwithstanding any other provision herein. If the participant has elected to defer compensation in the form of stock units, the Corporation shall distribute to such participant shares of Common Stock of the Corporation equal to the number of stock units in such participant’s stock unit account on the day preceding the date of the Change of Control (with any fractional unit being settled by cash payment). Any notice by a participant to change or terminate his or her election to defer Compensation on or before the date of the Change of Control shall be effective as of the date of the Change of Control, notwithstanding any other provision herein.
(b) Any recapitalization, reclassification, split-up, spin-off, sale of assets, combination or merger not otherwise provided for herein which affects the outstanding shares of Common Stock of the Corporation or any other relevant change in the capitalization of the Corporation shall be appropriately adjusted for by the Board of Directors of this Corporation, and any such adjustments shall be final, conclusive and binding.
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9. DESIGNATION OF BENEFICIARY.
Each participant in the Plan shall deliver to the Committee a written instrument, in the form provided by the Committee, designating one or more beneficiaries to whom payment of the amount credited to his or her deferred incentive account shall be made in the event of his or her death. Unless the Committee shall otherwise determine, such payments shall be made in such amounts and at such times as they would otherwise have been paid to the participant if he had survived.
10. NONASSIGNABILITY OF PARTICIPATION RIGHTS.
No right, interest or benefit under the Plan shall be assignable or transferable under any circumstances other than to a participant’s designated beneficiary in the event of his or her death, nor shall any such right, interest or benefit be subject to or liable for any debt, obligation, liability or default of any participant. The payments, benefits or rights arising by reason of this Plan shall not in any way be subject to a participant’s debts, contracts or engagements, and shall not be subject to attachment, garnishment, levy, execution or other legal or equitable process.
11. RIGHTS OF PARTICIPANTS.
A participant in the Plan shall have only those rights, interests or benefits as are expressly provided in the Plan and in the Incentive Plans or successor plans. The Plan shall be deemed to be ancillary to the Incentive Plans or successor plans and the rights of participants in the Plan shall be limited as provided in the Incentive Plans or successor plans. The right of a participant or designated beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Corporation. All amounts credited to an account shall constitute general assets of the Corporation and may be disposed of by the Corporation at such time and for such purposes as it may deem appropriate.
12. CLAIMS FOR BENEFITS.
Claims for benefits under the Plan shall be filed with the Committee. Written notice of the disposition of a claim shall be furnished the claimant within 60 days after the application therefor is filed. In the event the claim is denied, the reasons for the denial shall be specifically set forth. Pertinent provisions of this Plan shall be cited. In addition, the written notice shall describe any additional material or information necessary for the claimant to perfect the claim (along with an explanation of why such material or information is needed), and the written notice will fully describe the claim review procedures of paragraph 13 below.
13. CLAIM REVIEW.
Any claimant who has been denied a benefit shall be entitled, upon request to the Committee, to receive a written notice of such action, together with a full and clear statement of the reasons for the action. The claimant may also review this Plan if he or she chooses. If the claimant wishes further consideration of his or her position, he or she may request a hearing. The request, together with a written statement of the
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claimant’s position, shall be filed with a Committee member no later than 60 days after receipt of the written notification provided for above. The Committee shall schedule an opportunity for a full and fair hearing of the issue within the next 60 days. The decision following the hearing shall be made within 60 days and shall be communicated in writing to the claimant. If the claimant requests, the hearing may be waived, in which case the Committee’s decision shall be made within 60 days from the date on which the hearing is waived and shall be communicated in writing to the claimant.
14. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
The Board of Directors of the Corporation (the “Board”) may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Board may reinstate any or all provisions of the Plan, except that no amendment, suspension or termination of the Plan shall, without the consent of a participant, adversely affect such participant’s right to receive payment of the entire amount credited to his or her deferred incentive account on the date of such Board action. In the event the Plan is suspended or terminated, the Board may, in its discretion, direct the Committee to pay to each participant the amount credited to his or her account either in a lump sum or in accordance with the Committee’s prior determination regarding the method of payment.
15. EFFECTIVE DATE.
The Plan shall become effective on July 1, 2004.
IN WITNESS WHEREOF, the undersigned authorized officer has signed this document on July 1, 2004, effective as of July 1, 2004 .
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MONEYGRAM INTERNATIONAL, INC. | |
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By: /s/ Teresa H. Johnson | |
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Its: Vice President and General Counsel |
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Exhibit 10.8
MONEYGRAM INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN (TIER I)
1. PURPOSE: To provide management continuity by inducing selected Executives to remain in the employ of MoneyGram International, Inc. (the “Corporation”) or one of its subsidiaries pending a possible Change of Control of the Corporation, effective as of June 30, 2004.
2. OBJECTIVES: To ensure in the event of a possible Change of Control of the Corporation, in addition to the Executive’s regular duties, that he may be available to be called upon to assist in the objective assessment of such situations, to advise management and the Board of Directors (the “Board”) of the Corporation as to whether such proposals would be in the best interests of the Corporation, its, subsidiaries and its shareholders and to take such other actions as management or the Board might determine reasonably appropriate and in the best interests of the Corporation and its shareholders.
3. PARTICIPATION: Participation in this Executive Severance Plan (Tier I) (this “Plan”) will be limited to selected Executives (each referred to herein as “Executive”) whose importance to the Corporation during such periods is deemed to warrant good and valuable special consideration by the Chief Executive Officer of the Corporation. Each such Executive’s participation shall be evidenced by a certificate (“Certificate”) issued by the Corporation, each of which is incorporated herein by reference as if set forth in its entirety. In the event an Executive shall become ineligible hereunder, his Certificate shall be surrendered promptly to the Corporation.
4. DEFINITION OF CHANGE OF CONTROL: For purposes of this Plan, a “Change of Control” shall mean any of the following events:
(a) An acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either: (1) the then
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outstanding shares of Common Stock of the Corporation (the “Outstanding Corporation Common Stock”) or (2) the combined voting power of the then Outstanding Voting Securities of the Corporation entitled to vote generally in the election of Directors (the “Outstanding Corporation Voting Securities”); excluding, however the following: (A) any acquisition directly from the Corporation or any entity controlled by the Corporation other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Corporation or any entity controlled by the Corporation, (B) any acquisition by the Corporation, or any entity controlled by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any entity controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of Section 4(c); or
(b) A change in the composition of the Board such that the individuals who, as of the effective date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided , however , for purposes of this Section 4(b) that any individual, who becomes a member of the Board subsequent to the effective date of the Plan, whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board, (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but provided further , that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or
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(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a “Corporate Transaction”) excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction (the “Prior Shareholders”) beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of Directors, as the case may be, of the Corporation or other entity resulting from such Corporate Transaction (including, without limitation, a corporation or other entity which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (2) no Person (other than the Corporation or any entity controlled by the Corporation, any employee benefit plan (or related trust) of the Corporation or any entity controlled by the Corporation or such corporation or other entity resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of Common Stock of the Corporation or other entity resulting from such Corporate Transaction or the combined voting power of the Outstanding Voting Securities of such Corporation or other entity entitled to vote generally in the election of Directors except to the extent that such ownership existed prior to the Corporate Transaction and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the Board of Directors of the Corporation resulting from such Corporate Transaction; and further excluding any disposition of all or substantially all of the assets of the Corporation
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pursuant to a spin-off, split-up or similar transaction (a “Spin-off”) if, immediately following the Spin-off, the Prior Shareholders beneficially own, directly or indirectly, more than 80% of the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of directors of both entities resulting from such transaction, in substantially the same proportions as their ownership, immediately prior to such transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities; provided , that if another Corporate Transaction involving the Corporation occurs in connection with or following a Spin-off, such Corporate Transaction shall be analyzed separately for purposes of determining whether a Change of Control has occurred; (d) The approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation.
5. DEFINITIONS:
(a) For purposes of this Plan, “Cause” with respect to an Executive shall mean:
(i) The willful and continued failure of the Executive to perform substantially the Executive’s duties with the Corporation or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance improvement is delivered to the Executive by the Board or the Chief Executive Officer of the Corporation which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or
(ii) The willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Corporation. For purposes of this Section 5(a), no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief
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that the Executive’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Corporation or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Corporation. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if he is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good-faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(b) For purposes of this Plan, “Good Reason” with respect to an Executive shall mean:
(i) The assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to the Change of Control, or any other action by the Corporation or any of its subsidiaries which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation or the applicable subsidiary promptly after receipt of notice thereof given by the Executive;
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(ii) Any reduction of the Executive’s base salary, annual bonus, incentive opportunities, retirement benefits, welfare or fringe benefits below the highest level enjoyed by the Executive during the 120-day period prior to the Change of Control;
(iii) The Corporation’s or one of its subsidiaries requiring the Executive to be based at any office or location other than that at which he was based immediately prior to the Change of Control or the Corporation’s or one of its subsidiaries requiring the Executive to travel to a substantially greater extent than required immediately prior to the Change of Control;
(iv) Any purported termination by the Corporation or one of its subsidiaries of the Executive’s employment otherwise than as expressly permitted by this Plan; or
(v) Any failure by the Corporation to comply with and satisfy Section 11(c) of this Plan. For purposes of this Plan, any good-faith determination of “Good Reason” made by an Executive shall be conclusive with respect to that Executive.
(c) For purposes of this Plan, “Window Period” means the 30-day period following the first anniversary of the Change of Control.
6. ELIGIBILITY FOR BENEFITS: Benefits as described in Section 7 shall be provided in the event the Executive’s employment with the Corporation or any of its subsidiaries is terminated:
(a) Involuntarily by the Corporation or the applicable subsidiaries without Cause (a “Without Cause Termination”); or
(b) By the Executive for Good Reason (a “Good Reason Termination”) or
(c) By the Executive’s own election for any reason during the Window Period; provided, in the case of a Without Cause Termination or a Good Reason Termination, that such termination occurs within thirty-six months after a Change of Control; and provided, further, that in
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no event shall a termination as a consequence of an Executive’s death, disability, or Retirement (as defined in the next sentence) entitle the Executive to benefits under this Plan. “Retirement” shall mean the Executive’s voluntary retirement at or after his normal retirement date under the Corporation’s or a subsidiary’s retirement plan or, if the Executive does not participate in any such plan that provides for a normal retirement date, at or after age 65.
7. BENEFIT ENTITLEMENTS:
(a) Lump Sum Payment: On or before the Executive’s last day of employment with the Corporation or any of its subsidiaries, the Corporation or the applicable subsidiary will pay to the Executive as compensation for services rendered a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld) equal to the sum of (i) Executive’s highest annual salary fixed during the period Executive was an employee of the Corporation or any of its subsidiaries, plus (ii) the greater of (x) the largest amount awarded to him in a year as cash bonus (whether or not deferred and regardless of deferral election) under the Corporation’s Management Incentive Plan during the preceding four years or if the Executive has not been employed for at least four full fiscal years, all of the completed full fiscal years during which the Executive has been employed, or (y) the target bonus under the Corporation’s Management Incentive Plan for the fiscal year in which the Change of Control occurs, plus (iii) the greater of (x) the largest amount awarded to Executive in a year as cash bonus (whether or not deferred and regardless of deferral election) under the Corporation’s Performance Unit Incentive Plan during the preceding four years or if the Executive has not been employed for at least four full fiscal years, all of the completed full fiscal years during which the Executive has been employed, or (y) the aggregate value of shares when earned during a performance period under any performance-related Restricted Stock award during the preceding four years or if the Executive has not been employed for at least four full fiscal years, all of the completed full fiscal years during which the Executive has been employed, or (z) the
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aggregate value at the time of grant of the target shares awarded under the Corporation’s performance-related Restricted Stock programs for the fiscal year in which the Change of Control occurs, multiplied by:
(i) Three times a fraction, the numerator of which is 36 minus the number of full months from the date of the Change of Control through the last day of the Executive’s employment, and the denominator of which is 36, in the case of a Without Cause Termination or a Good Reason Termination, or
(ii) Two if the termination is voluntary during the Window Period.
(b) Employee Plans: The Executive’s participation in life, accident, health, compensation deferral, automobile, club membership, and financial counseling plans of the Corporation, or the applicable subsidiary, if any, provided to the Executive immediately prior to the Change of Control or his termination, shall be continued, or equivalent benefits provided, by the Corporation or the applicable subsidiary at no direct cost or tax cost to the Executive in excess of the costs that would be imposed on the Executive, if he remained an employee, for a period (the “Severance Period”) of:
(i) Three years times a fraction, the numerator of which is 36 minus the number of full months from the date of the Change of Control through the last day of the Executive’s employment, and the denominator of which is 36, in the case of a Without Cause Termination or a Good Reason Termination, or
(ii) Two years if the termination is voluntary during the Window Period, in each case from the date of termination (or until his death or normal retirement date, whichever is sooner). The Executive’s participation in any applicable qualified or nonqualified retirement and/or pension plans and any deferred compensation or bonus plan of the Corporation or any of its subsidiaries, if any, shall continue only through the last day of employment. Any terminating
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distributions and/or vested rights under such plans shall be governed by the terms of the respective plans. For purposes of determining the eligibility of the Executive for any post-retirement life and health benefits, the Executive shall be treated as having attained an additional three years of age and service credit (in the case of a Without Cause Termination or a Good Reason Termination) or two years of age and service credit (if the termination is voluntary during the Window Period), in each case as of the last day of the Executive’s employment.
