<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-228
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MONEYGRAM PAYMENT SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 6099 84-1327808
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
7401 WEST MANSFIELD AVE.
LAKEWOOD, COLORADO 80235
(303) 716-6800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JOHN S. ZIESER
SECRETARY
MONEYGRAM PAYMENT SYSTEMS, INC.
10825 FARNAM DRIVE
OMAHA, NEBRASKA 68154
(402) 222-7215
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
KEVIN F. BLATCHFORD BRUCE K. DALLAS
SIDLEY & AUSTIN DAVIS POLK & WARDWELL
ONE FIRST NATIONAL PLAZA 450 LEXINGTON AVENUE
CHICAGO, ILLINOIS 60603 NEW YORK, NEW YORK 10017
(312) 853-7000 (212) 450-4000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two prospectus cover pages: one to be
used for a prospectus in connection with a United States and Canadian offering
(the "U.S. Prospectus") and one to be used for a prospectus in connection with
a concurrent international offering (the "International Prospectus"). The
International Prospectus will be identical to the U.S. Prospectus except that
it will have a different front cover page. The front cover page to be used in
the International Prospectus is located at the end of the U.S. Prospectus and
has been labeled "Alternate Page for International Prospectus."
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued October 4, 1996
LOGO
Shares
MoneyGram Payment Systems, Inc.
COMMON STOCK
----------
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY, ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. ALL OF THE SHARES OF
COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY INTEGRATED PAYMENT
SYSTEMS INC. ("IPS" OR THE "SELLING STOCKHOLDER"), A WHOLLY OWNED
SUBSIDIARY OF FIRST DATA CORPORATION. SEE "SELLING STOCKHOLDER." THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF
COMMON STOCK OFFERED HEREBY. PRIOR TO THE OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
----------
THE COMMON STOCK HAS BEEN APPROVED FOR
LISTING ON THE NEW YORK STOCK EXCHANGE
("NYSE"), SUBJECT
TO OFFICIAL NOTICE OF ISSUANCE, UNDER
THE SYMBOL "MNE."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER(2)
-------- -------------- --------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
(2) Before deducting expenses payable by the Selling Stockholder estimated
at $2,100,000.
(3) The Selling Stockholder has granted to the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of additional shares of Common Stock at the price
to public less underwriting discounts and commissions, for the purpose
of covering over-allotments, if any. If the U.S. Underwriters exercise
such option in full, the total price to public, underwriting discounts
and commissions and proceeds to Selling Stockholder will be $ ,
$ , and $ , respectively. See "Underwriters."
----------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1996 at the office of Morgan Stanley & Co. Incorporated, New York,
N.Y., against payment therefor in immediately available funds.
----------
MORGAN STANLEY & CO.
Incorporated
CS FIRST BOSTON
LEHMAN BROTHERS
SMITH BARNEY INC.
, 1996
<PAGE>
[Collage of pictures of MoneyGram
advertisements (including billboards
and bus benches) as described
in "Business--Sales and Marketing"
and consumer money wire transfer
checks as described in "Business--
the Money Transfer Process."]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE EXCHANGE ACT.
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER
THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR
DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT
PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE
POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDER AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE
ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION
OF THIS PROSPECTUS.
----------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments of subscriptions.
----------------
Unless the context otherwise requires, references to the "Company" or
"MoneyGram" are to MoneyGram Payment Systems, Inc. Prior to the consummation
of the offering made hereby (the "Offering"), IPS will transfer to the Company
certain assets and liabilities of its consumer money wire transfer service
business marketed under the name "MoneyGram" (the "Business") (such transfer
of assets and liabilities and the subsequent transition of the Business to the
Company, being referred to herein as the "Transition"). The information
contained in this Prospectus, unless otherwise indicated, gives effect to the
Transition as if completed prior to the date hereof and assumes that the
Company has owned and operated the assets acquired in the Transition as a
separate legal entity during the periods presented.
----------------
In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions, and all areas subject
to its jurisdiction.
The following trademarks and service marks are mentioned in this Prospectus:
"American Express(R)" is a registered trademark of American Express Company;
"First Data Corporation(R)" and "First Data(R)" are registered service marks
of First Data Corporation; and "MoneyGramSM" and "MoneySaverSM" are service
marks of the Company.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 4
The Transition and Ongoing
Relationship with First Data....... 9
Risk Factors........................ 14
Use of Proceeds..................... 24
Dividend Policy..................... 24
Dilution............................ 24
Capitalization...................... 25
Selected Financial and Operating
Data............................... 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 27
Business............................ 39
Management.......................... 56
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ownership of Capital Stock......... 60
Certain Relationships and Related
Transactions...................... 62
Description of Capital Stock....... 69
Selling Stockholder................ 71
Shares Eligible for Future Sale.... 71
Certain U.S. Federal Income Tax
Considerations for Non-U.S.
Holders of Common Stock........... 72
Underwriters....................... 75
Legal Matters...................... 78
Experts............................ 78
Additional Information............. 78
Index to Financial Statements ..... F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements,
including the related notes thereto, appearing elsewhere in this Prospectus
(the "Financial Statements"). Unless otherwise indicated, the information
contained in this Prospectus assumes that the U.S. Underwriters' over-allotment
option is not exercised. See "Underwriters." Prospective purchasers of the
Common Stock offered hereby should carefully consider the factors set forth
under "Risk Factors" as well as the other information contained in this
Prospectus.
THE COMPANY
OVERVIEW
The Company is a leading non-bank provider of consumer money wire transfer
services, with a strong, well-recognized brand-name. The Company accounted for
approximately 16% of all consumer money wire transfer transactions worldwide in
1995. The Company offers customers the ability to transfer funds quickly,
reliably, conveniently and at attractive prices through its network of agents
(each, a "MoneyGram Agent"), consisting of approximately locations in
countries worldwide. MoneyGram Agents representing approximately % of the
Company's revenues for the first nine months of 1996 are subject to long-term
contracts ranging in term from to years. MoneyGram targets its services
to individuals without traditional banking relationships, expatriates who send
money to their country of origin, traditional bank customers in need of
emergency money transfer services, tourists without local bank accounts and
businesses that need rapid and economical money transfer services. The Company
also provides cash advance and express bill payment services (including
payments on revolving credit, time and personal loans) through many MoneyGram
Agent locations in the United States.
The number of MoneyGram Agent locations has grown from 11,600 in 1991 to
approximately as of September 30, 1996. In 1995 and the first nine
months of 1996, the Company processed 5.4 million and million transactions,
respectively, and transferred $1.6 billion and $ million total face amount
of funds, respectively. In 1995, total revenues were $137.1 million, total
revenues from transaction fees excluding foreign exchange revenues and
investment income ("Transaction Fee Revenues") were $93.8 million, foreign
exchange revenues were $42.8 million and operating income was $29.7 million. In
the first nine months of 1996, the Company's total revenues, Transaction Fee
Revenues, foreign exchange revenues and operating income were $ million,
$ million, $ million and $ million, respectively. Substantially all
of the Company's transactions originate in the United States. In 1995, 45% of
the Company's transactions were between U.S. locations, 44% were from U.S. to
Mexico locations and 11% involved one or more international locations other
than Mexico.
The Company generates substantially all of its foreign exchange revenue on
its U.S. to Mexico transactions based on the difference between the cost of
Mexican pesos at wholesale rates and the retail exchange rate charged to
customers in such transactions. In addition to receive commissions, the Company
pays fees to Banco Nacional de Mexico, S.A. ("Banamex"), the Company's primary
receive-only MoneyGram Agent in Mexico, in an amount equal to one-half of the
total foreign exchange revenues derived from U.S. to Mexico MoneyGram
transactions received at a Banamex location.
CUSTOMERS AND MARKETS
Consumers sending expatriate remittance funds and individuals without bank
accounts are the two largest segments of repetitive money transfer customers.
The Federal Reserve Board of Governors estimates that there are approximately
23 million households in the United States without traditional banking
relationships. Additionally, industry analysts estimate that there are an
increasing number of people who remit funds to their respective countries of
origin on a regular basis.
Consumer money wire transfer services provide customers with a convenient,
rapid and secure method of sending money. The Company believes that consumer
money wire transfer service providers and their agent
4
<PAGE>
networks offer significant advantages over alternative methods of sending
money, including those provided by banks and the postal service, such as
reliability and security, global accessibility of agents, speed, convenient
hours, individualized services and customer flexibility.
Non-bank consumer money wire transfer services are provided primarily by two
global companies, MoneyGram and Western Union Financial Services, Inc.
("Western Union"), as well as several niche competitors. The Company estimates
that in 1995 the industry processed 33 million non-bank consumer money wire
transfer transactions worldwide, an increase of 29% over 1994, and representing
a compounded annual growth rate of 22% since 1991. In 1995, the Company
processed 5.4 million of the 33 million non-bank consumer money wire transfer
transactions worldwide, representing approximately 16% of such transactions.
Western Union accounted for approximately 81% of all such transactions
worldwide in 1995. The Company believes the gross revenues generated from non-
bank consumer money wire transfers in 1995 were $800 million on $9 to $10
billion in face amount of transferred funds.
The United States currently originates more consumer money wire transfer
transactions than any other country in the world. The Company expects that the
majority of the future growth in the United States will occur in transactions
that terminate in international locations. Money transfers from the United
States to Mexico currently represent an important and growing component of the
money transfer industry due to the large number of Mexican immigrants remitting
money from the United States to Mexico.
The Company believes international consumer money transfers will continue to
grow through the end of the decade, primarily due to the combination of
increased migration and greater consumer awareness. The Company believes that
migration dynamics throughout Latin America, the Caribbean, Europe and Asia
provide attractive growth potential for consumer money transfer services.
STRATEGY
MoneyGram's objectives are to continue to grow as a leading provider of
consumer money wire transfer services by offering competitive pricing and
superior service and to develop and introduce other financial services. The
Company has developed and has been pursuing the following strategy to
capitalize on its competitive position in the growing market for consumer money
transfer services:
. Target Frequent Users of Money Transfer Services. The Company uses
selected agent expansion in high-usage markets to ensure convenient access
to its services for its target customers. The Company focuses its
advertising and promotional campaigns in these high-usage markets to
increase brand awareness and generate consumer trial and repeat usage of
the MoneyGram service.
. Offer Enhanced Value to Customers. The Company offers value-added
features to its customers, including a free three-minute long distance
phone call with most transactions and a free 10-word message to the
recipient of the funds. As part of its marketing strategy, the Company has
maintained its prices 20% to 30% below those of Western Union on
frequently sent face amounts.
. Increase Brand Recognition and Loyalty. The Company's advertising and
promotional campaigns increase brand awareness and generate trial and
repeat usage of the MoneyGram service. The Company also will continue to
offer its MoneySaver card to increase loyalty to the MoneyGram service by
providing frequent users a discount on future transactions.
. Expand its Agent Network. The Company seeks to develop relationships with
potential MoneyGram Agents that offer the optimal combination of location,
existing service mix and commitment. The Company provides its agents with
a number of support services, including product training, traffic building
and cooperative advertising programs, as well as signage and personal
computers for certain MoneyGram Agents.
5
<PAGE>
. Grow Internationally. The Company is expanding its presence in
international markets, the next significant growth area for money transfer
services, by focusing on particular corridors. The Company believes that
future growth internationally should occur as migration continues and
advertising and promotional efforts increase international awareness of
the MoneyGram service. The Company will focus on countries with rapid
growth rates or inefficient and expensive delivery systems and, when
permissible, countries that currently are subject to U.S. trade embargoes.
. Penetrate Additional Retail Network and Other Distribution Channels. The
Company seeks to maintain a balanced and diversified MoneyGram Agent
network. Potential outlets for U.S. network expansions are check cashers,
postal and packaging outlets and supermarkets. The Company expects to
expand its international MoneyGram Agent network primarily by adding
travel agencies, bureau de change operations and banks.
. Develop Other Related Payment Products and Services. The Company plans to
offer complementary products and services through the MoneyGram Agent
network, such as money orders and phone cards, and, in the future, may
develop other related products, such as prepaid debit cards, secured
credit cards and insurance products. The Company believes that by
introducing new products it will generate additional revenues, as well as
enhance the attractiveness of the MoneyGram service to potential agents
and its target customers.
BACKGROUND
The Business was started in 1988 by American Express Company ("American
Express") and has been managed and operated by First Data Corporation ("First
Data"), through its wholly owned subsidiary Integrated Payment Systems Inc.
("IPS"). The Company was incorporated in Delaware in January 1996 and was
formed to acquire certain assets related to the Business prior to the
consummation of the Offering. The sale of Common Stock offered hereby is being
made in order to comply with the terms of the consent decree (the "Consent
Decree") entered into between First Data and the Federal Trade Commission (the
"FTC") in connection with First Data's merger with First Financial Management
Corporation ("FFM"), the parent company of Western Union. The Company will not
have conducted any business prior to the Offering. The Company's principal
executive offices are located at 7401 West Mansfield Avenue, Lakewood, Colorado
80235 and its telephone number is (303) 716-6800.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling
Stockholder:
U.S. offering.................... shares
International offering........... shares
------------
Total.......................... shares
------------
------------
Common Stock to be outstanding shares
after the Offering(1).............
Use of proceeds.................... The Company will not receive any proceeds
from the sale by the Selling Stockholder of
the Common Stock in the Offering.
New York Stock Exchange symbol..... MNE
</TABLE>
- --------
(1) Excludes shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan ( shares) and 1996 Broad-Based
Stock Option Plan ( shares). It is anticipated that options to
acquire approximately shares and shares of Common Stock will be
granted under the 1996 Stock Option Plan and the 1996 Broad-Based Stock
Option Plan, respectively, at an exercise price equal to 100% of the
initial public offering price of the Common Stock offered hereby effective
upon the consummation of the Offering. See "Management--Stock Plans" and
"Shares Eligible for Future Sale."
6
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN MATTERS RELATING TO
ANY INVESTMENT IN THE COMPANY. See "Risk Factors" on page 14 for a discussion
of: Highly Competitive Industry; Competition with First Data; Dependence on
Major MoneyGram Agents; Fluctuation of MoneyGram Agent Network; Factors
Relating to Independence and Sale of the Company--Reliance on First Data, --
Conflicts of Interest with First Data, --Absence of Arm's-Length Negotiations,
- --Agreements between the Company and Western Union Regarding Certain Service
Marks and --Loss of Use of American Express Name; Ability to Grow through New
Products and Services; New Management Team; Extensive Regulation; Risk of Loss;
Liquidity; Fluctuation in Quarterly Operating Results; Foreign Transactions
Risks; Financial Statement Presentation; Antitakeover Matters; Absence of Prior
Public Trading Market and Determination of Offering Price; Shares Eligible for
Future Sale and IPS Intention to Sell All of its Common Stock; and Dilution.
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following table sets forth summary financial data presented on a carve-
out basis for the Transition and are derived from historical financial data of
IPS. The financial data include allocations of operating and general and
administrative expenses to the Company from IPS. Such allocations do not
necessarily reflect the expenses that would have been or will be incurred by
the Company operating as a stand-alone entity. Management of the Company
believes that costs have been determined and allocated on a reasonable basis
and all costs attributable to conducting the Business have been included in the
Company's Financial Statements. In the opinion of management, such expenses
would not be materially affected by the Company operating as a stand-alone
entity. See Note 1 of the Notes to Financial Statements. The summary financial
data below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements appearing elsewhere in this Prospectus. The statement of operations
data set forth below with respect to the years ended December 31, 1993, 1994
and 1995 and the balance sheet data at December 31, 1994 and 1995 are derived
from, and are qualified by reference to, the audited Financial Statements
appearing elsewhere in this Prospectus. Balance sheet data as of December 31,
1993 have been derived from audited financial statements not included in this
Prospectus. The statement of operations data for the years ended December 31,
1991 and 1992 and balance sheet data as of December 31, 1991 and 1992 and June
30, 1995 are derived from unaudited financial statements not included in this
Prospectus. Balance sheet data as of June 30, 1996 and statement of operations
data for the six-month periods ended June 30, 1995 and 1996 are derived from,
and are qualified by reference to, unaudited interim financial statements
appearing elsewhere in this Prospectus. In the opinion of management, such
unaudited interim financial statements include all adjustments (consisting only
of normal recurring accruals) necessary for a fair and, except as noted below,
consistent presentation, in accordance with generally accepted accounting
principles, of such information. The financial and operating results for the
six months ended June 30, 1996 are not necessarily indicative of the Company's
results for any future interim period or the entire year.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Fee and other.......... $ 17,735 $ 30,519 $48,815 $71,015 $94,242 $47,319 $57,253
Foreign exchange....... 594 1,280 3,070 20,373 42,826 24,408 15,775
-------- -------- ------- ------- ------- ------- -------
Total revenues....... 18,329 31,799 51,885 91,388 137,068 71,727 73,028
Income (loss) before
income taxes (1)...... (16,681) (10,270) (3,196) 19,411 29,656 21,916 13,530
Net income (loss)...... $(11,009) $ (6,778) $(2,077) $12,176 $18,294 $13,519 $ 8,348
Pro forma net income
(loss) per common
share (2)............. $ $ $ $ $ $ $
BALANCE SHEET DATA (AT
END OF PERIOD):
Assets restricted to
settlement of
MoneyGram
transactions.......... $ 11,338 $ 11,573 $12,827 $20,927 $26,010 $22,140 $22,533
Fixed assets at cost,
net of depreciation... 950 1,123 1,275 3,084 6,000 5,567 6,721
Costs of acquiring
Agent Contracts, net
of amortization....... 3,369 2,864 1,956 3,401 7,979 3,814 14,594
Total assets........... 16,561 16,009 16,502 28,583 41,618 32,999 45,704
Liabilities relating to
unsettled MoneyGram
transactions.......... 11,338 11,573 12,827 20,927 26,010 22,140 22,533
Total liabilities...... 15,455 14,996 17,358 35,411 40,449 33,301 35,069
Stockholder's
equity/(deficit)...... 1,106 1,013 (856) (6,828) 1,169 (302) 10,635
OPERATING DATA:
Number of MoneyGram
Agent locations (at
end of period)........ 11.6 13.1 14.1 16.0 17.2 16.9 16.4
Percentage change...... 11% 13% 8% 13% 8%(3) N/A (3)%(3)
Number of transactions. 656 1,114 2,040 3,285 5,393 2,548 2,986
Percentage change...... 104% 70% 83% 61% 64% N/A 17%
</TABLE>
- -------
(1) During the first quarter of 1995, the Company received a $2.5 million
commission rebate from Banamex. The fourth quarter of 1995 includes $1.3
million of discretionary promotion-related payments to MoneyGram Agents. In
addition, in order to comply with the Consent Decree, the Company spent
approximately $6 million more than it otherwise would have for advertising
in the fourth quarter of 1995. The Company incurred costs and expenses
related to obtaining consents from MoneyGram Agents to permit the
assignment of their Agent Contracts to the Company of $375,000 in the
fourth quarter of 1995 and $450,000 in the six-month period ended June 30,
1996. Prior to 1996, the Company recorded advertising and promotion
expenses based on transaction volumes for interim reporting purposes.
Beginning in 1996, the Company recorded advertising and promotion expenses
based on actual expenses incurred during the interim period. If the Company
had continued to record advertising and promotion expenses based on
transaction volumes, advertising and promotion expenses would have been
approximately $1.5 million less for the first six months of 1996.
(2) Gives effect to the Company's issuance to IPS of shares of
Common Stock prior to the consummation of the Offering.
(3) During the last three months of 1995 and the first three months of 1996,
four MoneyGram Agents representing locations chose not to renew their
Agent Contracts. In addition, the Company's efforts to add new MoneyGram
Agents were hampered because, during this period, the Company's sales
personnel spent the majority of their time obtaining consents for the
assignment of Agent Contracts rather than focusing their efforts on
expanding the MoneyGram Agent base.
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THE TRANSITION AND ONGOING RELATIONSHIP WITH FIRST DATA
The Company was established to acquire, pursuant to the Transition, the
consumer money wire transfer service business managed and operated by First
Data, through First Data's wholly owned subsidiary IPS, under the name
"MoneyGram" and has not previously carried on an active business. Because of
the nature of consumer money wire transfer services, the Company will have
significant ongoing relationships with First Data and its affiliates under
which First Data and such affiliates will continue to own all of the contracts
with the MoneyGram Agents (the "Agent Contracts") and will provide the Company
with certain services. See "Certain Relationships and Related Transactions--
The Transition Agreements."
BACKGROUND
On June 12, 1995, First Data entered into a merger agreement with FFM, the
parent corporation of Western Union. Western Union is the principal competitor
of the Company. The Company estimates that of the 33 million non-bank consumer
money wire transfers processed worldwide in 1995, Western Union and the
Company accounted for approximately 81% and 16%, respectively, of all such
transactions.
In order to obtain the FTC's approval of its merger with FFM, First Data
entered into the Consent Decree dated January 19, 1996 with the FTC which
requires First Data to divest the sales and marketing functions associated
with the consumer money wire transfer business of the Company or Western Union
by January 23, 1997, but allows First Data to continue to perform processing
services for both businesses. In addition, on September 20, 1995 First Data
and the FTC entered into an agreement (the "Hold Separate Agreement") under
which First Data agreed to manage and maintain the Business as a separate,
ongoing business, independent of all other First Data businesses, including
Western Union. The Consent Decree and the Hold Separate Agreement require,
among other things, that prior to the Transition, First Data will: (i) spend
at least $24 million annually on advertising and promotion of the Business,
provided that no less than $10 million is spent in any two consecutive
quarters; (ii) pay 120% of the standard 1995 sales commission rates to the
MoneyGram sales force for each MoneyGram Agent renewal and MoneyGram Agent
recruitment; and (iii) operate the Business in the ordinary course so that,
when divested, the Business will be capable of providing a consumer money wire
transfer service substantially similar to that which had been provided under
First Data.
Upon the consummation of the Offering, the Consent Decree requires First
Data to, among other things: (i) make available to the Company, at no
additional cost and for a period of time of up to six months thereafter, such
personnel, assistance and training from First Data as is reasonably necessary
to transfer technology and knowledge of the Business; and (ii) refrain from
entering into any contract to provide a consumer money wire transfer service
with a selling MoneyGram Agent who has a contract with the Company to provide
the MoneyGram service until the scheduled expiration of such contract (without
giving effect to any contract extension or renewal provisions that become
effective after the consummation of the Offering). See "Risk Factors--
Competition with First Data."
THE TRANSITION
Following the signing of the Consent Decree and the Hold Separate Agreement,
First Data decided to divest itself of the sales and marketing functions
associated with the Business and to retain Western Union. Pursuant to this
decision, First Data identified those operations and functions necessary to
operate the Business as a stand-alone entity, including those assets and
personnel to be dedicated solely to the Business, began reconfiguring the
shared customer service centers so that IPS's leased facility in Lakewood,
Colorado (the "Lakewood Facility") would be exclusively used in the Business
and commenced the separation of information and services related to the
Business within the IPS data center in Englewood, Colorado.
In order to comply with applicable licensing requirements relating to the
operation of a consumer money transfer business, IPS managed and operated the
Business prior to the Transition under a management agreement with American
Express Travel Related Services, Inc. ("TRS"), a wholly owned subsidiary of
American Express (the "TRS Management Agreement"). The TRS Management
Agreement provided that TRS, as holder of
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licenses and permits that are necessary to own and operate the Business (the
"Required Licenses"), would own and execute all Agent Contracts and hold
certain funds related to unsettled MoneyGram transactions (the "Fiduciary
Funds"), and IPS would conduct the day-to-day operations of the Business and
receive the net economic benefits therefrom. As contemplated by the TRS
Management Agreement, IPS obtained the Required Licenses so as to be able to
own and operate the Business in its own name. Consequently, prior to the
consummation of the Offering, TRS, IPS and First Data will enter into an
agreement that effects the assignment of substantially all of the Agent
Contracts to IPS (the "TRS Assignment"), and IPS will begin performing all of
the functions previously performed by TRS under the TRS Management Agreement
in respect of such Agent Contracts. Those Agent Contracts that are not
assignable at the time of the TRS Assignment will be terminated by IPS as
required by the TRS Management Agreement. Following the Transition and the
Offering, IPS, as holder of the Required Licenses, will own and execute all
Agent Contracts and hold all Fiduciary Funds related thereto in accordance
with the Operations Agreement described below. The Operations Agreement
provides that IPS will assign all Agent Contracts to the Company at such time
as the Company obtains the Required Licenses to own and operate the Business
in its own name. The Company expects to obtain all Required Licenses within
one year of the date hereof; however, no assurance can be given that the
Company will obtain any or all such licenses.
The Transition Agreements
Pursuant to the Transition, the Company will enter into a Contribution
Agreement (the "Contribution Agreement"), an Operations Agreement (the
"Operations Agreement"), a Software License Agreement (the "Software License
Agreement"), a Short-Term Working Capital Facility (the "Facility"), a Service
Mark License Agreement (the "Service Mark License Agreement"), a Human
Resources Agreement (the "Human Resources Agreement"), a Telecommunications
Services Sharing Agreement (the "Telecom Agreement") and a Registration Rights
Agreement (the "Registration Rights Agreement") (collectively, the "Transition
Agreements"). Under the Transition Agreements, First Data or its affiliates
will provide a source of liquidity for working capital purposes and certain
licenses and services to the Company that are necessary to the operation of
the Business. See "Certain Relationships and Related Transactions--The
Transition Agreements."
The Contribution Agreement. Prior to the consummation of the Offering, the
Company, First Data and IPS will enter into the Contribution Agreement
pursuant to which (i) IPS will contribute $12 million to the Company for
general corporate purposes (the "IPS Cash Contribution") and (ii) IPS and
certain of its affiliates will contribute certain assets to the Company (the
"MoneyGram Assets"), which include, among other things, certain copyrights and
trademarks (including the MoneyGram service mark), certain software used in
connection with the Business, the economic benefits under the Agent Contracts,
the customer service center operations of the Business, the leasehold interest
in the Lakewood Facility and certain other personal property relating to the
Business's operations, including computers and signage provided to MoneyGram
Agents (collectively, the "Contribution"). The MoneyGram Assets will be
contributed to the Company "as is, where is." In consideration of the
Contribution, the Company will issue and deliver to IPS shares of
Common Stock. IPS currently holds 100 shares of the Company's Common Stock,
which represent all of the currently issued and outstanding shares.
As a result of the Transition, the tax basis (for federal income tax
purposes) of the MoneyGram Assets will increase from their tax basis in the
hands of IPS and certain of its affiliates at the time of the Contribution to
their fair market value at that time. Such tax basis is generally expected to
produce a tax benefit to the Company in future years through depreciation or
amortization deductions or through decreased gain or increased loss on a
disposition of any MoneyGram Asset. However, the "anti-churning" rules under
Section 197 of the Internal Revenue Code of 1986, as amended (the "Code"),
might apply to disallow such amortization with respect to certain intangible
assets of the Company. For financial accounting and reporting purposes, the
Company will record a deferred tax asset (with a corresponding credit to
capital surplus) for the tax effect of the difference between the net book
value of the assets contributed and liabilities assumed in the Contribution
and their tax basis. The amount of the net deferred tax asset which will be
recorded at the time of the Contribution may be reduced by a valuation
allowance which will be based upon management's judgment as to the likelihood
of the
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Company generating sufficient taxable income to realize the asset through
future tax deductions. Furthermore, based on the advice of its own tax
advisors, the Company may determine that it is not permitted to claim such
amortization deductions on its tax returns. See "Certain Relationships and
Related Transactions--the Transition Agreements--The Contribution Agreement--
Taxes."
The Operations Agreement. Under the Operations Agreement, which has an
initial two-year term, IPS or its affiliates will perform for the Company data
processing services, management services, disaster recovery services for the
Lakewood Facility customer service center, voice center services and certain
corporate support services. The Company and First Data have agreed to
schedules for fees and expenses which reflect First Data's good faith estimate
of the actual cost of providing such services (including reasonable
allocations of overhead expenses) calculated on a basis consistent with the
determinations made in preparing the Financial Statements appearing elsewhere
in this Prospectus. IPS has agreed to provide certain additional services
under the Operations Agreement at the request of the Company. No assurances
can be given, however, that the Company could not obtain such services at a
lower cost from a third party. See "Certain Relationships and Related
Transactions--The Transition Agreements--The Operations Agreement."
The data processing services include, among other things, data processing,
telecommunication management and data security management. The management
services include those functions that IPS must perform in order for the
Business to be in compliance with applicable licensing and other legal
requirements (including anti-fraud and anti-money laundering functions) until
such time as the Company has obtained the Required Licenses to own and operate
a consumer money wire transfer service in its own name. Disaster recovery
services will be provided by IPS for the Lakewood Facility customer service
center in the event the center is damaged by fire, earthquake, power loss,
telecommunications failure or similar events. Voice Center Services may entail
servicing up to 30% of the Company's incoming voice calls through IPS'
facility in Corpus Christi, Texas (the "Corpus Christi Facility"). Corporate
support services (such as payroll, regulatory compliance, operations support,
treasury and accounting services) will be provided until the Company can
administratively assume performance of such services itself. Under the terms
of the Operations Agreement, IPS will continue to be a party to all Agent
Contracts and to hold all Required Licenses to operate the Business, while
other activities relating to the Business, including pricing, selecting and
negotiating with MoneyGram Agents, determining commissions to be paid to
MoneyGram Agents and substantially all customer service center services, will
be conducted by the Company. IPS will hold all Fiduciary Funds related to
MoneyGram transactions and will be entitled to investment income thereon until
such time as the Company operates the Business in its own name. IPS will pay
to the Company, on a daily basis, an amount equal to Transaction Fee Revenues
generated by the Business (excluding the Company's portion of foreign exchange
revenues which will be paid by IPS to the Company on a monthly basis). The
Company will pay to First Data, on a monthly basis, all amounts owed to First
Data under the Operations Agreement.
Under the Operations Agreement, the Company will be obligated to obtain all
Required Licenses to operate the Business in its own name upon the earlier of
the expiration of the initial two-year term or within 180 days after
termination of the Operations Agreement in accordance with its terms. However,
the Operations Agreement provides that, at the request of the Company in its
sole discretion, IPS will negotiate in good faith to extend the term of the
Operations Agreement or negotiate a similar arrangement with the Company, in
either case upon such terms and conditions, including prices, to be agreed
upon by the Company and IPS. The Company may terminate the Operations
Agreement in its entirety or may terminate certain related groups of services
offered thereunder, including data processing services, or, if the Company has
obtained the Required Licenses and has converted its MoneyGram Agents, the
management services, upon prior written notice within specified periods of
varying lengths, none of which exceeds 90 days. In the event that the Company
terminates the data processing services, the Company is obliged to provide IPS
certain information required by IPS to perform its management services under
the Operations Agreement. See "Certain Relationships and Related
Transactions--The Transition Agreements--The Operations Agreement--
Termination."
The Software License Agreement. The software used in connection with the
Business is comprised of three components: personal computer based application
software (the "PC MoneyGram Software") used by those MoneyGram Agents who have
personal computers and enter transactions electronically; certain application
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software currently used by IPS to process all MoneyGram transactions (the
"MoneyGram Application Software"); and certain other application software used
in processing MoneyGram transactions, but which IPS also currently utilizes in
processing its money order payment products (the "IPS Application Software").
The PC MoneyGram Software and the MoneyGram Application Software will be
contributed to the Company pursuant to the Contribution Agreement. Pursuant to
the Software License Agreement, IPS will grant to the Company, effective upon
the termination of the data processing services under the Operations
Agreement, a perpetual, assignable, nonexclusive, royalty-free license to
reproduce, modify and use the IPS Application Software. In general, the
Software License Agreement permits the Company to use the IPS Application
Software exclusively in connection with the data processing and operational
requirements of the Company in connection with the MoneyGram service; the
Company is prohibited from using the IPS Application Software in connection
with other payment products or services. However, IPS has agreed, at the
request of the Company, to negotiate in good faith the terms (including
royalties) of an expansion of such software license that would permit the
Company to offer a money order product through MoneyGram Agents, but only for
so long as IPS or its affiliates provide the data processing for such money
order product. The Software License Agreement also requires the Company to
obtain IPS's consent (not to be unreasonably withheld) prior to the assignment
of its rights under the Software License Agreement, other than to a purchaser
of substantially all of the Business. See "Certain Relationships and Related
Transactions--The Transition Agreements--The Software License Agreement."
The Short-Term Working Capital Facility. Prior to the consummation of the
Offering, First Data and the Company will enter into the Facility pursuant to
which the Company may borrow from time-to-time, on a revolving basis, an
amount up to $20 million. Borrowings under the Facility will be unsecured and
only may be used for working capital requirements of the Company. The interest
rate on all outstanding borrowings under the Facility will be the prime rate,
as announced by Chase Manhattan Bank, N.A., plus one percent. The Facility
will terminate on January 15, 1997, at which time all outstanding borrowings
thereunder would have to be repaid or refinanced by the Company. The Facility
contains no commitment or other fees to be charged to the Company. The
Facility contains covenants that limit or restrict the ability of the Company,
without the consent of First Data, which will not be unreasonably withheld, to
(i) place liens on or otherwise encumber its assets and properties, (ii) to
pay dividends, make other distributions or acquire its capital stock, (iii)
dispose of property material to the Business or operations, (iv) merge or
consolidate or acquire assets of any other person or entity, (v) make certain
Investments (as defined therein), (vi) enter into certain transactions with
affiliates and (vii) incur additional indebtedness for money borrowed. The
Facility also will include terms, conditions, representations and warranties,
indemnities, events of default and other provisions that are customary in such
agreements. See "Certain Relationships and Related Transactions--The
Transition Agreements--The Short-Term Working Capital Facility."
The Service Mark License Agreement. Pursuant to the Service Mark License
Agreement, Western Union will grant to the Company a non-exclusive and
royalty-free license to use "The Better Way to Wire Money" and "Money in
Minutes Worldwide" in English and certain other languages (but not Spanish) in
certain countries, always accompanied by the word "MoneyGram" and to use "Wire
Money in Minutes" in the United States in English, always accompanied by the
word "MoneyGram." The Company will relinquish to Western Union any rights it
may have in, and will be prohibited from otherwise using, these marks, as well
as other specified marks Western Union uses. Western Union will covenant not
to use "The Better Way to Wire Money" in English in certain countries,
including the United States. Both the Company and Western Union will have a
six-month period, beginning at the consummation of the Offering, during which
non-conforming uses of the marks covered by the agreement will be permitted.