(c) Special Retirement Benefits: If the Executive is, immediately prior to his termination of employment, an active participant accruing benefits under any qualified and/or nonqualified defined benefit retirement plans (collectively, the “Retirement Plans”), then the Executive or his beneficiaries shall be paid Special Retirement Benefits as and when the Executive or such beneficiaries become entitled to receive benefits under the Retirement Plans (as defined below), equal to the excess of (i) the retirement benefits that would be payable to the Executive or his beneficiaries under the Retirement Plans if the Executive’s employment had continued during the Severance Period, all of his accrued benefits under the Retirement Plans (including those attributable to the Severance Period) were fully vested, and his final average compensation is equal to the Deemed Final Average Compensation, as defined below, over (ii) the total qualified and unqualified benefits actually payable to the Executive or his beneficiaries under the Retirement Plan. The “Deemed Final Average Compensation” means the Executive’s final average compensation computed in accordance with the Retirement Plans, except that the amount specified in Section 7(a) shall be considered as having been paid to the Executive as “compensation” in equal monthly installments during the Severance Period. All Special Retirement Benefits shall be unfunded and payable solely from the general assets of the Corporation or its appropriate subsidiary, and are not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code. The amount of the Special Retirement Benefits shall be determined using
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actuarial assumptions no less favorable to the Executive than those used in the qualified Retirement Plan immediately prior to the Change of Control.
(d) Outplacement: The Executive shall be provided with outplacement benefits in accordance with those offered to Executives immediately prior to the Change of Control.
(e) Minimum Benefit Entitlement: Notwithstanding anything to the contrary in this Section 7, and except as provided in Section 8(a), in no event shall an Executive’s severance benefits under this Plan be less than the benefits (if any) such Executive would have received in accordance with the severance policy of the Corporation or applicable subsidiary in effect immediately prior to the Change of Control.
8. TAXES: (a) Anything in this Plan to the contrary notwithstanding, and except as set forth below, in the event it shall be determined that any of an Executive’s Payment(s) would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Executive’s Payments. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Executive’s Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amounts payable under this Plan shall be reduced so that the Parachute Value of all of such Executive’s Payments, in the aggregate, equals the Executive’s Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the Executive’s Payments under Section 7(a), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive.
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For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. If the reduction of the amounts payable under this Plan would not result in a reduction of the Parachute Value of all Payments to the Executive’s Safe Harbor Amount, no amounts payable to such Executive under this Plan shall be reduced pursuant to this Section 8(a) and the Gross-Up Payment shall be made to the Executive. The Corporation’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon the Executive’s termination of employment.
(b) Determination By Accountant. Subject to the provisions of Section 8(c)ii, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment to any Executive is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Corporation’s auditor or another nationally recognized accounting firm appointed by the Corporation (the “Accounting Firm”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). The Accounting Firm shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Corporation. All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Corporation to the applicable Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Corporation and the applicable Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting
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Firm hereunder it is possible that Gross-Up Payments that will not have been made by the Corporation should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Corporation exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.
(c) Notification Required. The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order to effectively contest such claim, and
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(iv) Permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c)ii, the Corporation shall control all proceedings taken in connection with such contest and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund, or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however , that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall pay the amount of such payment to the Executive, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a the Gross-Up Payment would be payable hereunder and the
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Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) Repayment. If, after the receipt by the Executive of a Gross-Up Payment or an amount paid by the Corporation pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Corporation’s complying with the requirements of Section 8(c), if applicable,) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount paid by the Corporation pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the Executive shall not be required to repay such amount to the Corporation, but the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Withholding. Notwithstanding any other provision of this Section 8, the Corporation may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of each Executive, all or any portion of any Gross-Up Payment.
(f) Definitions: The following terms shall have the following meanings for purposes of this Section 8.
“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
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A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of an Executive, whether paid or payable pursuant to this Plan or otherwise.
The “Safe Harbor Amount” of an Executive means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.
“Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
9. INDEMNIFICATION: If litigation is brought to enforce or interpret any provision contained herein, the Corporation or applicable subsidiary, to the extent permitted by applicable law and the Corporation’s or subsidiary’s Articles of Incorporation, as the case may be, shall indemnify each Executive who is a party thereto for his reasonable attorneys’ fees and disbursements incurred in such litigation, regardless of the outcome thereof, and shall pay interest on any money judgment obtained by the Executive calculated at the Citibank, N.A. prime interest rate in effect from time to time from the date that payment(s) to him should have been made under this Plan until the date the payment(s) is made. Such attorneys’ fees and disbursements shall be paid promptly as incurred by the Executive.
10. PAYMENT OBLIGATIONS ABSOLUTE: Except as expressly provided in Section 13 and 14, the Corporation’s or subsidiary’s obligation to pay the Executive the benefits hereunder and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counter-claim, recoupment, defense or other right which the Corporation or any of its subsidiaries may have against him or anyone else. All amounts paid or payable by the Corporation or one of its subsidiaries hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation or subsidiary shall be final and the Corporation or subsidiary will not seek to recover all or any part of such payment(s) from the Executive or from whosoever may be
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entitled thereto, for any reason whatsoever. No Executive shall be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Plan, and the obtaining of any such other employment shall in no event effect any reduction of the Corporation’s or subsidiary’s obligations to make the payments and arrangements required to be made under this Plan. The Corporation or applicable subsidiary may at the discretion of the Chief Executive Officer of the Corporation enter into an irrevocable, third-party guarantee or similar agreement with a bank or other institution with respect to the benefits payable to an Executive hereunder, which would provide for the unconditional payment of such benefits by such third party upon presentment by an Executive of his Certificate (and on such other conditions deemed necessary or desirable by the Corporation or such subsidiary) at some specified time after termination of employment. Such third-party guarantor shall have no liability for improper payment if it follows the instructions of the Corporation or such subsidiary as provided in such Certificate and other documents required to be presented under the agreement, unless the Corporation or such subsidiary, in a written notice, has previously advised such third-party guarantor of the determination by its Board of Directors of ineligibility of the Executive in accordance with Section 15.
11. CONTINUING OBLIGATIONS: It shall be a condition to the entitlement of an Executive to any benefits under this Plan that he agree to retain in confidence any confidential information known to him concerning the Corporation and its subsidiaries and their respective businesses as long as such information is not publicly disclosed, except as required by law.
12. SUCCESSORS:
(a) The benefits provided under this Plan are personal to the Executives and without the prior written consent of the Corporation shall not be assignable by any Executive
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otherwise than by will or the laws of descent and distribution. This Plan shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(b) This Plan shall inure to the benefit of and be binding upon the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Plan in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Plan, Corporation shall mean the Corporation as hereinbefore defined and any other person or entity which assumes or agrees to perform this Plan by operation of law, or otherwise.
13. SEVERABILITY: Any provision in this Plan which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
14. OTHER PLANS AND AGREEMENTS: Notwithstanding any provision herein to the contrary, in the event the Executive’s employment with the Corporation or applicable subsidiary terminates and the Executive is entitled to receive termination, separation or other like amounts from the Corporation or any of its subsidiaries pursuant to any contract of employment, generally prevailing separation pay policy, or other program of the Corporation or applicable subsidiary, all such amounts shall be applied to and set off against the Corporation’s or applicable subsidiary’s obligation set forth in Sections 7 and 8 of this Plan. Nothing in this Section 14 is intended to result in set-off of pension benefits, supplemental executive retirement benefits,
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disability benefits, retiree benefits or any other plan benefits not directly provided as termination or separation benefits.
15. AMENDMENT AND TERMINATION: This Plan may be amended or terminated by action of the Board. This Plan shall terminate with respect to an Executive if the Chief Executive Officer of the Corporation determines that the Executive is no longer a key executive to be provided a severance agreement and so notifies the Executive by certified mail at least thirty (30) days before participation in this Plan shall cease. Notwithstanding the foregoing, no such amendment, termination or determination may be made, (and if made, shall have no effect during the period of thirty-six months following any Change of Control or (ii) during any period of time when the Corporation has knowledge that any third person has taken steps reasonably calculated to effect a Change of Control, until such third person has abandoned or terminated his efforts to effect a Change of Control as determined by the Board in good faith, but in its sole discretion.
16. GOVERNING LAW: This Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Plan are not part of the provisions hereof and shall have no force or effect.
17. ACCEPTANCE: By acceptance of participation in this Plan, an Executive agrees to give a minimum of four (4) weeks’ notice to the Corporation in the event of his voluntary resignation.
Exhibit 10.9
MONEYGRAM INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN (TIER II)
1. PURPOSE: To provide management continuity by inducing selected Executives to remain in the employ of MoneyGram International, Inc. (the “Corporation”) or one of its subsidiaries pending a possible Change of Control of the Corporation, effective as of June 30, 2004.
2. OBJECTIVES: To ensure in the event of a possible Change of Control of the Corporation, in addition to the Executive’s regular duties, that he may be available to be called upon to assist in the objective assessment of such situations, to advise management and the Board of Directors (the “Board”) of the Corporation as to whether such proposals would be in the best interests of the Corporation its subsidiaries and its shareholders, and to take such other actions as management or the Board might determine reasonably appropriate and in the best interests of the Corporation and its shareholders.
3. PARTICIPATION: Participation in this Executive Severance Plan (Tier II) (this “Plan”) will be limited to selected Executives (each referred to herein as “Executive”) whose importance to the Corporation during such periods is deemed to warrant good and valuable special consideration by the Chief Executive Officer of the Corporation. Each such Executive’s participation shall be evidenced by a certificate (“Certificate”) issued by the Corporation, each of which is incorporated herein by reference as if set forth in its entirety. In the event an Executive shall become ineligible hereunder, his Certificate shall be surrendered promptly to the Corporation.
4. DEFINITION OF CHANGE OF CONTROL: For purposes of this Plan, a “Change of Control” shall mean any of the following events:
(a) An acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either: (1) the then
2
outstanding shares of common stock of the Corporation (the “Outstanding Corporation Common Stock”) or (2) the combined voting power of the then Outstanding Voting Securities of the Corporation entitled to vote generally in the election of Directors (the “Outstanding Corporation Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Corporation or any entity controlled by the Corporation other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Corporation or any entity controlled by the Corporation, (B) any acquisition by the Corporation or any entity controlled by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any entity controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of Section 4(c); or
(b) A change in the composition of the Board such that the individuals who, as of the effective date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this section 4(b), that any individual who becomes a member of the Board subsequent to the effective date of the Plan, whose election or nomination for election by the Corporation’s shareholders was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but provided further , that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or
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(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a “Corporate Transaction”) excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction (the “Prior Shareholders”) beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of Directors, as the case may be, of the Corporation or other entity resulting from such Corporate Transaction (including, without limitation, a corporation or other entity which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (2) no Person (other than the Corporation or any entity controlled by the Corporation, any employee benefit plan (or related trust) of the Corporation or any entity controlled by the Corporation or such corporation or other entity resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of Common Stock of the Corporation or other entity resulting from such Corporate Transaction or the combined voting power of the Outstanding Voting Securities of such Corporation or other entity entitled to vote generally in the election of Directors except to the extent that such ownership existed prior to the Corporate Transaction and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the Board of Directors of the Corporation resulting from such Corporate Transaction; and further excluding any disposition of all or substantially all of the assets of the Corporation
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pursuant to a spin-off, split-up or similar transaction (a “Spin-off”) if, immediately following the Spin-off, the Prior Shareholders beneficially own, directly or indirectly, more than 80% of the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of directors of both entities resulting from such transaction, in substantially the same proportions as their ownership, immediately prior to such transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities; provided , that if another Corporate Transaction involving the Corporation occurs in connection with or following a Spin-off, such Corporate Transaction shall be analyzed separately for purposes of determining whether a Change of Control has occurred;
(d) The approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation.