Any non-conforming signage, including non-conforming signage installed during
the transition period, may be used through the life of such signage. The
Service Mark License Agreement has other terms, conditions and indemnities
customary in such licensing agreements. See "Risk Factors--Agreements between
the Company and Western Union Regarding Certain Service Marks" and "Certain
Relationships and Related Transactions--The Transition Agreements--The Service
Mark License Agreement."
The Human Resources Agreement. First Data, IPS and the Company will enter
into the Human Resources Agreement which defines the duties, obligations and
liabilities of First Data and IPS and the Company with
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respect to the transition of employees from First Data and IPS to the Company.
The Human Resources Agreement addresses the termination of such employees
under First Data's pension, profit sharing and stock plans and welfare benefit
plans (medical, dental, etc.) and their benefits as newly hired employees of
the Company. Pursuant to the Human Resources Agreement, First Data, IPS and
the Company have each agreed, for a one-year period from the consummation of
the Offering, not to solicit or hire each other's employees. See "Certain
Relationships and Related Transactions--The Transition Agreements--The Human
Resources Agreement."
The Telecommunications Services Sharing Agreement. First Data and the
Company will enter into the Telecom Agreement which provides that First Data
shall cooperate and use reasonable efforts to facilitate the provision of
telecommunication services under First Data's agreements with its various
long-distance telecommunication service providers to the Company and its
affiliates, if any. The Telecom Agreement permits the Company to choose among
such long-distance providers and to benefit from First Data's tariff rates.
The Company, in exchange, will agree to use the telecommunication services
provided by First Data's telecommunication service providers exclusively for
all of the Company's and its affiliates' person-to-person telephone calls
(both incoming and outgoing). The Telecom Agreement expires on December 31,
1998, unless earlier terminated for, among other things, breach by either
party of its representations, warranties or agreements therein, bankruptcy or
insolvency of a party or, at the Company's option, upon 60 days' written
notice.
The Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company has agreed to register under the Securities Act of
1933, as amended (the "Securities Act") (and applicable state securities
laws), the shares of Common Stock held by the Selling Stockholder, if any,
after the completion of the Offering. IPS has agreed that in the event the
U.S. Underwriters' over-allotment option is not exercised in full, it will
deposit any shares of Common Stock then-owned by it into an irrevocable voting
trust (the "Trust") with Wachovia Bank of North Carolina, N.A., as trustee
(the "Trustee"). Pursuant to the irrevocable voting trust agreement (the
"Trust Agreement") among First Data, IPS and the Trustee, the Trustee will
vote any shares of Common Stock subject to the Trust in the same proportion as
all shares of outstanding Common Stock are voted by the other stockholders.
The Trustee will also have the duty and the authority on behalf of IPS to
dispose of such shares of Common Stock on or prior to January 23, 1997, in a
manner advised by a nationally recognized investment banker, which may include
Morgan Stanley & Co. Incorporated, or to donate such shares to a designated
charity or charities on January 23, 1997 (unless the Trust is extended). See
"Certain Relationships and Related Transactions--The Transition Agreements--
The Registration Rights Agreement."
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RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of the Federal Securities Laws. Actual results and the timing of
certain events could differ materially from those projected in the forward-
looking statements due to a number of factors, including those set forth below
and elsewhere in this Prospectus. Prospective investors should consider
carefully the following factors in addition to the other information set forth
in this Prospectus in evaluating an investment in the shares of Common Stock
offered hereby.
HIGHLY COMPETITIVE INDUSTRY
The consumer money transfer and other payment products industry is highly
competitive. The principal methods of competition are price, advertising and
the number and quality of agents and agent locations. Quality of service and
service enhancements are, to a lesser extent, also competitive factors. The
Company faces competition from other consumer money wire transfer service
providers as well as from other payment products which offer consumers the
ability to transfer funds to others. Non-bank consumer money wire transfer
services are provided primarily by two global companies, MoneyGram and Western
Union. The Company estimates that Western Union accounted for approximately
81% of the 33 million non-bank consumer money wire transfers processed
worldwide in 1995 (compared to approximately 16% by the Company).
Recently, competition has increased through the entry of new competitors or
expanded services offered by existing competitors, particularly in the U.S. to
Mexico market. Orlandi Valuta, a competitor in the Los Angeles to Mexico
corridor, has expanded its U.S. presence to over 3,400 agents in California,
Illinois, Texas and Florida, now offers a 10-minute service to Mexico and is
contemplating offering a U.S. to U.S. service. The Company faces additional
competition from the U.S. Postal Service which announced plans to offer two
new money transfer products to Mexico in 1996. The U.S. Postal Service has
joined the Eurogiro Network AS, which allows the U.S. Postal Service to send
postal money order delivery information electronically to participating
partner postal administrations (such as Mexico's postal service). Funds also
may be wired to the receiving institution over this network. This "electronic
money order" service will allow customers to quickly send their money orders
to Mexico for pick up at the Mexican post office. In addition, the U.S. Postal
Service currently is testing an electronic funds transfer system in California
and Texas that will allow postal customers to wire money to Mexico to be
received at Bancomer, S.A. ("Bancomer"), Mexico's third largest bank. Niche
competitors who serve specific migratory corridors also compete with the
Company, including several Mexican banks (such as Bancomer) which have
recently begun to offer consumer money wire transfer services from the United
States to Mexico, focusing on specific geographic locations with high
densities of Mexican immigrants. Niche competitors are able to focus on
particular geographic corridors and eliminate the expenses associated with
maintaining nationwide and worldwide agent networks.
The Company also faces competition from providers of other payment products.
Banks, other financial institutions and credit card companies provide similar
services. Some financial institutions in the United States have announced
plans to expand such services or offer consumer money wire transfer services
for non-bank customers. The Company also faces competition from automated
teller machines and similar retail electronic networks that could allow
consumers to transfer funds to others. The Company also competes with
providers of money orders purchased through IPS, Western Union agents, the
United States Postal Service, currency exchanges, supermarkets, convenience
stores and other retail outlets. Money orders generally are less expensive
than consumer money wire transfer services and are available to customers
through more extensive distribution networks.
A significant portion of the Company's growth in revenues and transaction
volumes prior to 1996 resulted from promotional discounting of its prices,
which has reduced the Company's profit margins. Customers typically increase
usage during promotion periods, but also transmit smaller amounts of money per
transaction with a resulting lower average fee per transaction. Historically,
the Company's transaction volumes have increased during price promotions and,
although transaction volumes decline when the price promotion ends, they
consistently remain above pre-promotion levels. There can be no assurance as
to what the Company's competitors will do in the future in terms of pricing,
nor can there be any assurance that the Company will be
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able to continue to price below such competitors (particularly niche
competitors, such as Mexican banks establishing consumer wire transfer service
locations in high-use areas in the United States) or offer frequent and
substantial promotions. Future price competition could further reduce the
Company's profit margins (without any increase in transaction volume). As the
MoneyGram service increases its brand name recognition and transaction volumes
increase, the Company has in 1996, and currently intends to continue, to
reduce the number, scope, duration and level of discounting of its price
promotions compared to 1995 and 1994.
Many of the Company's competitors, including Western Union, have, and
potential competitors may have, significantly greater financial, technological
and marketing resources than the Company. No assurances can be given that such
competitors will not use such resources to compete more aggressively by
expanding their agent networks, funding substantial advertising campaigns,
adding enhanced customer services and/or reducing prices, that the Company
will be able to compete successfully against current or future competitors or
that such competition will not have a material adverse effect on the Company's
business, operating results or financial condition. See "Business--MoneyGram
Pricing and Fees," "--Sales and Marketing" and "--Competition."
COMPETITION WITH FIRST DATA
Following the Offering, the Company will compete directly with First Data
and Western Union, subject only to limited non-solicitation protections
provided by the Consent Decree. Although the Consent Decree prohibits First
Data from entering into a consumer money wire transfer service contract with a
MoneyGram Agent prior to the scheduled expiration of its Agent Contract, First
Data and Western Union may sign a consumer money wire transfer service
contract with any MoneyGram Agent whose Agent Contract is terminated in
accordance with its terms. If MoneyGram fails to comply with the terms of any
Agent Contract, the MoneyGram Agent may terminate the Agent Contract, in which
case First Data and Western Union are permitted under the Consent Decree to
sign such agent to a Western Union agent contract.
In addition, the scope of the Consent Decree is limited in certain respects.
Specifically, the non-solicitation provisions of the Consent Decree described
above do not limit First Data or Western Union from entering into contracts
with MoneyGram Agents to provide services utilizing automatic teller machines
and other point of sale devices, transactions involving debit cards, cash
advances utilizing credit cards, home banking, prepaid telephone and cash
cards, money orders and utility bill payment services. First Data and Western
Union therefore can offer such products in direct competition with the
Company, unrestricted by the Consent Decree. In addition, First Data is
unrestricted in its use of the IPS Application Software, including in
connection with conducting the operations of Western Union and developing
other products. Finally, certain senior managers of First Data, who previously
exercised direction and control over the Business, will remain as senior
managers of First Data with responsibility for, among other things, the
operations of Western Union. Moreover, other than pursuant to the
confidentiality provisions in the Hold Separate Agreement, First Data is not
restricted or precluded from applying its historical knowledge of the Business
to its management of Western Union, which may enhance Western Union's ability
to compete with the Company.
Western Union is likely to use its significantly greater financial,
technological and marketing resources to compete vigorously with the Company
in the consumer money wire transfer services industry, including by signing
terminated MoneyGram Agents, and may launch new products that compete with the
consumer money wire transfer service offered by the Company. Such competition
may have a material adverse effect on the Company's business, operating
results or financial condition. See "Business--Competition."
DEPENDENCE ON MAJOR MONEYGRAM AGENTS
In 1995, the Company's top 10 selling MoneyGram Agents, representing
approximately 2,500 agent locations, accounted for approximately 42% of the
Company's transaction volume and 43% of the Company's Transaction Fee
Revenues. In the first nine months of 1996, the Company's top 10 MoneyGram
Agents, representing approximately locations, accounted for approximately
% of the Company's transaction volume and % of the Company's Transaction
Fee Revenues for the first nine months of 1996. The Company
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has long-term contracts that expire no earlier than with of its 1996
top 10 MoneyGram Agents, representing approximately locations and
accounting for approximately % of the Company's transaction volume and %
of the Company's Transaction Fee Revenues for the first nine months of 1996.
Each of the two top 10 MoneyGram Agents in 1995, Banamex and the Chicago
Currency Exchange, was involved in transactions representing over 10% of the
Company's total revenues. In 1995, 46% of funds transferred and 44% of all
transactions processed by the Company were sent by MoneyGram Agents located in
the United States and received by MoneyGram Agents located in Mexico. Banamex,
the Company's primary MoneyGram Agent in Mexico (receive only), represented
approximately 71% of the Company's approximately 1,000 agent locations in
Mexico, accounted for 97% of the Company's approximately 2.4 million total
receive transactions in Mexico and generated $42.4 million in foreign exchange
revenues (representing 31% of total revenues) during 1995. The Agreement with
Banamex expires in April, 2002. The Chicago Currency Exchange (consisting of
approximately 85 separate Agent Contracts with owners of Chicago Currency
Exchange locations which expire in 2000 or 2001) in the aggregate initiated
send transactions that generated approximately 15% of the Company's total
Transaction Fee Revenues in 1995. In addition, in the first nine months of
1996, Ace Cash Express ("Ace") also was involved in transactions representing
over 10% of the Company's total revenues for the period. Ace has
locations which initiated send transactions that generated approximately %
of the Company's total Transaction Fee Revenues in the first nine months of
1996. The Agent Contract with Ace expires in 2000. The loss of, or significant
reduction in, business from one or more of the Company's significant MoneyGram
Agents, including Banamex, Ace and the Chicago Currency Exchange, could have a
material adverse effect on the Company's business, operating results or
financial condition. See "Business--The MoneyGram Agent Network."
FLUCTUATION OF MONEYGRAM AGENT NETWORK
The MoneyGram Agent network recently has experienced a net decrease in
MoneyGram Agents. This decrease resulted from normal turnover, as well as
extraordinary circumstances arising from the Transition. From October 1995 to
March 1996 (the "Consent Period"), the MoneyGram Agent sales force dedicated a
significant amount of time and effort to obtaining consents from MoneyGram
Agents to the assignment of their Agent Contracts. During the Consent Period,
the Company lost four significant MoneyGram Agents: Revco, D.S., Inc.
("Revco"), Greyhound Lines, Inc., Food 4 Less Supermarkets, Inc. and the
Pantry. Two of these four MoneyGram Agents were among the top 10 MoneyGram
Agents in 1995. While these four MoneyGram Agents collectively represented
1,749 locations at December 31, 1995 (10.2% of the total number of MoneyGram
Agents at such date), the percentage of total transactions and total revenues
attributable to these agents was only 6.8% and 5.3%, respectively. The loss of
these four MoneyGram Agents has contributed to the decline in the total number
of MoneyGram Agents from 17,200 at December 31, 1995 to at September
30, 1996. The Company believes that this decline resulted primarily from the
MoneyGram Agent sales force's focus on obtaining consents during the Consent
Period rather than focusing their efforts on maintaining and expanding the
agent base, as well as from normal attrition. Also as a result of the
Transition, the 450 American Express Travel Services Offices (the "TSOs") no
longer serve as MoneyGram Agents. The loss of the TSOs decreased the number of
countries covered by the MoneyGram Agent network by 11. Although the MoneyGram
Agent network has begun to grow through the addition of new MoneyGram Agents,
there can be no assurance that the MoneyGram Agent network will continue to
grow, the failure of which could have a material adverse effect on the
Company's business, operating results or financial condition. See "Business--
The MoneyGram Agent Network."
FACTORS RELATING TO INDEPENDENCE AND SALE OF THE COMPANY
Reliance on First Data. The operating success and viability of the Company
are dependent upon the performance by First Data or its affiliates of their
obligations under the Transition Agreements. Therefore, the breach or
termination of the Operations Agreement, the Software License Agreement or the
Service Mark License Agreement could have a material and adverse affect on the
Company's business, operations or financial condition. There can be no
assurance that the Company would be able to arrange an alternative source of
such services or support, access to software capable of performing functions
equivalent to the IPS Application
16
<PAGE>
Software or a source of working capital provided under the Transition
Agreements upon comparable terms (including prices) or at all. Moreover, until
such time as the Company has obtained the Required Licenses and title to the
Agent Contracts has been assigned to the Company by IPS, the Company will be
precluded from operating the Business other than under the Operations
Agreement or an extension thereof. Under the Operations Agreement, IPS has
agreed, at the request of the Company in its sole discretion, to negotiate in
good faith to extend the Operations Agreement or negotiate a similar
arrangement with the Company, in either case upon such terms and conditions,
including prices, to be agreed upon by the parties. Although the Company
expects to procure all of the Required Licenses within one year of the date
hereof, there can be no assurance that any or all Required Licenses will be
obtained in a timely manner or that, upon the failure to do so, First Data and
the Company will agree to extend the Operations Agreement. See "Certain
Relationships and Related Transactions--The Transition Agreements."
Conflicts of Interest with First Data. Conflicts of interest between First
Data and the Company could arise as a result of First Data's ownership of
Western Union, on one hand, and the obligations of First Data and its
affiliates under the Transition Agreements, on the other hand. See "Certain
Relationships and Related Transactions--The Transition Agreements." After
giving effect to the Offering, IPS will continue to own approximately 13% of
the outstanding shares of Common Stock (assuming the U.S. Underwriters do not
exercise their over-allotment option), which could result in IPS being the
Company's largest single stockholder, as well as IPS being deemed an
"affiliate" of the Company. However, IPS will not have any designated
directors on the Board of Directors of the Company or any other rights or
preferences as compared to any other stockholder of the Company, other than
any it may have by virtue of the number of shares of Common Stock it owns or
under the Registration Rights Agreement. In addition, if the U.S.
Underwriters' over-allotment option is not exercised in full and IPS continues
to own Common Stock following the Offering, IPS will deposit such Common Stock
into the Trust and will have no ability to direct or influence the manner in
which such Common Stock is voted or sold. See "The Transition and Ongoing
Relationship with First Data," "Certain Relationships and Related
Transactions--The Transition Agreements--The Registration Rights Agreement"
and "Selling Stockholder."
Absence of Arm's-Length Negotiations. While management of the Company has
participated in the preparation and negotiation of the Transition Agreements,
none of the Transition Agreements were the result of third party, arm's-length
negotiations. However, the fees and expenses to be paid by the Company for
services to be performed by First Data and its affiliates under the Operations
Agreement reflect First Data's good faith estimate of the actual cost
(including reasonably allocated overhead expenses) of providing such services,
calculated on a basis consistent with the determinations made in preparing the
Financial Statements appearing elsewhere in this Prospectus. No assurances can
be given that the Company could not obtain such services at a lower cost from
a third party. See "Certain Relationships and Related Transactions--The
Transition Agreements--The Operations Agreement."
Agreements between the Company and Western Union Regarding Certain Service
Marks. The Company uses certain service marks in the Business, including
"MoneyGram," "The Better Way to Wire Money," "Wire Money in Minutes" and
"Money in Minutes Worldwide." Many of these marks have been refused initial
registration by the U.S. Patent and Trademark Office or are being used
concurrently by Western Union, the Company's principal competitor.
IPS has registered "MoneyGram" in certain countries and has applications
pending to register the mark in the United States and in substantially all
other countries in which the Company is conducting, or intends imminently to
conduct, business. In the United States and in certain other countries, the
trademark examiners initially have refused to register "MoneyGram" on the
grounds that it is merely descriptive of the service. The Company intends to
defend vigorously the registrability of "MoneyGram." However, no assurance can
be given that "MoneyGram" will be registered in any country where applications
are pending.
Western Union is using, among other marks, "The Best Way to Send Money" and
"The Fastest Way to Send Money" and has registered these marks in the United
States and in other countries. IPS applied to register "The Better Way to Wire
Money" in the United States, and the U.S. trademark examiner rejected the
application due to Western Union's prior registrations for said marks.
17
<PAGE>
Western Union uses "Money in Minutes" and has registered this mark in the
U.S. and has applied to register the mark in certain other countries. IPS
applied to register "Wire Money in Minutes" in the United States and expects
that the U.S. trademark examiner will reject IPS's application due to Western
Union's prior United States registration.
The Company and Western Union have no current dispute regarding the
Company's use of "The Better Way to Wire Money," "Wire Money in Minutes" or
"Money in Minutes Worldwide," and the two entities have concurrently used
these or similar marks for some time. However, the Company's and Western
Union's respective rights to these marks and to similar marks are unsettled.
Consequently, the Company and Western Union will enter into the Service Mark
License Agreement at or prior to the consummation of the Offering. No
assurances can be given about the effect, if any, of entering into such
arrangements concerning such marks, or of the inability to use certain marks
in Spanish, may have on the Business or the Company's operating results or
financial condition. See "Business--Proprietary Rights and Trademarks" and
"Certain Relationships and Related Transactions--The Service Mark License
Agreement."
No assurances can be given about the effect that any dispute between the
Company and Western Union over the use of one of these marks, an adverse
resolution of such a dispute, if any, or the loss of any service mark of the
Company, would have on the Business or the Company's operating results or
financial condition.
Loss of Use of American Express Name. Prior to the Transition, IPS has
managed and operated the Business and other IPS payment products under the TRS
Management Agreement. Under the TRS Management Agreement, IPS is permitted to
use the American Express name and logo in connection with the marketing of the
MoneyGram service. The TRS Management Agreement contemplates that IPS would
phase out the use of the American Express name and logo by April 1997. IPS
already has commenced such phase out, for instance, in certain of its
advertising and promotions of the MoneyGram service. Upon the transfer of the
Agent Contracts from TRS to IPS in connection with the Transition, neither IPS
nor the Company will be permitted to use the American Express or TRS name or
logo in connection with advertising or promotion of the MoneyGram service,
except in certain point-of-sale advertising at MoneyGram Agent locations for a
limited period of time. No
assurances can be given that the loss of the use of the American Express or
TRS name and logo will not have a material adverse effect on the Company's
business, operating results or financial condition.
ABILITY TO GROW THROUGH NEW PRODUCTS AND SERVICES
To enhance its growth prospects, the Company intends to expand its business
by, among other things, (i) targeting frequent users of money transfer
services, (ii) increasing brand recognition and loyalty, (iii) providing
enhanced value to customers, (iv) growing internationally, (v) expanding its
agent network, (vi) penetrating additional retail and other distribution
channels and (vii) developing other related payment products and systems. This
growth strategy will require increased expenditures. Among the related payment
products the Company intends to develop is a money order product. IPS has
agreed, pursuant to the Operations Agreement, to negotiate in good faith the
terms of additional data processing and other services to be provided by IPS
and its affiliates in respect of a money order product offered by the Company,
initially in the names of IPS (as the licensed entity) and the Company and, at
such time as the Company has obtained all necessary licenses to offer such
product, a money order product offered by the Company in its own name, all at
rates not greater than then-current market rates. The Company's ability to
develop new products other than money orders may be hindered by the limited
scope of the license granted under the Software License Agreement. Under the
Software License Agreement, the Company will only have the right to use the
IPS Application Software in connection with the MoneyGram service, and will be
prohibited from using such software for other payment instruments or services
without the prior approval of IPS. If the Company desires expanded use of the
IPS Application Software for new products other than money orders, IPS has
agreed to negotiate the price and terms thereof in good faith. There can be no
assurance that the Company and IPS will reach any such agreement, that the
Company could not obtain the required services or software elsewhere at a more
favorable rate or, in the absence of such an agreement, the Company will be
able to develop its own money order or other new products in an expedited
fashion.
18
<PAGE>
Aspects of the Company's operations depend upon intellectual property
subject to patents or copyrights owned by, and licensed from, third party
providers such as software and telecommunications products. The Company
believes it currently has licenses or other protection in regard to all such
intellectual property. However, should the Company offer new or additional
services, products or programs or alter the current method of operating the
Business, the Company may engage in activities not covered by its current
licenses and agreements. There can be no assurance that in the process of
expanding its product base, the Company will not require additional or
expanded licenses from third party providers. While the Company believes that
such licenses are readily available, there can be no assurance that the
Company will not incur additional expenses to obtain such licenses.
NEW MANAGEMENT TEAM
Certain members of the Company's senior management group, including Mr.
Calvano, the Chairman and Chief Executive Officer, Mr. Fowler, the Executive
Vice President and Chief Financial Officer, Mr. Friedman, the Executive Vice
President--Operations, and Ms. Kenyon, the Secretary and General Counsel began
working with the Company in February, September, April and July of 1996,
respectively, and have only had the opportunity to work together with the
existing management team since then. In addition to other executive management
positions with other companies, Mr. Calvano previously served as president and
chief operating officer of Western Union from June 1991 through May 1993 and
Mr. Friedman previously served as chief financial officer of Western Union
from November 1994 through March 1996. Other senior sales and marketing
managers of the Company formerly held the same or similar positions while
managing the Business at IPS. Nevertheless, there can be no assurance that the
Company's management group will be successful in managing the operations of
the Company or be able to implement effectively the Company's business and
expansion strategy. In addition, none of the key senior management personnel
have an employment agreement with the Company. See "Management."
EXTENSIVE REGULATION
The Business is subject to supervision and regulation under state and
federal laws and regulations, as well as regulation by foreign governments.
The Company will be required, among other things, to obtain and maintain
licenses in 43 states, the District of Columbia and Puerto Rico. Potential
licensees such as the Company generally must meet certain financial
requirements and provide security (such as bonds). In addition, licensees are
generally subject to certain reporting requirements and, in some cases,
audits. Failure to obtain or maintain a license in a particular state could
preclude the Company from offering the MoneyGram service in that state or
subject the Company to fines and penalties under state law. The Business also
is subject to federal regulation, including the Bank Secrecy Act (the "BSA")
and the Money Laundering Control Act of 1986 (the "MLCA"), which were adopted
to combat "money laundering" via financial institutions, including money
transmitters such as the Company and MoneyGram Agents. In addition, some
foreign countries have regulations applicable to the Business. Such regulation
includes both international anti-money laundering initiatives and local
regulation of money transmission. Certain countries currently, or in the
future may limit consumer money transmission activities (as principal and/or
agent) to banks or similarly licensed financial institutions. Such
restrictions may limit who the Company can utilize as an agent, require the
Company to conduct the Business through a licensed entity or prohibit the
Company altogether from conducting the Business in such country. While the
Mexican government has enacted legislation which criminalizes money
laundering, Mexico currently does not require any special license to engage in
the consumer money wire transfer business.
The failure to comply with the laws or regulations to which the Business is
subject, adverse changes in the interpretation thereof or the adoption of more
stringent laws or regulations could have a material adverse effect on the
Company's business, operating results or financial condition. See "Business--
Regulation and Licensing."
RISK OF LOSS
The Company's operations are dependent on its ability to protect its
customer service center and other processing operations against damage from
fire, earthquake, power loss, telecommunications failure or similar
19
<PAGE>
events. The Company's voice center and other customer service operations are
located in its Lakewood Facility, although up to 30% of the inbound voice
calls may be routed through the Corpus Christi Facility in order to insure
that the Company will have adequate redundancy in its customer service system.
First Data and its affiliates will provide disaster recovery services for the
Company's voice center during the term of the Operations Agreement at First
Data's facilities in Englewood, Colorado, and, for such time as the Company
chooses to route inbound voice calls through the Corpus Christi Facility, at
the Corpus Christi Facility. The Company may determine in the future to obtain
such services from a third party. However, no assurance can be given that the
disaster recovery services selected by the Company, either from First Data or
a third party, will be adequate, and operations may still be interrupted, even
for extended periods. Any damage or failure that causes interruptions in the
Company's operations could have a material adverse effect on the Company's
business, operating results or financial condition. The Operations Agreement
does not provide for consequential damages for the Company in the event that
either the customer service center or the data processing disaster recovery
services are inadequate and the Company incurs resulting losses. The Company's
property and business interruption insurance may not be adequate to compensate
the Company for all losses that it could incur. See "Business--Operations."
LIQUIDITY
The Company's initial sources of liquidity will be the IPS Cash
Contribution, cash generated from operations and the Facility. In the event
that the IPS Cash Contribution and internally generated funds from operations
are not sufficient to meet the Company's liquidity requirements, the Company
will be dependent upon First Data under the Facility to provide working
capital funds until such time as the Company generates sufficient cash flow
from operations or the Company can replace the Facility with a credit facility
with a third party. The Facility will terminate on January 15, 1997 (unless
extended by First Data at its option), at which time all outstanding
borrowings thereunder would have to be repaid or refinanced. There can be no
assurance that the Facility will be extended or refinanced. In addition, the
Facility contains terms and conditions, including certain restrictive
covenants, customary in such agreements. See "Certain Relationships and
Related Transactions--The Transition Agreements--The Short-Term Working
Capital Facility." Although the Company believes it can refinance or replace
the Facility prior to its termination, if necessary, no assurances can be
given that it will be able to do so in a timely manner. In such event, and if
the IPS Cash Contribution and internally generated funds from operations are
not sufficient for working capital needs, the Company would be required to
seek other sources of liquidity, if available.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's Transaction Fee Revenues and foreign exchange revenues
fluctuate on a quarterly basis and, to a lesser extent, reflect some seasonal
variations in transaction volumes. Transaction Fee Revenues fluctuate based in
part upon whether the Company is offering a price discounting promotion. These
promotions are a part of the Company's growth strategy. Customers typically
increase usage during price promotions, but also usually transmit smaller
amounts of money per transaction, with a resulting lower average fee per
transaction. The lower average fee per transaction during promotions
historically has been partially offset by corresponding increases in
transaction volume. Foreign exchange revenues fluctuate based upon the
volatility in the spread earned between wholesale and retail exchange rates on
foreign exchange transactions (primarily to Mexico). These exchange rates are
affected by volatility of foreign currencies, particularly the Mexican peso,
and the face amount of transactions sent outside the United States, primarily
to Mexico. Seasonal factors such as holidays, migrant worker remittances,
which are higher in the summer and fall, and emergency transfers to travelers,
which are higher during the summer, also affect the Company's quarterly
results of operations.
FOREIGN TRANSACTIONS RISKS
Approximately 75% of the Company's total revenues (including foreign
exchange revenues) in each of 1994 and 1995 and 70% of total revenues in the
first six months of 1996 were derived from consumer money wire transfer
service transactions involving either a receiving or sending party (or both)
located outside of the United States (primarily U.S. to Mexico transactions).
The Company generates foreign exchange revenues on U.S. to international
transactions (primarily Mexico) due to the difference in the cost of foreign
currencies at wholesale
20
<PAGE>
exchange rates and the retail exchange rates charged to customers in such
transactions. Foreign exchange revenues in 1995 were substantially larger than
in prior years primarily due to the volatility of the value of the Mexican
peso. As the decrease in average foreign exchange revenues earned per
transaction from approximately $22 in the first six months of 1995 to
approximately $13 in the first six months of 1996 demonstrates, the Company's
average foreign exchange revenues per transaction in 1995 are not indicative
of what the Company expects to achieve in the future. While a substantial
portion of the Company's transaction volume and total revenues are the result
of transactions involving one or more MoneyGram Agent locations outside the
United States, substantially all of the Company's assets are located in the
United States and approximately 98% of all send transactions originate in the
United States. Consequently, virtually all Transaction Fee Revenues are based
in U.S. dollars.
The international portion of the Business is subject to a number of inherent
risks, including difficulties establishing and maintaining agent networks,
fluctuations in the value of foreign currencies, government actions such as
currency devaluations or imposition of foreign exchange controls, potential
political and economic instability and the need to comply with foreign
regulatory requirements. There can be no assurance that these factors will not
adversely affect the Company's international revenues (including foreign
exchange revenues), growth strategy or its operating results or financial
condition. See "Business--International Transactions."
FINANCIAL STATEMENT PRESENTATION
The Company's Financial Statements and other financial data appearing
elsewhere in this Prospectus are presented on a carve-out basis for the
Business and are derived from the historical financial statements and
financial data of IPS. The Financial Statements include allocations of
operating and general and administrative expenses to the Company from IPS.
However, such allocations do not necessarily reflect the expenses that would
have been or will be incurred by the Company operating as a stand-alone
entity. Management of the Company believes that costs have been determined and
allocated on a reasonable basis and all costs attributable to conducting the
Business have been included in the Company's Financial Statements.
Furthermore, in the opinion of management, the Company's expenses, as
reflected in the Financial Statements, would not be materially affected by the
Company operating as a stand-alone entity and its execution of the
Contribution Agreement, the Operations Agreement and the Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Financial Statement Presentation" and Note 1 of the
Notes to Financial Statements.
ANTITAKEOVER MATTERS
The Company's Certificate of Incorporation and By-laws contain certain
provisions that may delay, deter or prevent a takeover of the Company. The
Certificate of Incorporation provides for a classified board of directors,
with three classes of directors, each class being elected for three-year,
staggered terms, and prohibits stockholder action by written consent. In
addition, the Company's By-laws include provisions establishing advance notice
procedures with respect to stockholder proposals and director nominations,
permitting the calling of special stockholder meetings only by a majority of
the Board of Directors or the President and limiting the removal of directors
except for "cause." These factors could have the effect of making it more
difficult for a third party to acquire control of the Company, which could
adversely affect the market price of the Common Stock. See "Description of
Capital Stock."
ABSENCE OF PRIOR PUBLIC TRADING MARKET AND DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock has been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, there can be no assurance
that an active public market will develop for the Common Stock or that, if
such a market develops, the market price will equal or exceed the initial
public offering price set forth on the cover page of this Prospectus. The
initial public offering price for the Common Stock will be determined by
negotiations between
21
<PAGE>
the Selling Stockholder and the U.S. Representatives (as defined below) based
on the factors described under "Underwriters." The prices at which the Common
Stock trades from time to time after the Offering will be determined by the
marketplace and may be influenced by many factors, including the Company's
operating and financial performance, the depth and liquidity of the market for
the Common Stock, future sales of Common Stock (or the potential thereof),
including sales by IPS (unless the U.S. Underwriters exercise their over-
allotment option in full), investor perception of the Company and its
prospects, the Company's dividend policy and general economic conditions.
Further, the stock market may experience volatility that affects the market
prices of companies in ways unrelated to the operating performance of such
companies. These market fluctuations may adversely affect the market price of
the Common Stock. See "Shares Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE AND IPS INTENTION TO SELL ALL OF ITS COMMON
STOCK
Upon consummation of the Offering, the Company will have outstanding
shares of Common Stock and an additional shares reserved
for issuance under the Company's 1996 Stock Option Plan ( shares) and
1996 Broad-Based Stock Option Plan ( shares). See "Management--Stock
Plans." In addition, subsequent to the Offering, the Company currently expects
to implement a stock option plan for certain key MoneyGram Agents pursuant to
which the Company would reserve shares of Common Stock (the "MoneyGram Agent
Stock Option Plan"). If implemented, the Company may grant options to certain
key MoneyGram Agents (exercisable at the price of the Common Stock on the date
any such option is granted) in connection with the extension of existing or
the negotiation of new Agent Contracts. Such options, if granted, generally
would not be exercisable until the expiration of the initial term of such
Agent Contracts. The Company expects that any such stock options (and the
shares of Common Stock issuable upon exercise of such options) would be
registered under the Securities Act. Therefore, any shares of Common Stock
issued upon exercise of such options would be freely tradeable without
restriction. No assurance can be given that the Company will adopt such a
MoneyGram Agent Stock Option Plan (which may require stockholder approval) or
that, if adopted, any options would be granted thereunder.
All of the shares of Common Stock sold by the Selling Stockholder in the
Offering will be freely tradeable without restriction. In addition, the
Selling Stockholder has entered into the Registration Rights Agreement with
the Company pursuant to which it has the right to cause the Company to
register shares owned by it after the Offering, if any, under the Securities
Act for sales in underwritten offerings or from time to time in open market
transactions. See "Certain Relationships and Related Transactions--The
Transition Agreements--The Registration Rights Agreement." Under the terms of
the Trust Agreement, the Trustee has the duty and the authority on behalf of
IPS to dispose of any shares owned by IPS on or prior to January 23, 1997 or
to donate such shares to a designated charity or charities on January 23, 1997
(unless the Trust is extended). No predictions can be made as to the effect,
if any, that market sales of such shares, or the availability of shares for
future sales, will have on the market price of shares of Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities.