5. DEFINITIONS:
(a) For purposes of this Plan, “Cause” with respect to an Executive shall mean:
(i) The willful and continued failure of the Executive to perform substantially the Executive’s duties with the Corporation or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance improvement is delivered to the Executive by the Board or the Chief Executive Officer of the Corporation which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or
(ii) The willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Corporation. For purposes of this Section 5(a), no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief
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that the Executive’s action or omission was in the best interests of the Corporation. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Corporation or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Corporation. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive if he is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good-faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(b) For purposes of the Plan, “Good Reason” with respect to an Executive shall mean:
(i) The assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to the Change of Control, or any other action by the Corporation or any of its subsidiaries which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation or the applicable subsidiary promptly after receipt of notice thereof given by the Executive;
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(ii) Any reduction of the Executive’s base salary, annual bonus, incentive opportunities, retirement benefits, welfare or fringe benefits below the highest level enjoyed by the Executive during the 120-day period prior to the Change of Control;
(iii) The Corporation’s or one of its subsidiaries requiring the Executive to be based at any office or location other than that at which he was based immediately prior to the Change of Control or the Corporation’s or one of its subsidiaries requiring the Executive to travel to a substantially greater extent than required immediately prior to the Change of Control;
(iv) Any purported termination by the Corporation or one of its subsidiaries of the Executive’s employment otherwise than as expressly permitted by this Plan; or
(v) Any failure by the Corporation to comply with and satisfy Section 11(c) of this Plan.
For purposes of this Plan, any good faith determination of “Good Reason” made by an Executive shall be conclusive with respect to that Executive.
6. ELIGIBILITY FOR BENEFITS: Benefits as described in Section 7 shall be provided in the event the Executive’s employment with the Corporation or any of its subsidiaries is terminated:
(a) Involuntarily by the Corporation or the applicable subsidiaries without Cause (a “Without Cause Termination”); or
(b) By the Executive for Good Reason (a “Good Reason Termination”) provided that such termination occurs within eighteen months after a Change of Control; and provided, further, that in no event shall a termination as a consequence of an Executive’s death, disability, or Retirement (as defined in the next sentence) entitle the Executive to benefits under this Plan. “Retirement” shall mean the Executive’s voluntary retirement at or after his normal retirement
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date under the Corporation’s or a subsidiary’s retirement plan or, if the Executive does not participate in any such plan that provides for a normal retirement date, at or after age 65.
7. BENEFIT ENTITLEMENTS:
(a) Lump Sum Payment: On or before the Executive’s last day of employment with the Corporation or any of its subsidiaries, the Corporation or the applicable subsidiary will pay to the Executive as compensation for services rendered a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld) equal to (i) two times the sum of (x) Executive’s highest annual salary fixed during the period Executive was an employee of the Corporation or any of its subsidiaries, plus (y) the greater of (A) the largest amount awarded to him in a year as cash bonus (whether or not deferred and regardless of deferral election) under the Corporation’s Management Incentive Plan during the preceding four years (or if the Executive has not been employed for at least four full fiscal years, all of the completed full fiscal years during which the Executive has been employed), or (B) the target bonus under the Corporation’s Management Incentive Plan for the fiscal year in which the Change of Control occurs, plus (z) the greater of (I) the largest amount awarded to Executive in a year as cash bonus (whether or not deferred and regardless of deferral election) under the Corporation’s Performance Unit Incentive Plan during the preceding four years or if the Executive has not been employed for at least four full fiscal years, all of the completed full fiscal years during which the Executive has been employed, or (II) the aggregate value of shares when earned during a performance period under any performance-related Restricted Stock award during the preceding four years or if the Executive has not been employed for at least four fiscal years, all of the completed full fiscal years during which the Executive has been employed, or (III) the aggregate value at the time of grant of the target shares awarded under the Corporation’s performance-related Restricted Stock programs for the fiscal year in which the Change of Control occurs, multiplied by (ii) a fraction, the numerator of which is 24
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minus the number of full months from the date of the Change of Control through the last day of the Executive’s employment, and the denominator of which is 24.
(b) Employee Plans: The Executive’s participation in life, accident, health, compensation deferral, automobile, club membership, and financial counseling plans of the Corporation, or the applicable subsidiary, if any, provided to the Executive immediately prior to the Change of Control or his termination, shall be continued, or equivalent benefits provided, by the Corporation or the applicable subsidiary at no direct cost or tax cost to the Executive in excess of the costs that would be imposed on the Executive if he remained an employee for a period (the “Severance Period”) of two years times a fraction, the numerator of which is 24 minus the number of full months from the date of the Change of Control through the last day of the Executive’s employment, and the denominator of which is 24. The Executive’s participation in any applicable qualified or nonqualified retirement and/or pension plans and any deferred compensation or bonus plan of the Corporation or any of its subsidiaries, if any, shall continue only through the last day of employment. Any terminating distributions and/or vested rights under such plans shall be governed by the terms of the respective plans. For purposes of determining the eligibility of the Executive for any post-retirement life and health benefits, the Executive shall be treated as having attained an additional two years of age and service credit, in each case as of the last day of the Executive’s employment.
(c) Special Retirement Benefits: If the Executive is, immediately prior to his termination of employment, an active participant accruing benefits under any qualified and/or nonqualified defined benefit retirement plans (collectively, the “Retirement Plans”), then the Executive or his beneficiaries shall be paid Special Retirement Benefits as and when the Executive or such beneficiaries become entitled to receive benefits under the Retirement Plans (as defined below), equal to the excess of (i) the retirement benefits that would be payable to the Executive or
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his beneficiaries under the Retirement Plans if the Executive’s employment had continued during the Severance Period, all of his accrued benefits under the Retirement Plans (including those attributable to the Severance Period) were fully vested, and his final average compensation is equal to the Deemed Final Average Compensation, as defined below, over (ii) the total qualified and unqualified benefits actually payable to the Executive or his beneficiaries under the Retirement Plan. The “Deemed Final Average Compensation” means the Executive’s final average compensation computed in accordance with the Retirement Plans, except that the amount specified in Section 7(a) shall be considered as having been paid to the Executive as “compensation” in equal monthly installments during the Severance Period. All Special Retirement Benefits shall be unfunded and payable solely from the general assets of the Corporation or its appropriate subsidiary, and are not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code. The amount of the Special Retirement Benefits shall be determined using actuarial assumptions no less favorable to the Executive than those used in the qualified Retirement Plan immediately prior to the Change of Control.
(d) Outplacement: The Executive shall be provided with outplacement benefits in accordance with those offered to Executives immediately prior to the Change of Control.
(e) Minimum Benefit Entitlement: Notwithstanding anything to the contrary in this Section 7, and except as provided in Section 8(a), in no event shall an Executive’s severance benefit under this Plan be less than the benefits (if any) such Executive would have received in accordance with the severance policy of the Corporation or applicable subsidiary in effect immediately prior to the Change of Control.
8. TAXES: (a) Anything in this Plan to the contrary notwithstanding, and except as set forth below, in the event it shall be determined that any of an Executive’s Payment(s) would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the
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“Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Executive’s Payments. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Executive’s Safe Harbor Amount, then no Gross-Up Payment shall be made to the Executive and the amounts payable under this Plan shall be reduced so that the Parachute Value of all of such Executive’s Payments, in the aggregate, equals the Executive’s Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the Executive’s Payments under Section 7(a), unless an alternative method of reduction is elected by the Executive, and in any event shall be made in such a manner as to maximize the Value of all Payments actually made to the Executive. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. If the reduction of the amounts payable under this Plan would not result in a reduction of the Parachute Value of all Payments to the Executive’s Safe Harbor Amount, no amounts payable to such Executive under this Plan shall be reduced pursuant to this Section 8(a) and the Gross-Up Payment shall be made to the Executive. The Corporation’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon the Executive’s termination of employment.
(b) Determination By Accountant. Subject to the provisions of Section 8(c)ii, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment to any Executive is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Corporation’s auditor or another nationally recognized accounting firm appointed by the Corporation (the
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“Accounting Firm”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). The Accounting Firm shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Corporation. All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Corporation to the applicable Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Corporation and the applicable Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder it is possible that Gross-Up Payments that will not have been made by the Corporation should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Corporation exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.
(c) Notification Required. The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the
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expiration of the 30-day period following the date on which the Executive gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order to effectively contest such claim, and
(iv) Permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c)ii, the Corporation shall control all proceedings taken in connection with such contest and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund, or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a
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determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however , that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall pay the amount of such payment to the Executive, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a the Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) Repayment. If, after the receipt by the Executive of a Gross-Up Payment or an amount paid by the Corporation pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Corporation’s complying with the requirements of Section 8(c), if applicable,) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount paid by the Corporation pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the Executive shall
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not be required to repay such amount to the Corporation, but the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Withholding. Notwithstanding any other provision of this Section 8, the Corporation may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of each Executive, all or any portion of any Gross-Up Payment.
(f) Definitions: The following terms shall have the following meanings for purposes of this Section 8. “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of an Executive, whether paid or payable pursuant to this Plan or otherwise.
The “Safe Harbor Amount” of an Executive means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.
“Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
9. PAYMENT OBLIGATIONS ABSOLUTE: Except as expressly provided in Section 13 and 14, the Corporation’s or subsidiary’s obligation to pay the Executive the benefits hereunder and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counter-claim, recoupment, defense or other right which the Corporation or any of its subsidiaries may have against him or anyone else. All amounts paid or payable by the Corporation or one of its
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subsidiaries hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation or subsidiary shall be final and the Corporation or subsidiary will not seek to recover all or any part of such payment(s) from the Executive or from whosoever may be entitled thereto, for any reason whatsoever. No Executive shall be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Plan, and the obtaining of any such other employment shall in no event effect any reduction of the Corporation’s or subsidiary’s obligations to make the payments and arrangements required to be made under this Plan. The Corporation or applicable subsidiary may at the discretion of the Chief Executive Officer of the Corporation enter into an irrevocable, third-party guarantee or similar agreement with a bank or other institution with respect to the benefits payable to an Executive hereunder, which would provide for the unconditional payment of such benefits by such third party upon presentment by an Executive of his Certificate (and on such other conditions deemed necessary or desirable by the Corporation or such subsidiary) at some specified time after termination of employment. Such third-party guarantor shall have no liability for improper payment if it follows the instructions of the Corporation or such subsidiary as provided in such Certificate and other documents required to be presented under the agreement, unless the Corporation or such subsidiary, in a written notice, has previously advised such third-party guarantor of the determination by its Board of Directors of ineligibility of the Executive in accordance with Section 14.
10. CONTINUING OBLIGATIONS: It shall be a condition to the entitlement of an Executive to any benefits under this Plan that he agree to retain in confidence any confidential information known to him concerning the Corporation and its subsidiaries and their respective businesses as long as such information is not publicly disclosed, except as required by law.
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11. SUCCESSORS:
(a) The benefits provided under this Plan are personal to the Executives and without the prior written consent of the Corporation shall not be assignable by any Executive otherwise than by will or the laws of descent and distribution. This Plan shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(b) This Plan shall inure to the benefit of and be binding upon the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Plan in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Plan, Corporation shall mean the Corporation as hereinbefore defined and any other person or entity which assumes or agrees to perform this Plan by operation of law, or otherwise.
12. SEVERABILITY: Any provision in this Plan which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
13. OTHER PLANS AND AGREEMENTS: Notwithstanding any provision herein to the contrary, in the event the Executive’s employment with the Corporation or applicable subsidiary terminates and the Executive is entitled to receive termination, separation or other like amounts from the Corporation or any of its subsidiaries pursuant to any contract of employment, generally prevailing separation pay policy, or other program of the Corporation or applicable subsidiary, all such amounts shall be applied to and set off against the Corporation’s or applicable
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subsidiary’s obligation set forth in Section 7 of this Plan. Nothing in this Section 13 is intended to result in set-off of pension benefits, supplemental executive retirement benefits, disability benefits, retiree benefits or any other plan benefits not directly provided as termination or separation benefits.
14. AMENDMENT AND TERMINATION: This Plan may be amended or terminated by action of the Board. This Plan shall terminate with respect to an Executive if the Chief Executive Officer of the Corporation determines that the Executive is no longer a key executive to be provided a severance agreement and so notifies the Executive by certified mail at least thirty (30) days before participation in this Plan shall cease. Notwithstanding the foregoing, no such amendment, termination or determination may be made, (and if made, shall have no effect) (i) during the period of thirty-six months following any Change of Control or (ii) during any period of time when the Corporation has knowledge that any third person has taken steps reasonably calculated to effect a Change of Control, until such third person has abandoned or terminated his efforts to effect a Change of Control as determined by the Board in good faith, but in its sole discretion.
15. GOVERNING LAW: This Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Plan are not part of the provisions hereof and shall have no force or effect.
16. ACCEPTANCE: By acceptance of participation in this Plan, an Executive agrees to give a minimum of four (4) weeks’ notice to the Corporation or any of its subsidiaries in the event of his voluntary resignation.