Each of the Company, the Selling Stockholder and the Trustee pursuant to the
Trust Agreement has agreed, subject to certain exceptions, that, without the
prior written consent of Morgan Stanley & Co. Incorporated, it will not (i)
offer, pledge, issue, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, file a registration statement (in the case of the Company) or make
any demand for or exercise any right with respect to (in the case of the
Selling Stockholder and the Trustee) any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by such person or
are thereafter acquired directly from the Company) or (ii) enter into any swap
or similar agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) of this paragraph is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, for a period
of 180
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<PAGE>
days after the date of this Prospectus, in the case of the Company, and on
December 31, 1996, in the case of the Selling Stockholder and Trustee, other
than (a) the shares of Common Stock offered hereby, (b) any grant of stock
options that vest subsequent to 180 days after the date of this Prospectus,
(c) one or more registration statements relating to the Company's 1996 Stock
Option Plan, the 1996 Broad-Based Stock Option Plan or the MoneyGram Agent
Stock Option Plan or the Company's obligations under the Registration Rights
Agreement or (d) the deposit, if any, of any shares of Common Stock with
Wachovia Bank of North Carolina, N.A. as trustee pursuant to the Irrevocable
Voting Trust Agreement. See "Shares Eligible for Future Sale" and
"Underwriters."
DILUTION
As of June 30, 1996, the Company had a pro forma net tangible book value
per share of Common Stock of $ (after giving effect to the issuance of
shares of Common Stock to IPS and the IPS Cash Contribution in the Transition
and excluding any amounts attributable to deferred tax assets resulting from
the Transition). Based on an assumed initial public offering price of $ per
share, purchasers of Common Stock in the Offering will experience an immediate
dilution of $ per share. See "Dilution."
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<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Stockholder of the Common Stock in the Offering.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company expects to retain its future earnings to operate and support the
growth of its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Facility generally
prohibits the Company from paying any dividend or making any other
distribution with respect to, or acquiring, shares of its capital stock other
than (i) dividends or distributions payable in shares of its Common Stock,
(ii) acquisitions of Common Stock with proceeds from a concurrent issuance of
Common Stock and (iii) cash dividends in an aggregate amount in excess of 10%
of net income of the Company on a cumulative basis after September 30, 1996.
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996,
was $8.0 million or $ per share of Common Stock (after giving effect to the
issuance of shares of Common Stock to IPS and the IPS Cash
Contribution in the Transition, as if the Transition occurred on June 30, 1996
and excluding any amounts attributable to deferred tax assets resulting from
the Transition). See "The Transition and Ongoing Relationship with First
Data," "Capitalization" and "Certain Relationships and Related Transactions--
The Transition Agreements--The Contribution Agreement--Taxes." Net tangible
book value per share is equal to the Company's total tangible assets less
total liabilities, divided by the total number of shares of Common Stock
outstanding. Because the Company will not receive any proceeds from the
Offering, the sale of shares of Common Stock offered hereby will not affect
the pro forma net tangible book value. "Dilution" per share is determined by
subtracting pro forma net tangible book value per share from the amount paid
for a share of Common Stock in the Offering. The following table illustrates
this per share dilution at an assumed initial public offering price of $ per
share:
<TABLE>
<S> <C>
Assumed initial public offering price per share................... $
Net tangible book deficit per share prior to the Offering and
the IPS Cash Contribution...................................... $( )
Increase in net tangible book value per share attributable to
the IPS Cash Contribution......................................
Pro forma net tangible book value per share after giving effect to
the Transition(1)................................................
------
Dilution to purchasers of Common Stock in the Offering............ $
======
</TABLE>
- --------
(1) Based upon an assumed initial public offering price of $ per share, the
pro forma excess of the tax basis of the Company's net assets (resulting
from the Contribution) over their net book value at June 30, 1996 is
approximately $ million resulting in a pro forma gross deferred tax
asset of $ million. Based upon preliminary management assessments, a
valuation allowance of % or $ million would be necessary.
Including the pro forma net deferred tax asset of $ million would
increase the pro forma net tangible book value per share to $ million
or $ per share from $ million or $ per share.
24
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma cash, short-term debt and
capitalization of the Company as of June 30, 1996 (as if the Transition,
including the IPS Cash Contribution, had occurred on such date). This table
should be read in conjunction with the Financial Statements appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30,
1996
--------------
(IN THOUSANDS)
<S> <C>
Cash(1)................................................... $12,000
=======
Short-term debt(2)........................................ $ --
-------
Long-term debt............................................ --
-------
Stockholders' equity:
Common Stock, $.01 par value, 100,000,000 shares
authorized; issued and outstanding(3).......
-------
Capital surplus(4)(5)................................... 24,743
Accumulated deficit..................................... (2,108)
-------
Total stockholders' equity............................ 22,635
-------
Total capitalization................................ $22,635
=======
</TABLE>
- --------
(1) Represents the IPS Cash Contribution.
(2) Prior to the consummation of the Offering, First Data will extend to the
Company the Facility, pursuant to which the Company may borrow from time-
to-time, on a revolving basis, an amount up to $20 million. Borrowings
under the Facility will be unsecured. The Facility will terminate on
January 15, 1997, at which time all outstanding borrowings under the
Facility would have to be repaid or refinanced by the Company. See
"Certain Relationships and Related Transactions--The Transition
Agreements--The Short-Term Working Capital Facility."
(3) Excludes shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan ( shares) and 1996 Broad-Based
Stock Option Plan ( shares). See "Management--Stock Plans" and
"Shares Eligible for Future Sale."
(4) Includes $12 million, representing the IPS Cash Contribution.
(5) Excludes an estimated $ million attributable to pro forma net
deferred tax assets which will result from the Contribution assuming an
initial public offering price of $ per share. See "Dilution" and
"Certain Relationships and Related Transactions--The Transition
Agreements--The Contribution Agreement--Taxes."
25
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected financial data presented on a carve-
out basis for the Transition and are derived from historical financial data of
IPS. The financial data include allocations of operating and general and
administrative expenses to the Company from IPS. Such allocations do not
necessarily reflect the expenses that would have been or will be incurred by
the Company operating as a stand-alone entity. Management of the Company
believes that costs have been determined and allocated on a reasonable basis
and all costs attributable to conducting the Business have been included in
the Company's Financial Statements. In the opinion of management, such
expenses would not be materially affected by the Company operating as a stand-
alone entity. See Note 1 of Notes to Financial Statements. The selected
financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements appearing elsewhere in this Prospectus. The statement
of operations data set forth below with respect to the years ended December
31, 1993, 1994 and 1995 and the balance sheet data at December 31, 1994 and
1995 are derived from, and are qualified by reference to, the audited
Financial Statements appearing elsewhere in this Prospectus. Balance sheet
data as of December 31, 1993 have been derived from audited Financial
Statements not included in this Prospectus. The statement of operations data
for the years ended December 31, 1991 and 1992 and balance sheet data as of
December 31, 1991 and 1992 and June 30, 1995 are derived from unaudited
financial statements not included in this Prospectus. Balance sheet data as of
June 30, 1996 and statement of operations data for the six-month periods ended
June 30, 1995 and 1996 are derived from, and are qualified by reference to,
unaudited interim financial statements appearing elsewhere in this Prospectus.
In the opinion of management, such unaudited interim financial statements
include all adjustments (consisting only of normal recurring accruals)
necessary for a fair and, except as noted below, consistent presentation, in
accordance with generally accepted accounting principles, of such information.
The financial and operating results for the six months ended June 30, 1996 are
not necessarily indicative of the Company's results for any future interim
period or the entire year.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Fee and other.......... $ 17,735 $ 30,519 $48,815 $71,015 $94,242 $47,319 $57,253
Foreign exchange....... 594 1,280 3,070 20,373 42,826 24,408 15,775
-------- -------- ------- ------- ------- ------- -------
Total revenues....... 18,329 31,799 51,885 91,388 137,068 71,727 73,028
Expenses:
Agent commissions and
amortization of Agent
Contract acquisition
costs................. 11,612 17,957 22,112 28,742 34,801(1) 16,245(1) 22,615
Processing costs....... 9,791 11,022 12,361 15,334 25,542 11,627 12,728
Advertising and
promotion (2)......... 8,800 7,847 13,708 19,523 33,822(3) 16,002 16,763
Selling, service and
general and
administrative........ 4,807 5,243 6,900 8,378 13,247(4) 5,937 7,392(4)
-------- -------- ------- ------- ------- ------- -------
Total expenses....... 35,010 42,069 55,081 71,977 107,412 49,811 59,498
Income (loss) before
income taxes.......... (16,681) (10,270) (3,196) 19,411 29,656 21,916 13,530
Net income (loss)...... $(11,009) $ (6,778) $(2,077) $12,176 $18,294 $13,519 $ 8,348
Pro forma net income
(loss) per common
share (5)............. $ $ $ $ $ $ $
BALANCE SHEET DATA (AT
END OF PERIOD):
Assets restricted to
settlement of
MoneyGram
transactions.......... $ 11,338 $ 11,573 $12,827 $20,927 $26,010 $22,140 $22,533
Fixed assets at cost,
net of depreciation... 950 1,123 1,275 3,084 6,000 5,567 6,721
Costs of acquiring
Agent Contracts, net
of amortization....... 3,369 2,864 1,956 3,401 7,979 3,814 14,594
Total assets........... 16,561 16,009 16,502 28,583 41,618 32,999 45,704
Liabilities relating to
unsettled MoneyGram
transactions.......... 11,338 11,573 12,827 20,927 26,010 22,140 22,533
Total liabilities...... 15,455 14,996 17,358 35,411 40,449 33,301 35,069
Stockholder's
equity/(deficit)...... 1,106 1,013 (856) (6,828) 1,169 (302) 10,635
OPERATING DATA:
Number of MoneyGram
Agent locations (at
end of period)........ 11.6 13.1 14.1 16.0 17.2 16.9 16.4
Percentage change...... 11% 13% 8% 13% 8%(6) N/A (3)%(6)
Number of transactions. 656 1,114 2,040 3,285 5,393 2,548 2,986
Percentage change...... 104% 70% 83% 61% 64% N/A 17%
</TABLE>
- -------
(1) Net of a $2.5 million commission rebate from Banamex received by the
Company during the first quarter of 1995.
(2) Prior to 1996 the Company recorded advertising and promotion expenses
based on transaction volumes for interim reporting purposes. Beginning in
1996, the Company recorded advertising and promotion expenses based on
actual expenses incurred during the interim period. If the Company had
continued to record advertising and promotion expenses based on
transaction volumes, advertising and promotion expenses would have been
approximately $1.5 million less for the first six months of 1996.
(3) To comply with the Consent Decree, the Company spent approximately $6
million more than it otherwise would have for advertising in the fourth
quarter of 1995. In addition, the fourth quarter of 1995 includes $1.3
million of discretionary promotion-related payments to MoneyGram Agents.
(4) Includes costs and expenses related to obtaining consents from MoneyGram
Agents to permit the assignment of their Agent Contracts to the Company of
$375,000 in the fourth quarter of 1995 and $450,000 in the six-month
period ended June 30, 1996.
(5) Gives effect to the Company's issuance to IPS of shares of Common
Stock prior to the consummation of the Offering.
(6) During the last three months of 1995 and the first three months of 1996,
four MoneyGram Agents representing locations chose not to renew their
Agent Contracts. In addition, the Company's efforts to add new MoneyGram
Agents were hampered because, during this period, the Company's sales
personnel spent the majority of their time obtaining consents for the
assignment of Agent Contracts rather than focusing their efforts on
expanding the MoneyGram Agent base.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Financial
Statements appearing elsewhere in this Prospectus. Such Financial Statements
give effect to the Transition as if completed prior to January 1, 1993, are
presented on a carve-out basis for the Business and are derived from the
historical financial information of IPS. See "--Financial Statement
Presentation" below. See "The Transition and Ongoing Relationship with First
Data" for a description of the Transition.
OVERVIEW
The Company is a leading non-bank provider of consumer money wire transfer
services, with a strong, well-recognized brand-name. The Company accounted for
approximately 16% of all consumer money wire transfer transactions worldwide
in 1995. The Company offers customers the ability to transfer funds quickly,
reliably, conveniently and at attractive prices through its approximately
MoneyGram Agent locations in countries worldwide. MoneyGram Agents
representing approximately % of the Company's revenues for the first nine
months of 1996 are subject to long-term contracts ranging in term from to
years. MoneyGram targets its services to individuals without traditional
banking relationships, expatriates who need to send money to their country of
origin, traditional bank customers in need of emergency money transfer
services, tourists without local bank accounts and businesses that need rapid
and economical money transfer services. The Company also provides cash advance
and bill payment services (including payments on revolving credit, time and
personal loans) through many MoneyGram Agent locations in the United States.
Consumers sending expatriate remittance funds and individuals without
traditional banking relationships are the two largest segments of repetitive
money transfer customers. The Federal Reserve Board of Governors estimates
that there are approximately 23 million households in the United States
without traditional banking relationships. Additionally, industry analysts
estimate that there are an increasing number of people who remit funds to
their respective countries of origin on a regular basis.
Non-bank consumer money wire transfer services are provided primarily by two
global companies, MoneyGram and Western Union, as well as several niche
competitors. The Company estimates that in 1995 the industry processed 33
million non-bank consumer money wire transfer transactions worldwide, an
increase of 29% over 1994, and representing a compounded annual growth rate of
22% since 1991. In 1995, the Company processed 5.4 million of the 33 million
non-bank consumer money wire transfer transactions worldwide, representing
approximately 16% of such transactions. Western Union accounted for
approximately 81% of all such transactions worldwide in 1995. The Company
believes the gross revenues generated from non-bank consumer money wire
transfers in 1995 were $800 million on $9 to $10 billion in face amount of
transferred funds.
The United States currently originates more consumer money wire transfer
transactions than any other country in the world. The Company expects that the
majority of the future growth in the United States will occur in transactions
that terminate in international locations. Money transfers from the United
States to Mexico currently represent an important and growing component of the
money transfer industry due to the large number of Mexican immigrants
remitting money from the United States to Mexico.
The Company believes international consumer money transfer will continue to
grow through the end of the decade, primarily due to the combination of
increased migration and greater consumer awareness. The Company believes that
migration dynamics throughout Latin America, the Caribbean, Europe and Asia
provide attractive growth potential for consumer money transfer services.
27
<PAGE>
Revenues
The Company's revenues are comprised of Transaction Fee Revenues (68% of
1995 revenues), foreign exchange revenues (31% of 1995 revenues) and
investment income (less than 1% of 1995 revenues). Transaction Fee Revenues
are a function of the number of transactions processed by the Company and the
fee per transaction paid by the customers sending the money. Transaction fees
are charged to customers according to a graduated schedule based upon the face
amount of the transaction. Prices are set to maximize transaction volume at
certain frequently transferred face value amounts. The average face amounts
for the Company's transactions during 1995 were $238, $302 and $446 for
transactions from U.S. to U.S., U.S. to Mexico and U.S. or international to
international locations, respectively, and the standard fees for such
transactions were approximately $20, $31 and $40 (depending on the location of
the recipient), respectively. The average face amounts for the Company's
transactions during the first six months of 1996 were $235, $267 and $393 for
transactions from U.S. to U.S., U.S. to Mexico and U.S. or international to
international locations, respectively. Foreign exchange revenues are a
function of the number of transactions and the spread between the cost to the
Company of purchasing currency at wholesale exchange rates and the retail
exchange rates charged to recipients of funds outside the United States
(primarily Mexico). Investment income represents income allocated from IPS for
funds which have been transferred through the MoneyGram system, but not yet
collected by the recipient. Following the Transition, IPS will retain such
investment income until such time as the Company operates the Business in its
own name.
Transaction volume has increased as a result of (i) the Company's
development of its broad, convenient network of agent locations, (ii)
advertising and promotion strategies targeted to increase brand awareness of
MoneyGram, which have built usage among frequent money transfer users and
established positions in potential growth markets, and (iii) the overall
growth in the money transfer industry. This growth in transaction volume has
been partially offset by a decrease in the average transaction fees earned per
transaction. This decrease was caused by the Company's marketing and pricing
policy designed to increase its market share. In order to grow its market
share, the Company has actively pursued a policy of maintaining its prices 20%
to 30% below those of Western Union on each of the most frequently sent face
value amounts and has featured numerous promotions with even greater discounts
on prices. Promotional discounting of prices has reduced the Company's profit
margins. Customers typically increase usage during promotion periods, but also
transmit smaller amounts of money per transaction with a resulting lower
average fee per transaction. Historically, the Company's transaction volumes
have increased during price promotions and, although transaction volumes
decline when the price promotion ends, they consistently remain above pre-
promotion levels.
Substantially all of the growth in foreign exchange revenues through the end
of 1995 has resulted from an increase in the number of U.S. to Mexico
transactions processed by the Company and an increase in the average foreign
exchange revenue earned per transaction as a result of the increased
volatility of the value of the Mexican peso versus the U.S. dollar. Both the
Company and Banamex realize foreign exchange revenues on U.S. to Mexico
transactions with respect to the difference between the Company's wholesale
rates and the retail exchange rates charged to MoneyGram customers. In
addition to receive commissions, the Company pays Banamex fees in an amount
equal to one-half of the total foreign exchange revenues derived from U.S. to
Mexico MoneyGram transactions received at a Banamex location. Banamex
purchases Mexican pesos at a known rate for transactions that will be paid the
following day. Banamex and the Company then set the Mexican peso pricing to be
charged for those transactions based on competitive retail market rates. At a
minimum, the Company believes that its retail pricing will cover the currency
purchase cost and, in almost every case, the transaction will generate income
equal to the difference between wholesale and retail exchange rates. The total
and per transaction foreign exchange revenues realized by the Company in 1995
were substantially larger than in prior years due to the volatility of the
peso. As the decrease in average foreign exchange revenues earned per
transaction from approximately $22 in the first six months of 1995 to
approximately $13 in the first six months of 1996 demonstrates, the Company's
average foreign exchange revenues per transaction in 1995 are not indicative
of what the Company expects to achieve in the future. Future levels of foreign
exchange revenues will continue to depend on the total number of MoneyGram's
international transactions and the volatility of the currencies in the
recipient countries. In addition, foreign exchange revenues will depend on the
structure of the
28
<PAGE>
Agent Contracts the Company executes in international markets and, in
particular, on the manner in which the
Company shares foreign exchange revenues with receiving MoneyGram Agents and
on the arrangement under which the Company pays commissions to the receiving
MoneyGram Agents.
Total investment income is a relatively small contributor to revenues as the
average time required to collect funds from MoneyGram Agents is only slightly
less than the average time it takes for the funds to be collected by the
recipient.
Expenses
The Company's expenses include commissions paid to MoneyGram Agents and
guarantee commission payments to certain MoneyGram Agents (30.6% of 1995
expenses), advertising and promotion expenses (31.5% of 1995 expenses),
processing expenses (23.8% of 1995 expenses), selling, service and general and
administrative expenses (12.3% of 1995 expenses) and the amortization of Agent
Contract acquisition payments (1.8% of 1995 expenses). Commissions are set
forth in the Agent Contracts. Commissions paid to selling MoneyGram Agents
typically are based on a percentage of the transaction fee (averaging 20% of
the transaction fee) and receive commissions are based on either a flat or
percentage fee (averaging 16% of the transaction fee). Agent Contract
acquisition payments are amortized over the original term of the contract
(typically five years). Advertising and promotion expenses include signage
related expenses, print and media advertisements, "giveaways," discretionary
promotional cash rebates to MoneyGram Agents and currently a free three-minute
long distance phone call with each transaction within the United States or
between the United States and the Americas so that the sender may provide the
recipient notice of the transaction. Processing expenses primarily represent
the cost of the Company's customer service center, as well as information
processing and fraud prevention costs. Selling and service expenses represent
the costs associated with the Company's agent services, technical services and
sales, field services and marketing groups. General and administrative
expenses include the Company's legal, accounting and human resources
functions.
The Company's operating expenses can be divided into four categories: (i)
expenses that vary based upon transaction fees earned, primarily MoneyGram
Agent commissions; (ii) expenses that vary based upon the number of
transactions processed, primarily transaction processing expenses and customer
service center costs; (iii) discretionary expenses, primarily advertising; and
(iv) fixed expenses, primarily amortization of Agent Contract acquisition
costs, sales and service and general and administrative expenses. Under the
Operations Agreement, the Company will pay a fixed data processing fee for
each transaction. Future growth may require additional operational facilities
and enhanced management, information and telecommunications systems and other
operations, causing the Company to incur additional expenses. However, the
Company believes that cost reduction opportunities exist through economies of
scale, the further automation of MoneyGram Agents and the renegotiation of
certain vendor relationships.
Under the Consent Decree and the Hold Separate Agreement, First Data has
been obligated since September, 1995, and until the consummation of the
Offering will be obligated, to spend a total of $24 million per year and no
less than $10 million in any two consecutive quarters on MoneyGram advertising
and promotion. To comply with the Consent Decree, the Company spent
approximately $6 million more than it otherwise would have for advertising in
the fourth quarter of 1995.
Financial Statement Presentation
The Financial Statements appearing elsewhere in this Prospectus reflect the
historical financial results of the Company giving effect to the Transition as
if completed prior to January 1, 1993. See "The Transition and Ongoing
Relationship with First Data" for a description of the Transition pursuant to
which, among other things, IPS will contribute to the Company the MoneyGram
Assets. As a result, the Financial Statements and other financial data
appearing elsewhere in this Prospectus are presented on a "carve-out" basis
for the Business and are derived from the historical financial information of
IPS. The Financial Statements include allocations of operating and general and
administrative expenses to the Company from IPS. However, such allocations do
not
29
<PAGE>
necessarily reflect the expenses that would have been or will be incurred by
the Company operating as a stand-alone entity. Management of the Company
believes that costs have been determined and allocated on a reasonable basis
and all costs attributable to conducting the Business have been included in
the Company's Financial Statements. In the opinion of management, the
Company's expenses, as reflected in the Financial Statements would not be
materially affected by the Company operating as a stand-alone entity and its
execution of the Transition Agreements. See Note 1 of the Notes to Financial
Statements.
Taxes
As a result of the Transition, the tax basis (for federal income tax
purposes) of the MoneyGram Assets will increase from their tax basis in the
hands of IPS and certain of its affiliates at the time of the Contribution to
their fair market value at that time. Such tax basis is generally expected to
produce a tax benefit to the Company in future years through depreciation or
amortization deductions or through decreased gain or increased loss on a
disposition of any MoneyGram Asset. However, the "anti-churning" rules under
Section 197 of the Code might apply to disallow such amortization with respect
to certain intangible assets of the Company. For financial accounting and
reporting purposes, the Company will record a deferred tax asset (with a
corresponding credit to capital surplus) for the tax effect of the difference
between the net book value of the assets contributed and liabilities assumed
in the Contribution and their tax basis. The amount of the net deferred tax
assets which will be recorded at the time of the Contribution may be reduced
by a valuation allowance which will be based upon management's judgment as to
the likelihood of the Company generating sufficient taxable income to realize
the asset through future tax deductions. Furthermore, based on the advice of
its own tax advisors, the Company may determine that it is not permitted to
claim such amortization deductions on its tax returns. Based upon an assumed
initial public offering price of $ per share, the pro forma excess of the
tax basis of the Company's net assets over their net book value at June 30,
1996 will be approximately $ million resulting in a pro forma gross
deferred tax asset of $ million. Based upon preliminary management
assessments, a valuation allowance of % or $ million would be
established resulting in a pro forma net deferred tax asset of $ million.
See "Certain Relationships and Related Transactions--the Transaction
Agreements--The Contribution Agreement--Taxes."
Quarterly Results of Operations
The Company's Transaction Fee Revenues and foreign exchange revenues
fluctuate on a quarterly basis and, to a lesser extent, reflect some seasonal
variations in transaction volumes. Transaction Fee Revenues fluctuate based in
part upon whether the Company is offering a price discounting promotion. These
promotions are a part of the Company's growth strategy. Customers typically
increase usage during price promotions, but also usually transmit smaller
amounts of money per transaction, with a resulting lower average fee per
transaction. The lower average fee per transaction during promotions
historically has been partially offset by corresponding increases in
transaction volume. Foreign exchange revenues fluctuate based upon the
volatility in the spread earned between wholesale and retail exchange rates on
foreign exchange transactions (primarily to Mexico). These exchange rates are
affected by volatility of foreign currencies, particularly the Mexican peso,
and the face amount of transactions sent outside the United States, primarily
to Mexico. Seasonal factors such as holidays, migrant worker remittances,
which are higher in the summer and fall, and emergency transfers to travelers,
which are higher during the summer, also affect the Company's quarterly
results of operations.
30
<PAGE>
The following table presents unaudited interim operating results of the
Company. The Company believes that the following information includes all
adjustments (consisting only of normal, recurring adjustments) that the
Company considers necessary for a fair and consistent presentation, in
accordance with generally accepted accounting principles, of such information.
The financial and operating results for any interim period are not necessarily
indicative of results for any future interim period or the entire year.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------
1994 1995 1996
--------------------------------- ------------------------------------ -------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Fee and other.......... $14,738 $18,800 $19,494 $17,983 $18,899 $28,420 $25,615 $21,308 $27,567 $29,686
Foreign exchange....... 1,950 5,399 5,457 7,567 13,928 10,480 8,737 9,681 8,044 7,731
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues........ 16,688 24,199 24,951 25,550 32,827 38,900 34,352 30,989 35,611 37,417
Expenses:
Agent commissions and
amortization of Agent
Contract acquisition
costs................. 5,988 7,454 7,956 7,344 5,770(1) 10,475 9,342 9,214 10,925 11,690
Processing............. 3,092 4,132 4,070 4,040 5,289 6,338 5,873 8,042 6,822 5,906
Advertising and
promotion(2).......... 3,766 4,866 5,145 5,746 7,737 8,265 8,013 9,807(3) 8,814 7,949
Selling and service.... 894 929 914 963 1,510 1,742 1,993 2,280(4) 2,221(4) 2,555(4)
General and
administrative........ 1,044 1,115 1,182 1,337 1,294 1,391 1,455 1,582 1,391 1,225
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total expenses........ 14,784 18,496 19,267 19,430 21,600 28,211 26,676 30,925 30,173 29,325
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 1,904 5,703 5,684 6,120 11,227 10,689 7,676 64 5,438 8,092
Income tax expense...... 710 2,126 2,118 2,281 4,302 4,095 2,941 24 2,083 3,099
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 1,194 $ 3,577 $ 3,566 $ 3,839 $ 6,925 $ 6,594 $ 4,735 $ 40 $ 3,355 $ 4,993
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Pro forma net income per
common share(5)........ $ $ $ $ $ $ $ $ $ $
Number of transactions.. 633 819 866 967 1,232 1,316 1,276 1,569 1,505 1,481
</TABLE>
- -------
(1) Net of a $2.5 million commission rebate from Banamex received by the
Company during the first quarter of 1995.
(2) Prior to 1996, the Company recorded advertising and promotion expenses
based on transaction volumes for interim reporting purposes. Beginning in
1996, the Company recorded advertising and promotion expenses based on
actual expenses incurred during the interim period. If the Company had
continued to record advertising and promotion expenses based on
transaction volumes, advertising and promotion expenses would have been
approximately $2 million less for the first quarter of 1996 and $.5
million more for the second quarter of 1996.
(3) To comply with the Consent Decree, the Company spent approximately $6
million more than it otherwise would have for advertising in the fourth
quarter of 1995. In addition, the fourth quarter of 1995 includes $1.3
million of discretionary promotion-related payments to MoneyGram Agents.
(4) Includes costs and expenses related to obtaining consents from MoneyGram
Agents to permit the assignment of their Agent Contracts to the Company of
$375,000 in the fourth quarter of 1995, $300,000 in the first quarter of
1996 and $150,000 in the second quarter of 1996.
(5) Gives effect to the Company's issuance to IPS of shares of
Common Stock prior to the consummation of the Offering.
31
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationships to total revenues of certain items included in the Company's
statements of operations.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
----------------------------------
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Transaction Fees.................. 93.8% 77.4% 68.5% 65.7% 78.2%
Foreign exchange.................. 5.9 22.3 31.2 34.0 21.6
Investment income................. .3 .3 .3 .3 .2
----- ----- ----- ----- -----
Total revenues................ 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Agent commissions................. 40.9 30.4 24.0 21.6 29.2
Amortization of Agent Contract
acquisition costs................ 1.7 1.1 1.4 1.0 1.8
Processing........................ 23.8 16.8 18.6 16.2 17.4
Advertising and promotion......... 26.4 21.3 24.6 22.3 23.0
Selling and service............... 5.8 4.0 5.5 4.5 6.5
General and administrative........ 7.5 5.1 4.2 3.7 3.6
----- ----- ----- ----- -----
Total expenses................ 106.1 % 78.7% 78.3% 69.3% 81.5%
----- ----- ----- ----- -----
Income (loss) before income taxes... (6.1)% 21.3% 21.7% 30.7% 18.5%
----- ----- ----- ----- -----
Net income (loss)................... (4.0)% 13.3% 13.4% 18.8% 11.4%
===== ===== ===== ===== =====
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues. The Company's revenues increased 2% in the first six months of
1996 to $73.0 million from $71.7 million for the same period in 1995. This
increase was caused primarily by an increase in Transaction Fee Revenues,
partially offset by a decrease in foreign exchange revenues.
Transaction Fee Revenues increased 21% in the first six months of 1996 to
$57.1 million from $47.1 million for the same period in 1995. This growth was
due to a 17% increase in transactions to approximately 3.0 million
transactions in the first six months of 1996 from approximately 2.5 million
transactions in the same period of 1995 and an increase of 3% in the average
gross fee per transaction to $19.11 compared to $18.48 for the same period in
1995. Transactions increased due to increased sales by existing MoneyGram
Agents as a result of the impact of advertising and promotion expenditures
throughout 1995 and the first six months of 1996. The increase in average
gross fee per transaction was due to the Company sponsoring only three weeks
of price promotions in 1996 compared to 13 weeks of price promotions during
the same period in 1995. The impact of the price promotion was slightly offset
by a 11% decrease in the average face amount per transaction to $269 for the
first six months of 1996 from $302 for the same period in 1995.
Foreign exchange revenues, substantially all of which arise from U.S. to
Mexico transactions, decreased 35% to $15.8 million in the first six months of
1996 compared to $24.4 million for the same period in 1995. The average
foreign exchange revenue per Banamex transaction decreased 40% in the first
six months of 1996 to approximately $13 from $22 for the same period in 1995.
The unusually high foreign exchange revenue during the first six months of
1995 was primarily due to the higher volatility of the peso during this period
and a higher average face amount of funds transferred of $301 compared to $267
for same period in 1996. Management believes the decrease in the average face
amount is due to the depreciation of the peso against the U.S. dollar whereby
fewer U.S. dollars purchase the same number of pesos.
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The peso to U.S. dollar exchange revenue for the Company and Banamex
averaged 10% of the average face amount during the first six months of 1996
compared to 14% during the same period in 1995. The peso exhibited high
volatility in late 1994 and early 1995 due to the devaluation of the peso by
the Mexican government on December 20, 1994, political unrest related to the
Chiapas uprising and the assassination of the favored presidential candidate,
Luis Donaldo, and other economic uncertainties. During 1995, the Mexican
government took steps to stabilize the economy and the political unrest. As a
result, the peso was less volatile in late 1995 and early 1996 and the
Company's average foreign exchange revenue per transaction is expected to
continue to be less in 1996 compared to 1995. The foreign exchange revenue
decrease was offset slightly by a 5.8% increase in the number of Banamex
transactions to 1,181,000 for the first six months of 1996 compared to
1,116,000 transactions for the same period in 1995.
Expenses. The Company's total operating expenses increased 19% to $59.5
million in the first six months of 1996 compared to $49.8 million during the
same period in 1995. During the first six months of 1995, Banamex agreed to
reduce its earned agent commission by approximately $2.5 million (the "1995
Banamex Rebate") since it was sharing in unusually high foreign exchange
revenue with the Company, as described above, and wanted to help support the
Company's price promotion during the first three months of 1995. In addition,
during the first six months of 1996, the Company paid approximately $450,000
of sales representative salaries, commissions and out-of-pocket expenses
related to obtaining consents from MoneyGram Agents to permit the assignment
of their Agent Contracts to the Company. Also, as described below, effective
January 1, 1996, the Company changed its method of accounting for advertising
and promotion expenses during interim periods which increased operating
expenses by $1.5 million during the first six months of 1996 as compared to
the same period in 1995. Excluding the impact of the above items, the
Company's total operating expenses would have increased 10% during the first
six months of 1996.
As a percentage of total revenues, total operating expenses increased to 81%
during the first six months of 1996 compared to 69% during the same period in
1995, primarily as a result of foreign exchange revenues being unusually high
during the 1995 period. As a percentage of Transaction Fee Revenues, and after
excluding the impact of the expense related items described in the immediately
preceding paragraph, total operating expenses declined from 111% in the first
six months of 1995 to 101% in the first six months of 1996.
MoneyGram Agent commissions and amortization of Agent Contract acquisition
payments increased 39% to $22.6 million during the first six months of 1996
from $16.2 million during the same period in 1995. MoneyGram Agent commissions
and amortization of Agent Contract acquisition payments as a percentage of
Transaction Fee Revenues increased to 40% during the first six months of 1996
from 34% for the same period in 1995. This increase was due primarily to the
$2.5 million 1995 Banamex Rebate. If the impact of the 1995 Banamex Rebate is
excluded from 1995 MoneyGram Agent commissions and amortization of Agent
Contract acquisition payments as a percentage of Transaction Fee Revenues
would have been 40% in 1995. Expenses associated with MoneyGram Agents failing
to reach guaranteed minimums increased to $1 million in the first six months
of 1996 from approximately $.4 million during the same period of 1995
primarily due to the addition of new MoneyGram Agents who are not yet
operating above minimum guarantee levels.
Processing expenses increased 9% to $12.7 million during the first six
months of 1996 from $11.6 million during the same period in 1995 primarily due
to increased transaction volume of 17% offset by the efficiencies created by
additional agent automation. As a percentage of Transaction Fee Revenues,
processing expenses decreased to 22% during the first six months of 1996 from
25% during the same period in 1995.
Advertising and promotion expenses increased 5% to $16.8 million during the
first six months of 1996 from $16.0 million during the same period in 1995. As
a percentage of total revenues, advertising and promotion expenses increased
to 23% during the first six months of 1996 compared to 22% during the same
period in 1995. During 1995 the Company recorded advertising and promotion
expenses based on transaction volumes for interim reporting purposes.
Beginning in 1996, the Company recorded advertising and promotion expenses
based
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on actual expenses incurred during the interim period. If the Company
continued to record advertising and promotion expenses based on transaction
volumes, advertising and promotion expenses would have been approximately $1.5
million less for the first six months of 1996 and would have represented 21%
of total revenues.