Exhibit 10.10
MONEYGRAM INTERNATIONAL, INC.
SUPPLEMENTAL 401(k) PLAN
1. Purpose of the Plan
The purpose of the Supplemental 401(k) Plan (the Plan) is to provide a select group of management or highly compensated employees who are officers and key employees of MoneyGram International, Inc. (the Company) and its subsidiaries with an opportunity to accumulate pre-tax savings for retirement.
2. Administration of the Plan
The Plan shall be administered by the Compensation Advisory Committee (the Committee) the members of which shall be appointed by the Chief Executive Officer of the Company. Subject to the express provisions of the Plan, the Committee shall have the authority to adopt, amend and rescind such rules and regulations, and to make such determinations and interpretations relating to the Plan, which it deems necessary or advisable for the administration of the Plan, but it shall not have the power to amend, suspend or terminate the Plan. All such rules, regulations, determinations and interpretations shall be conclusive and binding on all parties.
3. Participation in the Plan
(a) Participation in the Plan shall be restricted to those officers and key employees of the Company and its subsidiaries as designated by the Company’s President and Chief Executive Officer and whose annual compensation limits the elective deferrals they may contribute to the MoneyGram International, Inc. 401(k) Plan as contained in Section 402 of the Internal Revenue Code, and whose timely written requests to defer the receipt of compensation, which may be owed to them for services rendered, are honored in whole or in part by the Committee, in its sole discretion. A written request for deferral under paragraph 4 shall not be timely in any event unless it is duly submitted to the Committee before the services to which the base salary to be deferred is related have been rendered.
(b) If a participant in the Plan shall (1) sever his or her employment with the Company or one of its subsidiaries during or following such employment, (2) engage in any activity in competition with the Company or any of its subsidiaries during or following such employment, or (3) remain in the employ of a corporation which for any reason ceases to be a subsidiary of the Company, his or her participation in the Plan shall automatically terminate, and the Committee may direct, in its sole discretion, that he or she be paid in a lump sum the aggregate amount credited to his or her deferred compensation account as of the date his or her employment is severed or the Committee determines that he or she has engaged in such competitive activity or that his or her employer is no longer a subsidiary of the Company.
4. Requests for Deferral
All requests for deferral of compensation must be made in writing 30 days prior to the beginning of each quarter and shall be in such form and shall contain such terms and conditions as the Committee may determine. Each such request shall specify the percentage or dollar amount of base salary if any, but in no event shall the amount to be deferred in a Plan year be greater than the lesser of (i) $41,000, or the amount specified by the Internal Revenue Service under Code Section 415, Defined Contribution Annual Maximum, less the total amount of all contributions of whatever nature, to the Participant’s 401(k) Plan account during the same time period, or (ii) 50% of the participant’s base salary in the Plan year. Each such request shall also specify (1) the date when payment of the aggregate amount credited to the deferred compensation account is to commence (which shall not be earlier than age 55 nor later than the actual retirement date) and (2) whether such payment is then to be made in a lump sum or in quarterly or annual installments, and the period of time (not in excess of ten years) over which the installments are to be paid. The Committee shall not, under any circumstances, accept any request for deferral greater than the limits defined above, or any request which is not in writing or which is not timely submitted.
5. Deferral of Compensation
The Committee shall notify each individual who has submitted a request for deferral of compensation whether or not such request has been accepted and honored. If the request has been honored in whole or in part, the Committee shall advise the participant of the percentage of his or her compensation which the Committee has determined to be deferred. The Committee shall further advise the participant of its determination as to the date when payment of the aggregate amount credited to the participant’s deferred compensation account is to commence, whether payment of the amount so credited as of that date will then be made in a lump sum or in quarterly or annual installments, and if payment is to be made in installments, the period of time over which the installments will be paid. Upon subsequently being advised of the existence of special circumstances which are beyond the participant’s control and which impose a severe financial hardship on the participant or his or her beneficiary, the Committee may, in its sole and exclusive discretion, modify the deferral arrangement established for that participant to the extent necessary to remedy such financial hardship.
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6. Deferred Compensation Account
| (a) | A deferred compensation account shall be maintained for each participant of this Plan by his or her employer. The employer shall credit to each participant’s account the following amounts, as appropriate: |
(i) The deferral duly elected under this Plan on the date the participant would have received such deferral as base salary;
(ii) Based on the provision of the 401(k) Plan in effect at the time, an amount with respect to the deferrals in (1), above, calculated on the same basis as the employer’s then current matching contribution on elective deferrals under the 401(k) Plan on the first day of each quarter. In no event shall this amount exceed the maximum amount of matching contributions which would be available, assuming the participant elects the maximum deferrals allowed under 401(k) and the limitations on elective deferrals contained in Code Section 402 do not apply, less the amount of actual matching contributions made by the employer to the participant’s 401(k) account, if any, for the same period;
(iii) Based on the provisions of the 401(k) Plan in effect at the time, and not withstanding the amount, if any, of deferrals in (i) above, an amount equal to the employer matching contributions which would have been made to the participant’s 401(k) Plan account based on the amount of elective deferrals actually made by said participant to the 401(k) Plan, but for the application of Code Section 401(a)(17) or any other similar law on the first day of each quarter; and
(iv) Interest on the participant account balance at a per annum rate equal to the yield as of January 1, April 1, July 1, and October 1 on Merrill Lynch Taxable Bond Index-Long Term Medium Quality (A3) Industrial Bonds or such other rate the Committee may determine in its sole discretion, credited quarterly prior to the termination of the participant’s deferral period, or if the deferred compensation account is to be paid in installments, prior to the termination of such installment period.
(b) The Company or employer, as the case may be, shall not be required to physically segregate any amounts of money or property or otherwise provide for funding of any amounts credited to the deferred compensation accounts of participants in the Plan. Participants have no claim, interest or right to any particular funds or property that the Company or any employer may choose to reserve or otherwise use to provide for its liabilities under this Plan and the participants of this Plan shall have the rights of general creditor only with respect to their interests in the Plan.
7. Designation of Beneficiary
Each participant in the plan shall deliver to the Committee a written instrument, in the form provided by the Committee, designating one or more beneficiaries to whom payment of the amount credited to his or her deferred compensation account shall be made in the event of his or her death. Unless the Committee shall otherwise determine, such payments shall be made in such amounts and at such times as they would otherwise have been paid to the participant if he had survived.
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8. Nonassignability of Participant Rights
No right, interest or benefit under the Plan shall be assignable or transferable under any circumstances other than to a participant’s designated beneficiary in the event of his or her death, nor shall any such right, interest or benefit be subject to or liable for any debt, obligation, liability or default of any participant. In the event of any attempt to assign or transfer any right, interest or benefit under the Plan, or to subject any such right, interest or benefit to a debt, obligation, liability or default of a participant, his or her participation in the Plan shall terminate on the date such an attempt is made, and he or she shall be paid in a lump sum the aggregate amount credited to his or her deferred compensation account as of that date.
9. Rights of Participants
A participant in the Plan shall have only those rights, interest or benefits as are expressly provided in the Plan. This Plan does not create for any employee or participant any right to be retained in service by any Company nor affect the right of any such Company to discharge any employee or participant from employment.
10. Amendment, Suspension or Termination of the Plan
(a) The Board of Directors of the Company (the Board) may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Board may reinstate any or all provisions of the Plan, except that no amendment, suspension or termination of the Plan shall, without consent of a participant, adversely affect such participant’s right to receive payment of the entire amount credited to his or her deferred compensation account on the date of such Board action. In the event the Plan is suspended or terminated, the Board may, in its discretion, direct the Committee to pay to each participant the amount credited to his or her account either in a lump sum or in accordance with the Committee’s prior determination regarding the method of payment.
(b) Any action by MoneyGram International, Inc., under the Plan may be by resolution of its Board of Directors, or by any person or persons duly authorized by resolution of said Board to take such action.
11. Effective Date
The Plan shall become effective on the date of its approval by the Board or on such other date as the Board may direct. The Plan year is January 1 to December 31.
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MONEYGRAM INTERNATIONAL, INC. | |
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By: /s/ Teresa H. Johnson | |
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Title: Vice President and General Counsel |
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Exhibit 10.12
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF
MONEYGRAM INTERNATIONAL, INC.
June 30, 2004
| 1. | ESTABLISHMENT OF PLAN. |
An unfunded plan of voluntary deferred compensation known as the “Deferred Compensation Plan for Directors” (Plan) has been established in recognition of the valuable services provided to MoneyGram International, Inc., by the individuals who serve as members of its Board of Directors. Viad Corp, a Delaware corporation, intends to distribute to its stockholders (the Spin-Off) one share of common stock, $0.01 par value, of its wholly-owned subsidiary (MoneyGram International, Inc.) which will own and operate its financial services business (MoneyGram International, Inc. Common Stock) for each outstanding share of common stock of Viad Corp). All references herein to the “Corporation” mean MoneyGram International, Inc. All Directors of the Corporation, except Directors receiving a regular salary as an employee of the Corporation or one of its subsidiaries, are eligible to participate in this Plan. A Director may elect to defer under this Plan any retainer or meeting attendance fee otherwise payable to him or her (Compensation) by the Corporation or by domestic subsidiaries of this Corporation (subsidiaries). Travelers Express Company, Inc., which, upon consummation of the Spin-Off will be a wholly owned subsidiary of MoneyGram International, Inc., hereby assumes and is solely responsible for all liabilities under the Deferred Compensation Plan for Directors of Viad.
| 2. | EFFECTIVE DATE. |
This Plan will become effective on June 30, 2004.
| 3. | ELECTION TO PARTICIPATE IN THE PLAN. |
A. (i) A Director of this Corporation may elect to defer the receipt of all or a specified part of the Compensation otherwise payable to him or her during a calendar year by the Corporation or its subsidiaries. Any person who shall become a Director during any calendar year, and who was not a Director of the Corporation or its subsidiaries on the preceding December 31, may elect before the Director’s term begins to defer such Compensation. Such election shall also specify whether the account shall be treated as a cash account under Section 4A or a stock unit account under Section 4B; provided that an election to defer Compensation into a stock unit account must be specifically approved by the Board of Directors of the Corporation. If the account is to be a cash account, the Compensation, if it is a meeting attendance fee, shall be payable on the date of each applicable meeting, and, if it is a retainer, shall be payable on the last
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trading day of each applicable quarter. If the account is to be a stock unit account, the Compensation shall be converted into stock units by dividing the closing price of the Corporation’s Common Stock (as reported for the New York Stock Exchange-Composite Transactions) on the day such Compensation is payable into such Compensation, which, in the case of a meeting attendance fee or a retainer, is the last trading day of each applicable quarter.
B. Any election under this Plan, unless otherwise provided therein, shall be made by delivering a signed request to the Secretary of the Corporation on or before December 31 with respect to the following calendar year, or, for a new Director, on or before his or her term begins. An election shall continue from year to year, unless specifically limited, until terminated by a signed request in the same manner in which an election is made. However, any such termination shall not become effective until the end of the calendar year in which notice of termination is given.
C. Each Director may, by notice delivered to the Secretary of the Corporation, convert: (i) the aggregate balance in his or her deferred compensation account (either before or after payments from the account may have commenced) from an account in the form of stock units to an account in the form of cash in an amount equal to such stock units balance multiplied by the closing price of the Common Stock of the Corporation (as reported for the New York Stock Exchange-Composite Transactions) on the last trading day of the quarter in which such notice is given, said account to accrue interest as set forth in Section 4 below, or (ii) convert the aggregate balance in his or her deferred compensation account (either before or after installment payments from the account may have commenced) from an account in the form of cash to an account in the form of stock units in an amount equal to cash balance divided by the closing price of the Common Stock of the Corporation (as reported for the New York Stock Exchange-Composite Transactions) on the last trading day of the quarter in which such notice is given, said account to accrue dividend equivalents as set forth in Section 4 below; provided however, that no such notice of conversion (“Conversion Notice”) (a) may be given within six months following the date of an election by such Director, with respect to any plan of the Corporation, that effected a Discretionary Transaction (as defined in Rule 16b-3(f) under the Securities Exchange Act of 1934) that was an acquisition (if the Conversion Notice is pursuant to clause (i)) or a disposition (if the Conversion Notice is pursuant to clause (ii)) or (b) may be given after an individual ceases to be a Director.
| 4. | ACCRUAL OF INTEREST OR DIVIDEND EQUIVALENTS. |
A. If a Director has elected to defer Compensation in the form of cash, then interest on the unpaid balance of such Director’s deferred compensation account, consisting of both accumulated Compensation and interest, if any, will be credited on the last day of each quarter based upon the yield on Merrill Lynch
2
Taxable Bond Index-Long Term Medium Quality (A3) Industrial Bonds in effect at the beginning of such quarter, said interest to commence with the date such compensation was otherwise payable. After payment of deferred Compensation commences, interest shall accrue on the unpaid balance thereof in the same manner until all such deferred Compensation has been paid.
B. If a Director has elected to defer Compensation in the form of stock units, then, in the event of a dividend paid in cash, stock of the Corporation (other than Common Stock) or property, additional credits (dividend equivalents) shall be made to the Director’s stock unit account consisting of a number of stock units equal to the amount of such dividend per share (or the fair market value, on the date of payment, of dividends paid in stock or property), multiplied by the aggregate number of stock units credited to such Director’s deferred compensation account on the record date for the payment of such dividend, divided by the last closing price of the Corporation’s Common Stock (as reported for the New York State Exchange-Composite Transactions) prior to the date such dividend is payable to stockholders. Furthermore, additional credits (dividend equivalents) shall be made to the Director’s stock unit account consisting of a number of stock units equal to the amount of such dividend per share (or the fair market value, on the date of payment, of dividends paid in stock or property), multiplied by the incremental number of stock units credited to such Director’s deferred compensation account, on the last business day prior to the date such dividend is payable to stockholders, attributable to meeting attendance fee(s), divided by the last closing price of the Corporation’s Common Stock (as reported for the New York State Exchange-Composite Transactions) prior to the date such dividend is payable to stockholders. After payment of deferred Compensation commences, dividend equivalents shall accrue on the unpaid balance thereof in the same manner until all such deferred Compensation has been paid.
C. In the event of a dividend of Common Stock declared and paid by the Corporation, an additional credit shall be made to the Director’s stock unit account of a number of stock units equal to the number of shares of the Corporation’s Common Stock which the Director would have received as a stock dividend had he or she been the owner on the record date for the payment of such stock dividend of the number of shares of Common Stock equal to the number of units in such stock unit account on such date. After payment of deferred Compensation commences, additional credits for stock dividends shall accrue on the unpaid balance thereof in the same manner until all such deferred Compensation has been paid.
| 5. | ACCOUNTING. |
No fund or escrow deposit shall be established by any deferred Compensation payable pursuant to this Plan, and the obligation to pay deferred Compensation hereunder shall be a general unsecured obligation of the Corporation, payable
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out of its general account, and deferred Compensation shall accrue to the general account of the Corporation. However, the Controller of the Corporation shall maintain an account and properly credit Compensation to each such account, and keep a record of all sums which each participating Director has elected to have paid as deferred Compensation and of interest or dividend equivalents accrued thereon. Within sixty (60) days after the close of each calendar year the Controller shall furnish each Director who has participated in the Plan a statement of all sums and stock units, including interest and dividend equivalents, which have accrued to the account of such Director as of the end of such calendar year.
| 6. | PAYMENT FROM DIRECTORS’ ACCOUNTS. |
A. After a Director ceases to be a director of the Corporation, the aggregate amount of deferred compensation credited to a Director’s account, either in the form of cash or stock units, together with interest or dividend equivalents accrued thereon, shall be paid in a lump sum or, if the Director elects, in substantially equal quarterly, semi-annual, or annual installments over a period of years, not greater than ten (10), specified by the Director. Furthermore, with respect to each Director who is also a non-employee Director of Viad Corp, a participant shall not be considered, for purposes of the Plan, to have ceased to be a Director of the Corporation unless he or she is neither a Director of the Corporation nor a Director of Viad Corp. Such election must be made by written notice delivered to the Secretary of the Corporation prior to December 31 of the year preceding the year in which, and at least six months prior to the date on which, the Director ceases to be a director. The first installment (or the lump sum payment) shall be made promptly following the date on which the Director ceases to be a Director of the Corporation, and any subsequent installments shall be paid promptly at the beginning of each succeeding specified period until the entire amount credited to the Director’s account shall have been paid. To the extent installment payments are elected, and the Director’s account consists of cash as well as stock units, a pro rata portion of the cash, and the cash equivalent of a pro rata portion of the stock units, shall be paid with each installment. If the participating Director dies before receiving the balance of his or her deferred compensation account, then payment shall be made in a lump sum to any beneficiary or beneficiaries which may be designated, as provided in paragraph B of this Section 6, or in the absence of such designation, or, in the event that the beneficiary designated by such Director shall have predeceased such Director, to such Director’s estate.
B. Each Director who elects to participate in this Plan may file with the Secretary of the Corporation a notice in writing designating one or more beneficiaries to whom payment shall be made in the event of such Director’s death prior to receiving payment of any or all of the deferred Compensation hereunder.
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C. If the Director has elected to defer Compensation in the form of cash, the Corporation shall distribute a sum in cash to such Director, pursuant to his or her election provided for in paragraph A of this Section 6. If the Director has elected to defer Compensation in the form of stock units, the Corporation shall distribute to such Director, pursuant to his or her election provided for in paragraph A of this Section 6, the cash equivalent of the portion of the stock units being distributed in such installment which will be calculated by multiplying (i) the average of the month-end closing prices of the Corporation’s Common Stock for the last 12 months preceding the date of each distribution, as reported for the New York Stock Exchange-Composite Transactions, by (ii) the number of stock units being distributed in such installment.
| 7. | CHANGE OF CONTROL OR CHANGE IN CAPITALIZATION. |
A. If a tender offer or exchange offer for shares of Common Stock of the Corporation (other than such an offer by the Corporation) is commenced, or if the stockholders of the Corporation shall approve an agreement providing either for a transaction in which the Corporation will cease to be an independent publicly owned corporation or for a sale or other disposition of all or substantially all the assets of the Corporation (Change of Control), a lump sum cash payment shall be made to each Director participating in the Plan of the aggregate current balance of his or her deferred compensation account accrued to the Director’s deferred compensation account on the date of the Change of Control, notwithstanding any other provision herein. If the Director has elected to defer Compensation in the form of stock units, the Corporation shall distribute to such Director the sum in cash equal to the closing price of the Corporation’s Common Stock on the day preceding the date of the Change of Control (as reported for the New York Stock Exchange-Composite Transactions) multiplied by the number of stock units in such account. Any notice by a Director to change or terminate his or her election to defer Compensation or before the date of the Change of Control shall be effective as of the date of the Change of Control, notwithstanding any other provision herein.
B. Any recapitalization, reclassification, split up, sale of assets, combination or merger not otherwise provided for herein which affects the outstanding shares of Common Stock of the Corporation or any other relevant change in the capitalization of the Corporation shall be appropriately adjusted for by the Board of Directors of this Corporation, and any such adjustments shall be final, conclusive and binding.
| 8. | NONALIENATION OF BENEFITS. |
No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to alienate, sell, assign, pledge, encumber or charge the same shall be void. To the extent permitted by law, no right or benefit hereunder shall in any manner be attachable
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for or otherwise available to satisfy the debts, contracts, liabilities or torts of the person entitled to such right or benefit.
| 9. | APPLICABLE LAW. |
The Plan will be construed and enforced according to the laws of the State of Delaware; provided that the obligations of the Corporation shall be subject to any applicable law relating to the property interests of the survivors of a deceased person and to any limitations on the power of the person to dispose of his or her interest in the deferred Compensation.
| 10. | AMENDMENT OR TERMINATION OF PLAN. |
The Board of Directors of the Corporation may amend or terminate this Plan at any time, provided, however, any amendment or termination of this Plan shall not affect the rights of participating Directors or beneficiaries to payments, in accordance with Section 6 or 7, of amounts accrued to the credit of such Directors or beneficiaries at the time of such amendment or termination.
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Exhibit 10.13
MONEYGRAM INTERNATIONAL, INC.
DIRECTOR’S CHARITABLE MATCHING PROGRAM
The Director’s Charitable Matching Program provides for corporate matching of charitable contributions made by nonemployee directors, on a dollar-for-dollar basis, up to an aggregate maximum of $5,000 per year.
Exhibit 10.16
MONEYGRAM EMPLOYEE EQUITY TRUST
Effective as of June 30, 2004
TABLE OF CONTENTS
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Page
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ARTICLE 1.
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Trust, Trustee and Trust Fund | 5 | ||||
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1.1
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Trust | 5 | ||||
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1.2.
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Trustee | 5 | ||||
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1.3.
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Trust Fund | 5 | ||||
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1.4.
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Trust Fund Subject to Claims | 5 | ||||
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1.5.
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Definitions | 6 | ||||
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ARTICLE 2.
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Contributions and Dividends | 9 | ||||
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2.1.
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Contributions | 9 | ||||
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2.2.
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Dividends | 10 | ||||
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ARTICLE 3.
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Release and Allocation of Company Stock | 10 | ||||
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3.1.
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Release of Shares | 10 | ||||
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3.2.
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Allocations | 10 | ||||
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3.3.
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Excess Shares | 10 | ||||
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ARTICLE 4.
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Compensation, Expenses and Tax Withholding | 11 | ||||
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4.1.
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Compensation and Expenses | 11 | ||||
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4.2.
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Withholding of Taxes | 12 | ||||
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ARTICLE 5.
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Administration of Trust Fund | 12 | ||||
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5.1.
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Management and Control of Trust Fund | 12 | ||||
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5.2.
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Investment of Funds | 12 | ||||
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5.3.
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Trustee’s Administrative Powers | 12 | ||||
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5.4.
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Voting and Tendering of Company Stock | 14 | ||||
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5.5.
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Indemnification | 15 | ||||
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5.6.
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General Duty to Communicate to Committee | 16 | ||||
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ARTICLE 6.
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Accounts and Reports of Trustee | 16 | ||||
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6.1.
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Records and Accounts of Trustee | 16 | ||||
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6.2.
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Fiscal Year | 16 | ||||
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6.3.
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Reports of Trustee | 16 | ||||
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6.4.
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Final Report | 16 | ||||
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ARTICLE 7.
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Succession of Trustee | 16 | ||||
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7.1.
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Resignation of Trustee | 16 | ||||
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7.2.
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Removal of Trustee | 16 | ||||
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7.3.
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Appointment of Successor Trustee | 17 | ||||
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7.4.
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Succession to Trust Fund Assets | 17 | ||||
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7.5.
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Continuation of Trust | 17 | ||||
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7.6.
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Changes in Organization of Trustee | 17 | ||||
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7.7.
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Continuance of Trustee's Powers in Event of Termination of the Trust | 17 | ||||
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Page
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ARTICLE 8.
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Amendment or Termination | 17 | ||||
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8.1.
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Amendments | 17 | ||||
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8.2.
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Termination | 18 | ||||
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8.3.
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Form of Amendment or Termination | 18 | ||||
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ARTICLE 9.
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Miscellaneous | 18 | ||||
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9.1.
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Controlling Law | 18 | ||||
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9.2.
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Committee Action | 18 | ||||
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9.3.
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Notices | 19 | ||||
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9.4.
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Severability | 19 | ||||
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9.5.
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Protection of Persons Dealing with the Trust | 19 | ||||
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9.6.
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Tax Status of Trust | 19 | ||||
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9.7.
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Participants to Have No Interest in the Company by Reason of the Trust | 19 | ||||
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9.8.
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Nonassignability | 19 | ||||
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9.9.
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Gender and Plurals | 20 | ||||
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9.10.
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Counterparts | 20 | ||||
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MONEYGRAM EMPLOYEE EQUITY TRUST
THIS TRUST AGREEMENT (the “Agreement”) made effective as of June 30, 2004, between MoneyGram International, Inc., a Delaware corporation (the “Company”), and Wells Fargo Bank, N.A., a national banking association (the “Trustee”), as trustee.
W I T N E S S E T H :
WHEREAS, pursuant to the Separation and Distribution Agreement dated as of June 30, 2004 (the “Separation and Distribution Agreement”) by and among Viad Corp, a Delaware corporation (“Viad”), Travelers Express Company, Inc., and MGI Merger Sub, Inc., the Company will become an independent, publicly traded corporation through a distribution (the “Distribution”) of all of the Company Stock (as defined below) owned by Viad to holders of shares of Viad Common Stock (as defined in the Separation and Distribution Agreement); and
WHEREAS, in connection with the Distribution, it has been agreed in the Employee Benefits Agreement dated as of June 30, 2004 by and among Viad, the Corporation and TECI (the “Employee Benefits Agreement”) that (1) the trustee of the Viad Corp Employee Equity Trust created pursuant to the Trust Agreement dated as of August 15, 1996, between Viad and Wells Fargo Bank of Arizona, N.A., as trustee (the “Viad Trust”), will transfer to the trustee of a new trust established by MoneyGram, effective as of June 30, 2004, all of the shares of Company Stock distributed in the Distribution with respect to the shares of common stock of Viad held in the Viad Trust as of the record date for the Distribution, (2) Viad will assign to the Company a portion of the principal amount of the Promissory Note dated August 15, 1996 issued by the Trustee to the Company (the “Original Note”) and (3) the trustee of such new trust will assume in favor of the Company, and Viad will release the Viad Trust from, such portion of the Original Note; and
WHEREAS, the Company desires to establish a trust (the “Trust”) to implement the foregoing; and
WHEREAS, the Trustee desires to act as trustee of the Trust, and to hold legal title to the assets of the Trust, in trust, for the purposes hereinafter stated and in accordance with the terms hereof;
WHEREAS, the Company or its subsidiaries have previously adopted the Plans (as defined below);
WHEREAS, the Company desires to provide assurance of the availability of the shares of Company Stock necessary to satisfy certain of its obligations or those of its subsidiaries under the Plans (as defined below);
WHEREAS, the Company desires that the assets to be held in the Trust Fund (as defined below) should be principally or exclusively securities of the Company and, therefore, expressly waives any diversification of investments that might otherwise be necessary, appropriate, or required pursuant to applicable provisions of law; and
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NOW, THEREFORE, the parties hereto hereby enter into the Trust Agreement and the Trust and agree that the Trust will be comprised, held and disposed of as follows:
ARTICLE 1.