Selling and service expenses increased by 47% to $4.8 million during the
first six months of 1996 from $3.3 million for the same period in 1995. This
increase is due to an increase in the number of sales and service employees
hired to further expand and support the MoneyGram Agent network. As a
percentage of Transaction Fee Revenues, selling and service expenses were 8%
and 7% during the first six months of each of 1996 and 1995, respectively.
During the first six months of 1996 the Company incurred approximately
$450,000 of sales, salaries, commissions and out-of-pocket expenses related to
obtaining consents from MoneyGram Agents to permit the assignment of their
Agent Contracts to the Company.
General and administrative expenses decreased by 3% to $2.6 million during
the first six months of 1996 from $2.7 million during the same period in 1995.
As a percentage of Transaction Fee Revenues, general and administrative
expenses decreased to 5% during the first six months of 1996 from 6% during
the same period in 1995.
Operating Income. Operating income decreased by 38% to $13.5 million in the
first six months of 1996 from $21.9 million during the same period in 1995. As
a percentage of total revenues, operating income decreased to 19% during the
first six months of 1996 from 31% during the same period in 1995.
Net Income. The Company's net income decreased 38% in the first six months
of 1996 to $8.3 million from $13.5 million during the same period in 1995. The
decrease in net income primarily resulted from the 35% decrease in foreign
exchange revenues caused by less volatility in the value of the Mexican peso
compared to the U.S. dollar, a 19% increase in total operating expenses due to
an increase in transaction volumes, the 1995 Banamex Rebate and the $1.5
million increase in advertising and promotion expenses resulting from the
Company's accounting change relating thereto. The increase in operating
expenses was offset substantially by a 21% increase in Transaction Fee
Revenues.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. The Company's revenues increased 50% in 1995 to $137.1 million
from $91.4 million for 1994. This growth reflected a 64% increase in the
number of transactions processed from 3.3 million to 5.4 million and a 110%
increase in the Company's foreign exchange revenues, substantially all of
which arises from U.S. to Mexico transactions, from $20.4 million to $42.8
million. This growth in foreign exchange revenues from U.S. to Mexico
transactions is a result of a 71% increase in the number of such transactions
from 1.4 million to 2.4 million, coupled with a 25% increase in the average
foreign exchange revenue earned per transaction from $14.60 to $18.21,
resulting from the increased volatility of the value of the Mexican peso
versus the U.S. dollar. The total and per transaction foreign exchange
revenues realized by the Company in 1995 were substantially larger than in
prior years, primarily due to the significant volatility of the value of the
Mexican peso. Accordingly, the Company's average foreign exchange revenues per
transaction in 1995 are not indicative of what the Company expects to achieve
in the future.
The remaining growth in 1995 revenues was due to the significant overall
transaction growth in 1995 discussed above, partially offset by a decrease of
19% in the average Transaction Fee Revenues earned per transaction from $21.55
to $17.39. The decrease in the average Transaction Fee Revenues per
transaction in 1995 compared to 1994 was primarily due to the 27 weeks of
price promotions in 1995 compared to six weeks in 1994. For example, due to a
fourth quarter price promotion, the average transaction fee for fourth quarter
1995 was only $13.52 compared to $17.39 for the full year 1995. The $13.52
average Transaction Fee Revenues during the fourth quarter of 1995 represented
a 35% decrease compared to the average Transaction Fee Revenues of $20.85
during the second and third quarters of 1995 when a price promotion was not
offered. This decrease in average Transaction Fee Revenues was offset in part
by a 21% increase in transaction volume during the fourth quarter of 1995 as
compared to the average volumes during the second and third quarters of 1995.
The growth in
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the number of transactions was attributable to the Company's advertising
campaigns and discount price and other promotions, as well as greater
availability of the MoneyGram service resulting from 8% growth from 16,000 to
17,200 in the number of MoneyGram Agent locations. The decrease in average
Transaction Fee Revenues per transaction was due to increased usage by
customers who took advantage of the promotional discount prices to transmit
smaller face amounts. The average transaction face amount decreased 16% from
$344 to $289.
Expenses. The Company's total operating expenses increased 49% to $107.4
million in 1995 from $72.0 million in 1994. As a percentage of total revenues,
total operating expenses decreased 78% in 1995 from 79% in 1994. Growth in the
total amount of funds transferred and volumes of transactions processed
resulted in higher commissions to MoneyGram Agents and processing costs,
respectively, while the Company's marketing and price promotions contributed
to significantly increased advertising and promotion expenses.
MoneyGram Agent commissions and amortization of Agent Contract acquisition
payments increased 21% to $34.8 million from $28.7 million, and decreased to
25% in 1995 from 32% in 1994 as a percentage of total revenues. MoneyGram
Agent commissions and amortization of Agent Contract acquisition payments as a
percentage of Transaction Fee Revenues decreased to 37% in 1995 from 40% in
1994. This decline was largely attributable to the $2.5 million 1995 Banamex
Rebate.
Processing expense increased 67% to $25.5 million in 1995, principally as a
result of the growth in transaction volume. As a percentage of Transaction Fee
Revenues, processing expense increased to 27% in 1995 from 22% in 1994,
primarily due to the decline in average Transaction Fee Revenues per
transaction described above.
Advertising and promotion expense increased in 1995 to $33.8 million, from
$19.5 million in 1994, as a result of the advertising and promotion strategies
designed to increase market share and broaden the brand recognition of the
MoneyGram service in its target markets. In addition, during the fourth
quarter of 1995, in conjunction with the price promotion, the Company paid its
MoneyGram Agents discretionary promotion-related cash payments of
approximately $1.3 million. As a percentage of total revenues, advertising and
promotion expense increased to 25% in 1995 from 21% in 1994. Selling and
service expense increased by 103% to $7.5 million as a result of an increase
in the number of sales and service employees hired to further expand the
MoneyGram Agent network, a 12% increase in the number of MoneyGram Agents and
an increase in marketing costs associated with the Company's advertising
campaigns. In addition, during the fourth quarter of 1995, the Company
incurred approximately $375,000 of sales, salaries, commission and other out-
of-pocket expenses related to obtaining consents from MoneyGram Agents to
permit the assignment of their Agent Contracts to the Company. As a percentage
of Transaction Fee Revenues, selling and service expense increased to 8% in
1995 from 5% in 1994. General and administrative expenses increased by 22% in
1995 to $5.7 million due to an overall increase in the number of employees as
a result of growth in the Business. As a percentage of Transaction Fee
Revenues, general and administrative expenses decreased to 6% in 1995 from 7%
in 1994.
Operating Income. Operating income increased by 53% to $29.7 million in 1995
from $19.4 million in 1994. As a percentage of total revenues, operating
income increased to 22% from 21%. The fourth quarter of 1995 was adversely
impacted by the combination of the pricing promotion discussed under revenues
and the additional $6 million advertising expense discussed above.
Net Income. The Company's net income increased 50% in 1995 to $18.3 million
from $12.2 million in 1994. The 1995 increase in net income resulted from
increased foreign exchange revenues from U.S. to Mexico transactions and the
continued growth in the number of transactions processed.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Revenues. The Company's revenues increased 76% in 1994 to $91.4 million from
$51.9 million in 1993. This growth reflected a 61% increase in the number of
transactions processed from 2.0 million to 3.3 million and significant growth
in the Company's foreign exchange revenues, substantially all of which arises
from U.S. to Mexico transactions, from $3.1 million to $20.4 million. This
growth in foreign exchange revenues from U.S. to Mexico transactions was a
result of a 56% increase in the number of such transactions from .9 million to
1.4
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million, coupled with a 307% increase in the average foreign exchange revenue
earned per transaction from $3.59 to $14.60, resulting from the increased
volatility of the value of the Mexican peso versus the U.S. dollar.
The remaining growth in 1994 revenues was due to the significant overall
transaction growth discussed above, partially offset by a decrease of
approximately 10% in the average Transaction Fee Revenues earned per
transaction from $23.86 to $21.55. The growth in the number of transactions
was attributable to the Company's advertising campaigns and price promotions,
as well as greater availability of the MoneyGram service resulting from 13%
growth from approximately 14,100 to 16,000 in the number of MoneyGram Agent
locations. The decrease in average Transaction Fee Revenues per transaction
was due to increased usage by customers who took advantage of the promotional
discount prices to transmit smaller face amounts per transaction. The average
transaction face amount decreased 9% from $377 to $344.
Expenses. The Company's total operating expenses increased 31% to $72.0
million in 1994 from $55.1 million in 1993. As a percentage of total revenues,
operating expense decreased to 79% in 1994 from 106% in 1993. Growth in the
total amount of funds transferred and volumes of transactions processed
resulted in higher agent commissions and processing costs, respectively, while
the Company's marketing and price promotions contributed to significantly
increased advertising and promotion expenses.
MoneyGram Agent commissions and amortization of Agent Contract acquisition
costs increased 30% to $28.7 million in 1994 from $22.1 million in 1993 and
decreased as a percentage of total revenues to 31% from 43%. MoneyGram Agent
commissions and the amortization of Agent Contract acquisition payments
decreased to 40% from 45% as a percentage of Transaction Fee Revenues in 1994
as compared to 1993.
Processing expense increased 24% to $15.3 million in 1994. As a percentage
of Transaction Fee Revenues, processing expense decreased to 22% in 1994 from
25% in 1993.
Advertising and promotion expense increased by 42% in 1994 to $19.5 million,
as the Company began its campaign to promote the MoneyGram service. As a
percentage of total revenues, advertising and promotion expense decreased to
21% in 1994 from 26% in 1993. Selling and service expense increased by
approximately 23% to $3.7 million in 1994, primarily as a result of an
increase in marketing costs associated with the Company's advertising
campaigns. As a percentage of Transaction Fee Revenues, selling and service
expense decreased to 5% in 1994 from 6% in 1993. General and administrative
expenses increased by 20% in 1994 to $4.7 million. As a percentage of
Transaction Fee Revenues, general and administrative expense decreased to 7%
in 1994 from 8% in 1993.
Operating Income. Operating income increased to $19.4 million in 1994 from
an operating loss of $3.2 million in 1993.
Net Income. The Company earned net income in 1994 of $12.2 million compared
to a net loss of $2.1 million in 1993. The 1994 improvement in net income
resulted from increased foreign exchange revenues from U.S. to Mexico
transactions and the continued growth in the number of transactions processed,
offset, in part, by the increased advertising expenditures.
LIQUIDITY AND CAPITAL RESOURCES
Total assets of the Company increased by $4.1 million to $45.7 million at
June 30, 1996 from $41.6 million at December 31, 1995. The $22.5 million of
assets attributable to unsettled MoneyGram transactions at June 30, 1996,
declined by 13% ($3.5 million) as compared to the December 31, 1995 balance of
$26.0 million due to seasonality of transactions. "Costs of acquiring Agent
Contracts, net of amortization," increased by $6.6 million from $8.0 million
at December 31, 1995 to $14.6 million at June 30, 1996, as a result of Agent
Contract signings and renewals. Currently, the Company is negotiating the
renewal of certain existing MoneyGram Agents and the
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signing of new MoneyGram Agents. In 1995, the Company paid $6.5 million
related to Agent Contract acquisition payments. During 1996, the Company has
already paid $ million related to Agent Contract acquisition payments and
estimates additional Agent Contract acquisition payments will be approximately
$ million for the remainder of 1996. The Company believes that 1997 Agent
Contract acquisition payments will be lower (estimated at $6 million) as most
major MoneyGram Agents will be under long-term (three-to-five year)
agreements, but that Agent Contract acquisition payments will increase in 1998
(estimated at $7 to $8 million) as contracts with several key MoneyGram
Agents, as well as those between Western Union and many of its key agents,
begin to expire. However, in the event that the Company implements the
MoneyGram Agent Stock Option Plan, the Company will be able to reduce the
amount of cash required for signing bonuses by offering certain new and
renewing MoneyGram Agents a combination of cash payments and stock options
under the MoneyGram Agent Stock Option Plan.
During the first six months of 1996, cash flows from operating activities
decreased by $2.6 million to $8.7 million from $11.3 million during the same
period in 1995. This was due to reduced net income partially offset by reduced
cash outflows related to working capital items in the first six months of 1996
compared to 1995.
During the first six months of 1996, cash flows used by investing activities
increased by $5.5 million to $9.8 million from $4.3 million during the same
period in 1995. The increase in cash outflows from investing activities was
due to Agent Contract acquisition payments primarily to existing agents to
extend the term of these Agent Contracts by an average of five years. As a
result of this increased investing activity, the Company required $1.1 million
of funding from IPS during the 1996 period as compared to returning capital of
$7.0 million to IPS during the 1995 period.
The Company's cash flows from operating activities decreased by $1.9 million
from $23.3 million in 1994 to $21.4 million in 1995. This decrease was
principally the result of net cash outflows attributable to working capital
items of $600,000 in 1995 as compared to a net cash inflow of $9.2 million in
1994 offset by higher net income in 1995. During 1995, the Company increased
its investing activities by $7.0 million to $12.1 million from $5.1 million in
1994, primarily due to an increase in Agent Contract acquisition payments
attributable to the signing of MoneyGram Agents and increased capital
expenditures for signage and personal computers for its MoneyGram Agents. As a
result of these increased investing activities, net capital returns to IPS
declined by $8.8 million from $18.1 million in 1994 to $9.3 million in 1995.
The Company has relied primarily on cash flows from operating activities
and, in part, on funding from First Data to support operating and investing
activities. Management expects the Company's future operating and investing
cash needs will be provided by cash flows from operating activities, the $12
million IPS Cash Contribution and the Facility. The Facility will terminate on
January 15, 1997, at which time all outstanding borrowings thereunder would
have to be repaid or refinanced. The Facility contains terms and conditions,
including certain restrictive covenants, customary in such agreements. See
"Certain Relationships and Related Transactions--the Transition Agreements--
The Short-Term Working Capital Facility." Management expects to negotiate a
credit facility with a third party prior to the expiration of the Facility, if
necessary, with borrowing availability, terms and conditions sufficient to
meet the Company's liquidity and capital resource requirements for the
foreseeable future. However, there can be no assurance that the Company will
be successful in arranging such financing in a timely manner.
Each consumer money wire transfer transaction involves the transfer of funds
from the sending customer to the selling MoneyGram Agent and shortly
thereafter from the selling MoneyGram Agent to IPS as the licensed entity on
behalf of the Company. These funds are used to satisfy the liability to pay
the recipient customer the amount transferred, usually by the end of the same
or next day. The Company does not utilize such funds to support the operations
of the Company. These funds are included on the Company's Balance Sheet under
the caption "Proceeds including proceeds due from/(to) IPS relating to
unsettled MoneyGram transactions," and support the associated liability
"Liabilities relating to unsettled MoneyGram transactions." See Note 1 of the
Notes to Financial Statements.
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In certain instances, the Company has guaranteed minimum commissions to
certain MoneyGram Agents. As of June 30, 1996, the remaining maximum
commitment equalled approximately $81.6 million over the next seven years.
Historically, the Company's transaction volume growth has been sufficient to
mitigate the Company's required payments under these guarantees, with annual
payments of between $1.3 and $2.5 million during each of the three years in
the period ended December 31, 1995. The Company believes that its future
required payments under the guarantees will not have a material impact on its
financial condition or results of operations.
Management believes that the cash flows to be provided by operations, the
$12 million IPS Cash Contribution and the Facility will be sufficient to meet
its working capital and capital expenditure needs for the foreseeable future.
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BUSINESS
OVERVIEW
The Company is a leading non-bank provider of consumer money wire transfer
services, with a strong, well-recognized brand-name. The Company accounted for
approximately 16% of all consumer money wire transfer transactions worldwide
in 1995. The Company offers customers the ability to transfer funds quickly,
reliably, conveniently and at attractive prices through its approximately
MoneyGram Agent locations in countries worldwide. MoneyGram Agents
representing approximately % of the Company's revenues for the first nine
months of 1996 are subject to long-term contracts ranging in term from to
years. MoneyGram targets its services to individuals without traditional
banking relationships, expatriates who send money to their country of origin,
traditional bank customers in need of emergency money transfer services,
tourists without local bank accounts and businesses that need rapid and
economical money transfer services. The Company also provides cash advance and
express bill payment services (including payments on revolving credit, time
and personal loans) through many MoneyGram Agent locations in the United
States.
The number of MoneyGram Agent locations has grown from 11,600 in 1991 to
approximately as of September 30, 1996. In 1995 and the first nine
months of 1996, the Company processed 5.4 million and million
transactions, respectively, and transferred $1.6 billion and $ million
total face amount of funds, respectively. In 1995 total revenues were $137.1
million, Transaction Fee Revenues were $93.8 million, foreign exchange
revenues were $42.8 million, and operating income was $29.7 million. In the
first nine months of 1996, the Company's total revenues, Transaction Fee
Revenues, foreign exchange revenues and operating income were $ million,
$ million, $ million and $ million, respectively. Substantially
all of the Company's transactions originate in the United States. In 1995, 45%
of the Company's transactions were between U.S. locations, 44% were from U.S.
to Mexico locations and 11% involved one or more international locations other
than Mexico.
The Company generates substantially all of its foreign exchange revenue on
its U.S. to Mexico transactions based on the difference between the cost of
Mexican pesos at wholesale rates and the retail exchange rate charged to
customers in such transactions. In addition to receive commissions, the
Company pays Banamex fees in an amount equal to one-half of the total foreign
exchange revenues derived from U.S. to Mexico MoneyGram transactions received
at a Banamex location.