Trust, Trustee and Trust Fund
1.1. Trust. This Agreement and the Trust shall be known as the MoneyGram Employee Equity Trust. The parties intend that the Trust will be an independent legal entity with title to and power to convey all of its assets. The parties hereto further intend that the Trust not be subject to the Employee Retirement Income Security Act of 1974, as amended. The Trust is not a part of any of the Plans (as herein defined) and does not provide retirement or other benefits to any Plan Participant (as herein defined). The assets of the Trust will be held, invested and disposed of by the Trustee, in accordance with the terms of the Trust.
1.2. Trustee. The trustee named above, and its successor or successors, is hereby designated as the trustee hereunder, to receive, hold, invest, administer and distribute the Trust Fund in accordance with this Agreement, the provisions of which shall govern the power, duties and responsibilities of the Trustee.
1.3. Trust Fund. The assets held at any time and from time to time under the Trust collectively are herein referred to as the “Trust Fund” and shall consist of contributions received by the Trustee, proceeds of any loans, investments and reinvestment thereof, the earnings and income thereon, less disbursements therefrom. Except as herein otherwise provided, title to the assets of the Trust Fund shall at all times be vested in the Trustee and securities that are part of the Trust Fund shall be held in such manner that the Trustee’s name and the fiduciary capacity in which the securities are held are fully disclosed, subject to the right of the Trustee to hold title in bearer form or in the name of a nominee, and the interests of others in the Trust Fund shall be only the right to have such assets received, held, invested, administered and distributed in accordance with the provisions of the Trust.
1.4. Trust Fund Subject to Claims. Notwithstanding any provision of this Agreement to the contrary, the Trust Fund shall at all times remain subject to the claims of the Company’s general creditors under federal and state law.
In addition, the Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company’s Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue allocations pursuant to Article 3.
Unless the Trustee has actual knowledge of the Company’s Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company’s Insolvency.
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If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue allocations pursuant to Article 3 and shall hold the Trust Fund for the benefit of the Company’s general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of employees as general creditors of the Company with respect to benefits due under the Plan(s) or otherwise.
The Trustee shall resume allocations pursuant to Article 3 only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent).
1.5. Definitions. In addition to the terms defined in the preceding portions of the Trust, certain capitalized terms have the meanings set forth below:
Basket Value. “Basket Value” means with respect to each Trust Year, the product of (a) the Available Shares for such Trust Year, (b) the product of four and the Company’s most recent reported quarterly earnings per share, and (c) the equal weighted average price earnings ratio of the following companies (or any successor of such companies) as reported in the Wall Street Journal on the last business day of such Trust Year: First Data Corp; Global Payment Inc.; and Total Systems Services.
Board of Directors. “Board of Directors” means the board of directors of the Company.
Calculation Period. “Calculation Period” means a period consisting of July 1, 2004 – December 31, 2007, or calendar years 2008 — 2012.
Change of Control. “Change of Control” means any of the following events:
(a) An acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 20% or more of either: (1) the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then Outstanding Voting Securities of the Company entitled to vote generally in the election of Directors (the “Outstanding Company Voting Securities”); excluding, however the following: (A) any acquisition directly from the Company or any entity controlled by the Company other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company or any entity controlled by the Company, (B) any acquisition by the Company, or any entity controlled by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company or (D) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of paragraph (c) of this definition; or
(b) A change in the composition of the Board such that the individuals who, as of the effective date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this paragraph (b) that any individual, who becomes a member of the Board subsequent to the effective date of the Plan, whose election, or nomination
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for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board, (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction (the “Prior Shareholders”) beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of Directors, as the case may be, of the Company or other entity resulting from such Corporate Transaction (including, without limitation, a corporation or other entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company or any entity controlled by the Company, any employee benefit plan (or related trust) of the Company or any entity controlled by the Company or such corporation or other entity resulting from such Corporate Transaction) will beneficially owns, directly or indirectly, 20% or more of, respectively, the outstanding shares of Common Stock of the Company or other entity resulting from such Corporate Transaction or the combined voting power of the Outstanding Voting Securities of such Company or other entity entitled to vote generally in the election of Directors except to the extent that such ownership existed prior to the Corporate Transaction and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the Board of Directors of the Company resulting from such Corporate Transaction; and further excluding any disposition of all or substantially all of the assets of the Company pursuant to a spin-off, split-up or similar transaction (a “Spin-off”) if, immediately following the Spin-off, the Prior Shareholders beneficially own, directly or indirectly, more than 80% of the outstanding shares of Common Stock and the combined voting power of the then Outstanding Voting Securities entitled to vote generally in the election of directors of both entities resulting from such transaction, in substantially the same proportions as their ownership, immediately prior to such transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities; provided, that if another Corporate Transaction involving the Company occurs in connection with or following a Spin-off, such Corporate Transaction shall be analyzed separately for purposes of determining whether a Change of Control has occurred; or
(d) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
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Code. “Code” means the Internal Revenue Code of 1986, as amended.
Committee. “Committee” means a committee of officers, directors and/or employees of the Company which is charged by the Board of Directors with administration of the Trust.
Company. “Company” means MoneyGram International, Inc., a Delaware corporation, or any successor thereto. References to the Company shall include its subsidiaries where appropriate.
Company Stock. “Company Stock” means shares of common stock, par value $0.01 per share, issued by the Company or any successor securities.
DC Participant. “DC Participant” means as of any date any individual who is employed by the Company or any subsidiary of the Company as of such date and is a participant in a DC Plan.
DC Plan. “DC Plan” shall mean the MoneyGram 401(k) Plan and any successor thereto.
DC Plan Trustee Certification. “DC Plan Trustee Certification” means a certification to be delivered by the trustee of the DC Plan to the Trustee pursuant to Section 5.4, which sets forth the directions made by each DC Participant as to voting or tendering of Company Stock allocated to his account in the DC Plan with respect to the voting or tendering decision at issue.
Extraordinary Dividend. “Extraordinary Dividend” means any dividend or other distribution of cash or other property (other than Company Stock) made with respect to Company Stock, which the Board of Directors declares generally to be other than an ordinary dividend.
Fair Market Value. “Fair Market Value” means as of any date the average of the highest and lowest reported sales price regular way during normal business hours on such date (or if such date is not a trading day, then on the most recent prior date which is a trading day) of a share of Company Stock as reported on the composite tape, or similar reporting system, for issues listed on the New York Stock Exchange (or, if the Company Stock is no longer traded on the New York Stock Exchange, on such other national securities exchange on which the Company Stock is listed or national securities or central market system upon which transactions in Company Stock are reported, as either shall be designated by the Committee for the purposes hereof) or if sales of Common Stock are not reported in any manner specified above, the average of the high bid and low asked quotations on such date (or if such date is not a trading day, then on the most recent prior date which is a trading day) in the over-the-counter market as reported by the National Association of Securities Dealers’ Automated Quotation System or, if not so reported, by National Quotation Bureau, Incorporated or similar organization selected by the Committee.
Final Target Value. “Final Target Value” means with respect to each Trust Year the greater of (a) the Target Value and (b) the Basket Value.
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Insolvency. “Insolvency” means (a) the inability of the Company to pay its debts as they become due, or (b) the Company being subject to a pending proceeding as a debtor under the provisions of Title 11 of the United States Code (Bankruptcy Code).
Loan. “Loan” means the portion of the Viad Loan assumed by the Trustee pursuant to an Assignment, Assumption and Release Agreement dated as of June 30, 2004.
Plans. “Plans” mean the DC Plan, the employee benefit plans listed on Schedule A hereto and any other employee benefit plan of the Company or its subsidiaries designated as such by the Board of Directors.
Plan Participant. “Plan Participant” means a participant in any of the Plans.
Suspense Account. “Suspense Account” means a separate account to be maintained by the Trustee to hold Excess Shares pursuant to the terms of Article 3 hereof.
Target Value. “Target Value” for a given Trust Year means the amount set forth on Schedule B hereto.
Trustee. “Trustee” means Wells Fargo Bank, N.A., a national banking association (not in its corporate capacity but as trustee of the Trust), or any successor trustee.
Trust Year. “Trust Year” means the period beginning on July 1, 2004 and ending on December 31, 2004 and each 12-month period beginning on January 1 and ending on December 31 thereafter.
Viad Loan. “Viad Loan” means the loan and extension of credit to the Viad Trust evidenced by the promissory note made by the Trustee of the Viad Trust dated September 9, 1992, with which the Trustee of the Viad Trust purchased Company Stock, as amended as of August 15, 1996 to reduce the remaining principal amount as a result of the assignment to Dial, and the assumption by the trustee of a new trust established by Dial, of a portion of the remaining principal amount of the Original Note specified in Section 3.5 of the Viad Trust.
ARTICLE 2.
Contributions and Dividends
2.1. Contributions. For each Trust Year the Company shall contribute to the Trust in cash such amount, which together with dividends, as provided in Section 2.2, and any other earnings of the Trust, shall enable the Trustee to make all payments of principal and interest due under the Loan on a timely basis. Unless otherwise expressly provided herein, the Trustee shall apply all such contributions, dividends and earnings to the payment of principal and interest due under the Loan. If, at the end of any Trust Year, no such contribution has been made in cash, such contribution shall be deemed to have been made in the form of forgiveness of principal and interest on the Loan to the extent of the Company’s failure to make contributions as required by this Section 2.1. All contributions made under the Trust shall be delivered to the Trustee. The Trustee shall be accountable for all contributions received by it, but shall have no duty to require any contributions to be made to it.
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2.2. Dividends. Except as otherwise provided herein, dividends paid in cash on Company Stock held by the Trust, including Company Stock held in the Suspense Account, shall be applied to pay interest and repay scheduled principal due under the Loan. In the event that dividends paid on Company Stock held in the Trust, other than Extraordinary Dividends, exceed the amount of scheduled principal and interest due in any Trust Year, such excess shall be distributed to the Plans and/or to any other broad cross-section of individuals employed by the Company, as determined in good faith by the Committee; provided, however, that in the event that in any Trust Year cash dividends on Company Stock held by the Trust exceed the amount indicated on Schedule C hereto, other than by reason of an Extraordinary Dividend, such excess shall be applied to prepay principal of the Loan. Extraordinary Dividends, as well as dividends which are not in cash or in Company Stock, shall not be used to pay interest on or principal of the Loan, but shall be reduced to cash by the Trustee and reinvested in Company Stock as soon as practicable. Company Stock purchased with the proceeds of an Extraordinary Dividend or with the proceeds of a non-cash dividend shall, for purposes of this Agreement (including without limitation Section 3.1 hereof), be deemed to have been acquired with the proceeds of the Loan. In the Trustee’s discretion, investments in Company Stock may be made through open-market purchases, private transactions or (with the Company’s consent) purchases from the Company.
ARTICLE 3.
Release and Allocation of Company Stock
3.1. Release of Shares. Subject to the other provisions of this Article 3, upon the payment or forgiveness in any Trust Year of any principal on the Loan (a “Principal Payment”), the following number of shares of Company Stock acquired with the proceeds of the Loan shall be available for allocation (“Available Shares”) as provided in this Article 3: the number of shares so acquired and held in the Trust immediately before such payment or forgiveness, multiplied by a fraction the numerator of which is the amount of the Principal Payment and the denominator of which is the sum of such Principal Payment and the remaining principal of the Loan outstanding after such Principal Payment.
3.2. Allocations. Subject to the provisions of Section 3.3, Available Shares shall be allocated as directed by the Committee to the Plans on a quarterly basis or at such other times during the Trust Year as may be required to provide shares in accordance with the respective regular payment schedules for benefits under such Plans. The Committee’s discretion shall be limited to the number of shares of Company Stock allocated among Plans, with the allocation itself being mandatory. Subject to Section 3.3, in the event that as of December 31 of any given Trust Year, any unallocated Available Shares remain after satisfaction of all benefit obligations under each of the Plans for a given Trust Year, and/or after determination of the amount, if any, of Excess Shares, under Section 3.3, all remaining Available Shares shall be contributed by the Trustee to the Plans or such other plans of the Company or its subsidiaries covering a broad cross-section of individuals employed by the Company as the Committee shall direct.
3.3. Excess Shares. (a) Notwithstanding the provisions of Section 3.2, Available Shares shall not be released from the Trust and allocated during a given Trust Year
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pursuant to Section 3.2 to the extent that the Fair Market Value of the Available Shares theretofore allocated during such Trust Year, as of the date(s) of allocation, together with the Fair Market Value of the Available Shares proposed to be allocated, as of the date(s) of proposed allocation, exceeds the Target Value. If, as of December 31 of such Trust Year, the Fair Market Value of the Available Shares theretofore allocated during such Trust Year, as of the date(s) of allocation, together with the Available Shares for such Trust Year not yet allocated, exceeds the Final Target Value, the Available Shares with a Fair Market Value as of December 31 in an amount equal to such excess shall not be released and allocated pursuant to this Section 3.2 but rather, such Available Shares (“Excess Shares”) shall be held by the Trustee in the Suspense Account and allocated in accordance with the provisions of this Section 3.3.
(b) In the event that there are any Excess Shares created in any Trust Year within a Calculation Period, such Excess Shares shall be released from the Suspense Account pursuant to Section 3.2 to the extent that but for such release the Fair Market Value of the Available Shares in a subsequent Trust Year within the same Calculation Period would be less than the Final Target Value. In the event that in any Trust Year the value of the Available Shares was less than the Final Target Value for such Trust Year (such amount being referred to as the “Shortfall”) and Excess Shares are created in subsequent Trust Year within the same Calculation Period, Excess Shares with a value equal to the Shortfall shall be transferred by the Trustee to such Plans as directed by the Committee; it being understood, that such shares may not, in any event, be transferred to the Company.
(c) In the event that at the end of any Calculation Period there are Excess Shares that have not been allocated pursuant to Section 3.3(b), such Excess Shares shall, subject to the provisions of this subsection (c), be distributed in equal amounts of shares in each Trust Year in the next Calculation Period to individuals employed by the Company or plans in which they participate, as directed by the Committee taking into account the best interest of the individuals employed by the Company and its subsidiaries. However, Excess Shares which would have been allocated in a Trust Year pursuant to the preceding sentence shall instead be allocated pursuant to Section 3.2 to the extent that there is a Shortfall with respect to such Trust Year. Any Excess Shares remaining in the Trust at the beginning of the final Calculation Period of the Trust shall be contributed in equal amounts of shares in each Trust Year during such Calculation Period to individuals employed by the Company or plans in which they participate, as directed by the Committee taking into account the best interest of the individuals employed by the Company and its subsidiaries, and the Trust shall not terminate until such Excess Shares have been so contributed.
ARTICLE 4.
Compensation, Expenses and Tax Withholding
4.1. Compensation and Expenses. The Trustee shall be entitled to such reasonable compensation for its services as may be agreed upon from time to time by the Company and the Trustee and to be reimbursed for its reasonable legal, accounting and appraisal fees, expenses and other charges reasonably incurred in connection with the administration, management, investment and distribution of the Trust Fund. Such compensation shall be paid, and such reimbursement shall be made out of the Trust Fund. The Company agrees to make
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sufficient contributions to the Trust to pay such amounts owing the Trustee in addition to those contributions required by Section 2.1 and, in the event the Company fails to make the contributions necessary to pay amounts owing to the Trustee, the Trustee shall be entitled to seek payment directly from the Company.
4.2. Withholding of Taxes. The Trustee may withhold, require withholding, or otherwise satisfy its withholding obligation, on any distribution which it is directed to make, such amount as it may reasonably estimate to be necessary to comply with applicable federal, state and local withholding requirements. Upon settlement of such tax liability, the Trustee shall distribute the balance of such amount. Prior to making any distribution hereunder, the Trustee may require such release or documents from any taxing authority, or may require such indemnity, as the Trustee shall reasonably deem necessary for its protection.
ARTICLE 5.
Administration of Trust Fund
5.1. Management and Control of Trust Fund. Subject to the terms of this Agreement, the Trustee shall have exclusive authority, discretion and responsibility to manage and control the assets of the Trust Fund.
5.2. Investment of Funds.
Except as otherwise provided in Section 2.2 and in this Section 5.2, the Trustee shall invest and reinvest the Trust Fund exclusively in Company Stock, including any accretions thereto resulting from the proceeds of a tender offer, recapitalization or similar transaction which, if not in Company Stock, shall be reduced to cash as soon as practicable. The Trustee may invest any portion of the Trust Fund temporarily pending investment in Company Stock, distribution or payment of expenses in (a) investments in United States Government obligations with maturities of less than one year, (b) interest-bearing accounts including but not limited to certificates of deposit, time deposits, saving accounts and money market accounts with maturities of less than one year in any bank, including the Trustee’s, with aggregate capital in excess of $1,000,000,000 and a Moody’s Investor Services rating of at least P1, or an equivalent rating from a nationally recognized ratings agency, which accounts are insured by the Federal Deposit Insurance Corporation or other similar federal agency, (c) obligations issued or guaranteed by any agency or instrumentality of the United States of America with maturities of less than one year or (d) short-term discount obligations of the Federal National Mortgage Association.
5.3. Trustee’s Administrative Powers.
Except as otherwise provided herein, and subject to the Trustee’s duties hereunder, the Trustee shall have the following powers and rights, in addition to those provided elsewhere in this Agreement or by law:
(a) to retain any asset of the Trust Fund;
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(b) subject to Section 5.4 and Article 3, to sell, transfer, mortgage, pledge, lease or otherwise dispose of, or grant options with respect to any Trust Fund assets at public or private sale;
(c) upon direction from the Company, to borrow from any lender (including the Company pursuant to the Loan), to acquire Company Stock as authorized by this Agreement, to enter into lending agreements upon such terms (including reasonable interest and security for the loan and rights to renegotiate and prepay such loan) as may be determined by the Committee; provided, however, that any collateral given by the Trustee for the Loan shall be limited to cash and property contributed by the Company to the Trust and dividends paid on Company Stock held in the Trust Fund and shall not include Company Stock acquired with the proceeds of Loan;
(d) with the consent of the Committee, to settle, submit to arbitration, compromise, contest, prosecute or abandon claims and demands in favor of or against the Trust Fund;
(e) to vote or to give any consent with respect to any securities, including any Company Stock, held by the Trust either in person or by proxy for any purpose, provided that the Trustee shall vote, tender or exchange all shares of Company Stock as provided in Section 5.4;
(f) to exercise any of the powers and rights of an individual owner with respect to any asset of the Trust Fund and to perform any and all other acts that in its judgment are necessary or appropriate for the proper administration of the Trust Fund, even though such powers, rights and acts are not specifically enumerated in this Agreement;
(g) to employ such accountants, actuaries, investment bankers, appraisers, other advisors and agents as may be reasonably necessary in collecting, managing, administering, investing, valuing, distributing and protecting the Trust Fund or the assets thereof or any borrowings of the Trustee made in accordance with Section 5.3(c); and to pay their reasonable fees and expenses, which shall be deemed to be expenses of the Trust and for which the Trustee shall be reimbursed in accordance with Section 4.1;
(h) to cause any asset of the Trust Fund to be issued, held or registered in the Trustee’s name or in the name of its nominee, or in such form that title will pass by delivery, provided that the records of the Trustee shall indicate the true ownership of such asset;
(i) to utilize another entity as custodian to hold, but not invest or otherwise manage or control, some or all of the assets of the Trust Fund; and
(j) to consult with legal counsel (who may also be counsel for the Trustee generally) with respect to any of its duties or obligations hereunder; and to pay the reasonable fees and expenses of such counsel, which shall be deemed to be expenses of the Trust and for which the Trustee shall be reimbursed in accordance with Section 4.1.
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Notwithstanding the foregoing, neither the Trust nor the Trustee shall have any power to, and shall not, engage in any trade or business.
5.4. Voting and Tendering of Company Stock.
(a) Voting of Company Stock. The Trustee shall follow the directions of the trustee of the DC Plan as to the manner in which shares of Company Stock held by the Trust are to be voted on each matter brought before an annual or special stockholders’ meeting of the Company or the manner in which any consent is to be executed, in each case as provided below. Before each such meeting of stockholders, the Trustee shall cause to be furnished to the trustee of the DC Plan a copy of the proxy solicitation material received by the Trustee, together with a form requesting confidential instructions as to how to vote the shares of Company Stock held by the Trustee. Upon timely receipt of the DC Plan Trustee Certification, the Trustee shall on each such matter vote the number of shares (including fractional shares) of Company Stock held by the Trust as follows:
The Trustee shall, with respect to each DC Plan, assign to each DC Participant, a number of shares (the “DC Participant Directed Amount”) equal to the product of (i) the total number of shares of Common Stock held in the Trust Fund, and (ii) a fraction, the numerator of which is the number of shares of Company Stock allocated from the Trust Fund to such DC Participant’s account in the DC Plan for the most recent preceding Trust Year and the denominator of which is the total number of shares of Company Stock contributed by the Trustee to the trustees of the trusts established under the DC Plan with respect to such Trust Year, in each case, as reflected in the DC Plan Trustee Certification. Each share assigned to each DC Participant in accordance with the previous sentence shall be voted in accordance with such participant’s direction to the trustee of the DC Plan in which he participates with respect to shares of Company Stock allocated to his account in such DC Plan, as reflected in the DC Plan Trustee Certification. Any shares of Company Stock which remain undirected pursuant to the foregoing provisions shall be voted for, against or to abstain in the same proportions as the shares of Company Stock for which the Trustee is directed as provided above. Similar provisions shall apply in the case of any action by shareholder consent without a meeting.
(b) Tender or Exchange of Company Stock. The Trustee shall use its best efforts timely to distribute or cause to be distributed to the trustee of any trust established under any DC Plan any written materials distributed to stockholders of the Company generally in connection with any tender offer or exchange offer, together with a form requesting confidential instructions on whether or not to tender or exchange shares of Company Stock held in the Trust. Upon timely receipt of the DC Plan Trustee Certification, the Trustee shall tender or not tender the DC Participant Directed Amount for each DC Participant in accordance with such participant’s direction to the trustee of the DC Plan in which he participates with respect to shares of Company Stock allocated to his account in such DC Plan, as set forth in the DC Plan Trustee Certification. The trustee of any DC Plan shall not be limited in the number of instructions to tender or withdraw from tender which it may give but shall not have the right to give instructions to tender or withdraw from tender after a reasonable time established by the Trustee. If the Trustee shall not receive timely instruction by means of the DC Plan Trustee Certification as to the manner in which to respond to such a tender or exchange offer, the Trustee
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shall not tender or exchange any shares of Company Stock with respect to which the trustee of any DC Plan has the right of direction, and the Trustee shall have no discretion in such matter.
(c) The Company shall maintain appropriate procedures to ensure that all instructions by DC Participants are collected, tabulated, and transmitted to the trustee under the DC Plan and to the Trustee without being divulged or released to any person affiliated with the Company or its affiliates. All actions taken by DC Participants and the contents of the DC Plan Trustee Certification shall be held confidential by the Trustee and shall not be divulged or released to any person, other than (i) agents of the Trustee who are not affiliated with the Company or its affiliates or (ii) by virtue of the execution by the Trustee of any proxy, consent or letter of transmittal for the shares of Company Stock held in the Trust.
5.5. Indemnification.
(a) The Company shall and hereby does indemnify and hold harmless the Trustee from and against any claims, demands, actions, administrative or other proceedings, causes of action, liability, loss, cost, damage or expense (including reasonable attorneys’ fees), which may be asserted against it, in any way arising out of or incurred as a result of its action or failure to act in connection with the operation and administration of the Trust; provided that such indemnification shall not apply to the extent that the Trustee has acted in willful or negligent violation of applicable law or its duties under this Trust or in bad faith. The Trustee shall be under no liability to any person for any loss of any kind which may result (i) by reason of any action taken by it in accordance with any direction of the Committee or any DC Participant acting pursuant to Section 5.4 (hereinafter collectively referred to as the “directing participants”), (ii) by reason of its failure to exercise any power or authority or to take any action hereunder because of the failure of any such directing participant to give directions to the Trustee, as provided for in this Agreement, or (iii) by reason of any act or omission of any of the directing participants with respect to its duties under this Trust. The Trustee shall be fully protected in acting upon any instrument, certificate, or paper delivered by the Committee or any DC Participant or beneficiary and believed in good faith by the Trustee to be genuine and to be signed or presented by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing, but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained.
(b) The Company may, but shall not be required to, maintain liability insurance to insure its obligations hereunder. If any payments made by the Company or the Trust pursuant to this indemnity are covered by insurance, the Company or the Trust (as applicable) shall be subrogated to the rights of the indemnified party against the insurance company.
(c) Without limiting the generality of the foregoing, the Company may, at the request of the Trustee, advance to the Trustee reasonable amounts of expenses, including reasonable attorneys’ fees and expenses, which the Trustee advises have been incurred in connection with its investigation or defense of any claim, demand, action, cause of action, administrative or other proceeding arising out of or in connection with the Trustee’s performance of its duties under this Agreement.
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5.6. General Duty to Communicate to Committee. The Trustee shall promptly notify the Committee of all communications with or from any government agency or with respect to any legal proceeding with regard to the Trust and with or from any Plan Participants concerning their entitlements under the Plans or the Trust.
ARTICLE 6.
Accounts and Reports of Trustee
6.1. Records and Accounts of Trustee. The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection or audit by any person designated by the Company and which shall be retained as required by applicable law.
6.2. Fiscal Year. The fiscal year of the Trust shall be the twelve month period beginning on January 1 and ending on December 31.
6.3. Reports of Trustee. The Trustee shall prepare and present to the Committee a report for the period ending on the last day of each fiscal year, and for such shorter periods as the Committee may reasonably request, listing all securities and other property acquired and disposed of and all receipts, disbursements and other transactions effected by the Trust after the date of the Trustee’s last account, and further listing all cash, securities, and other property held by the Trust, together with the fair market value thereof, as of the end of such period. In addition to the foregoing, the report shall contain such information regarding the Trust Fund’s assets and transactions as the Committee in its discretion may reasonably request.
6.4. Final Report. In the event of the resignation or removal of a Trustee hereunder, the Committee may request and the Trustee shall then with reasonable promptness submit, for the period ending on the effective date of such resignation or removal, a report similar in form and purpose to that described in Section 6.3.
ARTICLE 7.
Succession of Trustee
7.1. Resignation of Trustee. The Trustee or any successor thereto may resign as Trustee hereunder at any time upon delivering a written notice of such resignation, to take effect sixty (60) days after the delivery thereof to the Committee, unless the Committee accepts shorter notice; provided, however, that no such resignation shall be effective until a successor Trustee has assumed the office of Trustee hereunder.
7.2. Removal of Trustee. The Trustee or any successor thereto may be removed by the Company by delivering to the Trustee so removed an instrument executed by the Committee. Such removal shall take effect at the date specified in such instrument, which shall not be less than sixty (60) days after delivery of the instrument, unless the Trustee accepts shorter notice; provided, however, that no such removal shall be effective until a successor Trustee has assumed the office of Trustee hereunder.
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7.3. Appointment of Successor Trustee. Whenever the Trustee or any successor thereto shall resign or be removed or a vacancy in the position shall otherwise occur, the Board of Directors shall use its best efforts to appoint a successor Trustee as soon as practicable after receipt by the Committee of a notice described in Section 7.1, or the delivery to the Trustee of a notice described in Section 7.2, as the case may be, but in no event more than seventy-five (75) days after receipt or delivery, as the case may be, of such notice. A successor Trustee’s appointment shall not become effective until such successor shall accept such appointment by delivering its acceptance in writing to the Company. If a successor is not appointed within such 75 day period, the Trustee, at the Company’s expense, may petition a court of competent jurisdiction for appointment of a successor.
7.4. Succession to Trust Fund Assets. The title to all property held hereunder shall vest in any successor Trustee acting pursuant to the provisions hereof without the execution or filing of any further instrument, but a resigning or removed Trustee shall execute all instruments and do all acts necessary to vest title in the successor Trustee. Each successor Trustee shall have, exercise and enjoy all of the powers, both discretionary and ministerial, herein conferred upon its predecessors. A successor Trustee shall not be obliged to examine or review the accounts, records, or acts of, or property delivered by, any previous Trustee and shall not be responsible for any action or any failure to act on the part of any previous Trustee.
7.5. Continuation of Trust. In no event shall the legal disability, resignation or removal of a Trustee terminate the Trust, but the Board of Directors shall forthwith appoint a successor Trustee in accordance with Section 7.3 to carry out the terms of the Trust.
7.6. Changes in Organization of Trustee. In the event that any corporate Trustee hereunder shall be converted into, shall merge or consolidate with, or shall sell or transfer substantially all of its assets and business to, another corporation, state or federal, the corporation resulting from such conversion, merger or consolidation, or the corporation to which such sale or transfer shall be made, shall thereunder become and be the Trustee under the Trust with the same effect as though originally so named.
7.7. Continuance of Trustee’s Powers in Event of Termination of the Trust. In the event of the termination of the Trust, as provided herein, the Trustee shall dispose of the Trust Fund in accordance with the provisions hereof. Until the final distribution of the Trust Fund, the Trustee shall continue to have all powers provided hereunder as necessary or expedient for the orderly liquidation and distribution of the Trust Fund.
ARTICLE 8.
Amendment or Termination
8.1. Amendments. Except as otherwise provided herein, the Company may amend the Trust at any time and from time to time in any manner which it deems desirable, provided that no amendment which would adversely affect the contingent rights of Plan Participants may change (a) the allocation formula contained in Section 3.1 or Section 3.2 so as to change the Fair Market Value in any Trust Year of the Available Shares or the Excess Shares, (b) the terms of Section 3.3, (c) the Target Value reflected on Schedule B with respect to any
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Trust Year, (d) the provisions of Section 2.2 as to the use of dividends in excess of the amounts reflected on Schedule C, (e) the provisions of Section 5.4, (f) the provisions of Section 8.2, (g) the provisions of this Section 8.1, or (h) change the duties of the Trustee without the Trustee’s consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the Company shall retain the power under all circumstances to amend the Trust to correct any errors or clarify any ambiguities or similar issues of interpretation in this Agreement.
8.2. Termination. Subject to the terms of Section 3.3(c) and this Section 8.2, the Trust shall terminate on September 8, 2012 or any earlier date on which the Loan is paid in full (the “Termination Date”). The Board of Directors may terminate the Trust at any time prior to the Termination Date. The Trust shall also terminate automatically upon the Company giving the Trustee notice of a Change of Control. Immediately upon a termination of the Trust, the Company shall be deemed to have forgiven all amounts then outstanding under the Loan. As soon as practicable after receiving notice from the Company of a Change of Control or upon any other termination of the Trust, the Trustee shall sell all of the Company Stock and other non-cash assets (if any) then held in the Trust Fund as directed by the Committee in good faith taking into account the interests of a broad cross-section of individuals employed by the Company. The proceeds of such sale shall first be returned to the Company up to an amount equal to the principal amount, plus any accrued interest, of the Loan that was forgiven upon such termination. Subject to the provisions of Section 3.3(c), any funds remaining in the Trust after such payment to the Company shall be distributed with reasonable promptness to a broad cross-section of Plan Participants or to individuals employed by the Company generally or to any benefit plan or trust in which a broad cross-section of individuals employed by the Company participate, as the Committee may in good faith determine taking into account the best interests of the individuals employed by the Company.
8.3. Form of Amendment or Termination. Any amendment or termination of the Trust shall be evidenced by an instrument in writing signed by an authorized officer of the Company, certifying that said amendment or termination has been authorized and directed by the Company or the Board of Directors, as applicable, and, in the case of any amendment, shall be consented to by signature of an authorized officer of the Trustee, if required by Section 8.1.
ARTICLE 9.
Miscellaneous
9.1. Controlling Law. The laws of the State of Delaware shall be the controlling law in all matters relating to the Trust, without regard to conflicts of law.
9.2. Committee Action. Any action required or permitted to be taken by the Committee may be taken on behalf of the Committee by any individual so authorized. The Company shall furnish to the Trustee the name and specimen signature of each member of the Committee upon whose statement of a decision or direction the Trustee is authorized to rely. Until notified of a change in the identity of such person or persons, the Trustee shall act upon the assumption that there has been no change.
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9.3. Notices. All notices, requests, or other communications required or permitted to be delivered hereunder shall be in writing, delivered by registered or certified mail, return receipt requested as follows:
To the Company:
MoneyGram
International, Inc.
1550 Utica Avenue South
St. Louis Park, Minnesota 55416
Attention: General Counsel
To the Trustee:
Wells Fargo Bank, N.A.
6th and Marquette
Mail: N9303-110
Minneapolis, MN 55479
Attention: Nancy Sampair
Any party hereto may from time to time, by written notice given as aforesaid, designate any other address to which notices, requests or other communications addressed to it shall be sent.
9.4. Severability. If any provision of the Trust shall be held illegal, invalid or unenforceable for any reason, such provision shall not affect the remaining parts hereof, but the Trust shall be construed and enforced as if said provision had never been inserted herein.
9.5. Protection of Persons Dealing with the Trust. No person dealing with the Trustee shall be required or entitled to monitor the application of any money paid or property delivered to the Trustee, or determine whether or not the Trustee is acting pursuant to authorities granted to it hereunder or to authorizations or directions herein required.
9.6. Tax Status of Trust. It is intended that the Company, as grantor hereunder, be treated as the owner of the entire Trust and the trust assets under Section 671, et seq. of the Code. Until advised otherwise, the Trustee may presume that the Trust is so characterized for federal income tax purposes and shall make all filings of tax returns on that presumption.
9.7. Participants to Have No Interest in the Company by Reason of the Trust. Neither the creation of the Trust nor anything contained in the Trust shall be construed as giving any person, including any individual employed by the Company or any subsidiary of the Company, any equity or interest in the assets, business, or affairs of the Company except to the extent that any such individuals are entitled to exercise stockholder rights with respect to Company Stock pursuant to Section 5.4.
9.8. Nonassignability. No right or interest of any person to receive distributions from the Trust shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, or bankruptcy, but excluding death or mental incompetency,
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and no right or interest of any person to receive distributions from the Trust shall be subject to any obligation or liability of any such person, including claims for alimony or the support of any spouse or child.
9.9. Gender and Plurals. Whenever the context requires or permits, the masculine gender shall include the feminine gender and the singular form shall include the plural form and shall be interchangeable.
9.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original.
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IN WITNESS WHEREOF, the Company and the Trustee have caused this Agreement to be signed, and their seals affixed hereto, by their authorized officers all as of the day, month and year first above written.
|
MONEYGRAM INTERNATIONAL, INC.
|
||||
| By: | /s/ Teresa H. Johnson | |||
| Name: | Teresa Johnson | |||
| Title: | Vice President, General Counsel & Secretary | |||
|
WELLS FARGO BANK, N.A.
|
||||
| By: | /s/ Todd A. Crandall | |||
| Name: | Todd A. Crandall | |||
| Title: | Assistant Vice President/Relationship Manager | |||
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SCHEDULE A
| 1. | MoneyGram International, Inc. Supplemental 401(k) Plan | |||
| 2. | MoneyGram International, Inc. Deferred Compensation Plan | |||
| 3. | Travelers Express Company, Inc. Supplemental Pension Plan 4. MoneyGram Pension Plan | |||
| 5. | Active Employee and Retiree Health and Welfare Plans | |||
| 6. | MoneyGram International, Inc. Omnibus Incentive Plan | |||
| 7. | MoneyGram International, Inc. Management Incentive Plan | |||
| 8. | MoneyGram International, Inc. Executive Severance Plans (Tier I and Tier II) | |||
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SCHEDULE B
| Trust Year | Target Value ($) | |
|
|
|
|
|
2004 (7/1-12/31)
2005 2006 2007 |
25,129,749
28,747,201 32,903,423 37,752,348 |
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Exhibit 31.1
CERTIFICATION
I, Philip W. Milne, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of MoneyGram
International, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
control over financial reporting.
2
/s/ Philip W. Milne
Signature
Name: Philip W. Milne
Title: President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, David J. Parrin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of MoneyGram
International, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
(c) Disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ David J. Parrin
Signature
Name: David J. Parrin
Title: Vice President and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
In connection with the Quarterly Report of MoneyGram International, Inc. (the
“Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Philip
W. Milne, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
1.
The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Philip W. Milne
Philip W. Milne
Chief Executive Officer
August 13, 2004
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
In connection with the Quarterly Report of MoneyGram International, Inc. (the
“Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, David
J. Parrin, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
1.
The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ David J. Parrin
David J. Parrin
Chief Financial Officer
August 13, 2004