CUSTOMERS AND MARKETS
Consumers sending expatriate remittance funds and individuals without bank
accounts are the two largest segments of repetitive money transfer customers.
The Federal Reserve Board of Governors estimates that there are approximately
23 million households in the United States without traditional banking
relationships. Additionally, industry analysts estimate that there are an
increasing number of people who remit funds to their respective countries of
origin on a regular basis.
Consumer money wire transfer services provide customers with a convenient,
rapid and secure method of sending money. The Company believes that consumer
money wire transfer services have the following advantages over alternative
methods of transferring money:
. Reliability and Security. Consumer money wire transfer services are
generally viewed as a more reliable and secure method of sending money
than other methods such as mailing a money order or a bank check.
. Global Accessibility of Agents. U.S.-based consumer money wire transfer
service providers have over 30,000 agent locations in the United States
and over 10,000 agent locations outside the United States. Typically,
such agents are at locations convenient to customers. In addition,
consumer money wire transfer networks provide service to many foreign
locations which banks typically do not serve.
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. Speed. Money transferred through consumer money wire transfer services
often is available immediately and usually available within 24 hours
after it is sent, far faster than sending money through the mail.
. Convenient Hours. Unlike banks and post offices, many consumer money wire
transfer agents are open 24 hours a day, seven days a week.
. Individualized Services and Customer Flexibility. Agent networks
typically include agents fluent in a variety of foreign languages. In
addition, customers may purchase only the necessary financial services
without maintaining a continual relationship or account with the agent.
Non-bank consumer money wire transfer services are provided primarily by two
global companies, MoneyGram and Western Union, as well as several niche
competitors. The Company estimates that in 1995 the industry processed 33
million non-bank consumer money wire transfer transactions worldwide, an
increase of 29% over 1994 and representing a compounded annual growth rate of
22% since 1991. In 1995, the Company processed 5.4 million of the 33 million
non-bank consumer money wire transfer transactions worldwide, representing
approximately 16% of such transactions. Western Union accounted for
approximately 81% of all such transactions worldwide in 1995. The Company
believes the gross revenues generated from non-bank consumer money wire
transfers in 1995 were $800 million on $9 to $10 billion in face amount of
transferred funds.
The United States currently originates more consumer money wire transfer
transactions than any other country in the world. The Company expects that the
majority of the future growth in the United States will occur in transactions
that terminate in international locations. Money transfers from the United
States to Mexico currently represent an important and growing component of the
money transfer industry due to the large number of Mexican immigrants
remitting money from the United States to Mexico.
The Company believes international consumer money transfers will continue to
grow through the end of the decade, primarily due to the combination of
increased migration and greater consumer awareness. The Company believes that
migration dynamics throughout Latin America, the Caribbean, Europe and Asia
provide attractive growth potential for consumer money transfer services. The
Company intends to target advertising and promotional campaigns to raise
awareness of MoneyGram services to new groups of consumers.
STRATEGY
MoneyGram's objectives are to continue to grow as a leading provider of
consumer money wire transfer services by offering competitive pricing and
superior service and to develop and introduce other financial services. The
Company has developed and has been pursuing the following strategy to
capitalize on its competitive position in the growing market for consumer
money transfer services:
. Target Frequent Users of Money Transfer Services. Immigrants remitting
funds to their home countries, people who may have a bank account
(generally savings only) but who do not use other bank services or have
traditional banking relationships (the "Underbanked") and people sending
money to the Underbanked and unbanked represent a majority of consumer
money transfers. The Company uses selected agent expansion in high-usage
markets to ensure convenient access to its services for its target
customers. The Company focuses its advertising and promotional campaigns
in these high-usage markets to increase brand awareness and generate
consumer trial and repeat usage of the MoneyGram service.
. Offer Enhanced Value to Consumers. MoneyGram provides customers with an
attractive price/value relationship. The Company offers value-added
features to its customers, including a free three-minute long distance
phone call with each transaction within the United States or between the
United States and the Americas so that the sender may provide the
recipient notice of the transaction, and a free 10-word message to the
recipient included with the transferred funds. The Company also offers a
MoneySaver card to certain customers which provides a 10% discount to
frequent users. No other consumer money wire transfer provider currently
offers this array of services. Pricing has been an important part of the
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Company's consumer marketing strategy. The Company has maintained its
consumer prices 20% to 30% below those of Western Union on each of the
most frequently sent face amounts. In addition, the Company periodically
offers consumers even greater discounts.
. Increase Brand Recognition and Loyalty. Recognition of the MoneyGram
brand and consumer loyalty are critical to maintaining and enhancing
market share. In addition to offering value-added services to its
customers, the Company designs its advertising and promotional campaigns
to increase brand awareness and generate customer trial and repeat usage
of the service. The Company also uses its MoneySaver frequent user
discount program to build customer loyalty and enhance the MoneyGram
brand image.
. Expand its Agent Network. The MoneyGram Agent network is essential to the
Company's growth and the Company believes that the quantity and quality
of MoneyGram Agents available to the Company's customers are key elements
of the Company's continued success. The Company seeks to develop
relationships with potential MoneyGram Agents that offer the optimal
combination of location, existing service mix and commitment to providing
the MoneyGram service. In order to retain its agents, MoneyGram provides
them with a number of support services, including product training,
traffic building and cooperative advertising programs, as well as
signage. In addition, the Company's goal is to provide a computer to all
MoneyGram Agents processing more than 30 transactions per month, which
improves transaction speed, reliability and security.
. Grow Internationally. Management views international markets as the next
significant growth area for money transfer services. Focusing on
particular corridors, the Company is currently seeking to expand its
global presence. The Company has significantly increased its send
transaction volume to Asia, the Caribbean and Latin America. The advent
of send and receive capabilities by MoneyGram Agents in Latin America is
broadening the Company's customer base and fostering growth in this key
market. In addition, the Company currently is negotiating new Agent
Contracts in Europe and intends to focus increased resources on expanding
its service in Europe. Future growth should occur as migration patterns
continue and advertising and promotional efforts increase international
awareness of the MoneyGram service. The Company intends to focus on
countries with rapid growth rates or inefficient and expensive delivery
systems and, when permissible, countries that currently are subject to
U.S. trade embargoes. The Company is expanding its MoneyGram Agent
network to capitalize on these money transfer opportunities.
. Penetrate Additional Retail Network and Other Distribution Channels. The
Company's success depends on its ability to grow and develop its
MoneyGram Agent network. The key characteristics of an attractive agent
location are convenience, extended hours, days of service, cash
availability, well trained and motivated staffing and a secure
environment. The Company also seeks to maintain a balanced and
diversified network. Currently, check cashers and supermarkets generate
approximately 80% of the Company's send volume despite accounting for
only 30% to 35% of the Company's MoneyGram Agent locations. Potential
outlets for U.S. network expansion are check cashers, postal and
packaging outlets and supermarkets not currently offering a consumer
money wire transfer product. The Company expects to expand its
international MoneyGram Agent network primarily by adding travel
agencies, bureau de change operators and banks.
. Develop Other Related Payment Products and Systems. The Company plans to
offer complementary products and services through the MoneyGram Agent
network, such as money orders and phone cards and, in the future, may
develop other related products, such as prepaid debit cards, secured
credit cards and insurance products. The Company believes that by
offering additional products it will generate additional revenues, as
well as enhance the attractiveness of the MoneyGram service to potential
agents and its target customers. See "Risk Factors--Ability to Grow
through New Products and Services."
THE MONEYGRAM AGENT NETWORK
The Company has an extensive global network of MoneyGram Agents. Of the
MoneyGram Agent locations, approximately are located in the
United States, 1,000 in Mexico (of which approximately 700
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are Banamex locations) and in other countries around the world. The
MoneyGram Agent network includes a variety of types of businesses.
Supermarkets and check cashers represent approximately 30% to 35% of the
Company's MoneyGram Agent locations and approximately 80% of the Company's
send transaction volume. MoneyGram Agent locations also include travel
agencies, collection agencies, bus stations and credit unions. The Company
estimates that to of the MoneyGram Agent locations in any
given month, on average, initiate or receive a transaction. The total number
of MoneyGram Agent locations has increased from approximately 14,100 in 1993
to at September 30, 1996. Since October 1995, several large MoneyGram
Agents have added a significant number of agent locations, including Ace
America's Cash Express, Albertson's Inc. and Rite Aid Corporation, which added
91, 387 and 244 new MoneyGram Agents, respectively.
In order to accomplish the Transition, the MoneyGram Agent sales force
dedicated a significant amount of time and effort to obtaining the consents of
MoneyGram Agents to the assignment of their Agent Contracts from TRS to IPS
and, at such time as the Company obtains the Required Licenses, to the Company
(the "Consents"). During the period from October 1995 to March 1996 (the
"Consent Period"), the Major Accounts division of the MoneyGram Agent sales
force dedicated more than half of their time to obtaining Consents while the
Retail Sales division of the MoneyGram Agent sales force dedicated all of
their time between October 1995 and February 1996 to obtaining the Consents.
In the process of obtaining the Consents, the Company renewed many Agent
Contracts, and obtained long-term extensions to existing Agent Contracts
resulting in most MoneyGram Agents being under contract for a longer period of
time. As of September 30, 1996, Agent Contracts representing approximately
locations and approximately % of the Company's Transaction Fee
Revenues for the nine months then ended do not expire until or
thereafter. Agent Contracts representing approximately locations and
approximately % of the Company's transaction volume for the first nine
months of 1996 expire between October 1, 1996 and December 31, 1997. All other
Agent Contracts have expired or are currently in evergreen periods and are
subject to termination upon notice ranging from 90 to 365 days.
During the Consent Period four significant MoneyGram Agents, Revco,
Greyhound Lines, Inc., Food 4 Less Supermarkets, Inc. and the Pantry, chose
not to renew their Agent Contracts. While these four MoneyGram Agents
collectively represented 10.5% of the MoneyGram Agent locations at December
31, 1995, the percentage of total transactions and total revenues attributable
to these MoneyGram Agents were only 6.8% and 5.3%, respectively.
In addition, as a result of the Transition, the 450 American Express Travel
Services Offices ("TSOs") which serve as MoneyGram Agents no longer offer the
MoneyGram service. The TSOs accounted for approximately 9%, 6%, 2% and 1% of
the Company's transactions volume for 1993, 1994 and 1995 and the six-month
period ended June 30, 1996, respectively. The loss of these TSOs reduced the
number of countries with MoneyGram Agents by 11. The Company is actively
engaged in establishing independent Agent Contracts with the approximately 200
individual American Express Representative Offices, which are independently
owned but operated under the American Express name and logo.
As the process of obtaining the Consents nears completion, the MoneyGram
Agent network has again begun to grow. From March 1, 1996 through September
30, 1996, the Company added MoneyGram Agents, for a net gain for that
period of agents. Although the Company has lost approximately 2,700, 3,600
and MoneyGram Agents for the years ended 1994 and 1995 and the nine-
month period ended September 30, 1996, respectively, it has added
approximately 4,500, 4,900 and new MoneyGram Agents, respectively,
during such periods. of the MoneyGram Agents lost between
January 1, 1996 and September 30, 1996 were smaller agents who had conducted
ten or fewer transactions during the three months preceeding their
termination. The Company believes that turnover in agents, caused primarily by
the sale of the agent location, a change in the nature of their business or
the movement by agents among consumer money wire transfer service providers,
is normal for the industry. In addition, during the Consent Period, the
MoneyGram sales personnel spent the majority of their time obtaining the
Consents rather than focusing their efforts on expanding the MoneyGram Agent
base. The Company can give no assurance that it will be able to continue to
sign new agents at a rate that exceeds the attrition rate of existing agent
locations. See "Risk Factors--Fluctuation of MoneyGram Agent Network" and "--
Competition with First Data."
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A limited number of the Company's top MoneyGram Agents generate a
significant percentage of the Company's transaction volume and revenues. In
1995, the Company's top 10 selling MoneyGram Agents, representing
approximately 2,500 locations, accounted for approximately 42% of the
Company's transaction volume and 43% of the Company's Transaction Fee
Revenues. In the first nine months of 1996, the Company's top 10 MoneyGram
Agents, representing approximately locations, accounted for approximately
% of the Company's transaction volume and % of the Company's Transaction
Fee Revenues. The Company has long-term contracts that expire no earlier than
with of its 1996 top 10 MoneyGram Agents, representing
approximately locations and accounting for approximately % of the
Company's transaction volume and % of the Company's Transaction Fee Revenues
for the first nine months of 1996. Each of the two top 10 MoneyGram Agents in
1995, Banamex and the Chicago Currency Exchange, was involved in transactions
representing over 10% of the Company's total revenues. In 1995, 46% of funds
transferred and 44% of all transactions processed by the Company were sent by
MoneyGram Agents located in the United States and received by MoneyGram Agents
located in Mexico. During 1995, U.S. to Mexico transactions for which Banamex
was the receiving agent generated approximately $42.4 million in foreign
exchange revenues, representing 31% of total revenues. The Banamex Agreement
expires in April, 2002. The Chicago Currency Exchange (consisting of the
approximately 85 separate Agent Contracts with owners of Chicago Currency
Exchange locations which expire in 2000 or 2001) in the aggregate initiated
send transactions that generated approximately 15% of the Company's total
Transaction Fee Revenues in 1995. In addition, in the first nine months of
1996, Ace also was involved in transactions representing over 10% of the
Company's total revenues for the period. Ace has locations which
initiated send transactions that generated approximately % of the
Company's total Transaction Fee Revenues in the first nine months of 1996. The
Agent Contract with Ace expires in 2000. The loss of, or a significant
reduction in, business from one or more of the significant MoneyGram Agents,
including Banamex, Ace or a significant portion of the Chicago Currency
Exchange locations, could have a material adverse effect on the Company's
business, operating results or financial condition. In addition, each of
Banamex and the Chicago Currency Exchange is the primary provider of the
MoneyGram service in its geographic location. Therefore, the loss of either of
these relationships could leave the Company without the ability to provide
adequate service to its customers in a key geographic area. There can be no
assurance that the Company could replace the volume, revenues or geographic
range represented by either Banamex or the Chicago Currency Exchange
locations.
In order to retain and sign certain significant agents and to provide those
agents an opportunity to share in the growth of the Company, subsequent to the
Offering the Company expects to implement the MoneyGram Agent Stock Option
Plan. If implemented, the Company may grant options to certain key MoneyGram
Agents (exercisable at the price of the Common Stock on the date any such
option is granted) in connection with the extension of existing or the
negotiation of new Agent Contracts. Such options, if granted, generally would
not be
exercisable until the expiration of the initial term of such Agent Contracts.
The Company expects that any such stock options (and the shares of Common
Stock issuable upon exercise of such options) would be registered under the
Securities Act. Therefore, any shares of Common Stock issued upon exercise of
an option would be freely tradeable without restriction. No assurance can be
given that the Company will adopt such a MoneyGram Agent Stock Option Plan
(which may require stockholder approval) or that, if adopted, any options
would be granted thereunder.
EXPRESS PAYMENT AND CASH ADVANCE
Express Payment, a service which provides consumers with a way to quickly
pay third party loans, bills or debt, is one of the fastest growing segments
of the money transfer industry. Since 1988 all MoneyGram Agents have offered
the Express Payment service. The Company maintains contracts with entities
such as credit card companies, lending institutions and collection agencies
("Creditors") which provide customers with credit and require a means by which
delinquent customers can make overdue payments directly to Creditors. Typical
Creditors include GMAC, Ford Motor Credit Company, Capital One and American
Express. To use Express Pay, the Creditor directs the consumer to visit a
MoneyGram location and transmit the amount due. The consumer pays the
principal amount owed and a $10.50 flat fee to the MoneyGram Agent. A
MoneyGram money transfer check automatically prints out at the Creditor's
office as immediately usable funds.
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The Cash Advance product is an ancillary service offered by the Company
through about 140 MoneyGram Agents representing approximately 1,000 locations.
The service allows the customer to receive a cash advance of up to $1,000 on a
Visa or MasterCard. Fees vary based on the amount advanced.
NEW PRODUCTS
The Company expects to offer a phone card product beginning in the fourth
quarter of 1996. The market for phone cards is growing rapidly but is
increasingly fragmented. Annual revenues are estimated at $800 million and a
15-20% growth rate is expected through the year 2000. Customers without access
to long distance phone service can purchase a phone card in denominations of
$5, $10, $20 or $50 and use the card to make calls from any phone.
International calls typically can also be made with a phone card, but reduce
the number of available minutes. Currently, there are approximately 400
providers of retail phone cards, an increase from 200 providers in 1993. The
Company is well positioned to service the phone card market and believes that
the phone card is a natural complement to its existing products. Many of the
30 to 40 million people without a phone in the U.S. are the same individuals
who comprise the unbanked and Underbanked, one of the Company's target
customer sections. The Company intends to enter into an agreement with a major
telephone carrier to provide product support and customer service.
THE MONEY TRANSFER PROCESS
The actual collection and payout of funds in MoneyGram's money transfer
process is handled by the MoneyGram Agents. Selling MoneyGram Agents collect
the money to be transferred plus the transaction fee from the customer sending
the money. At the end of each day, the Company totals the amount of each
MoneyGram Agent's transactions and the corresponding transaction fees. The
following morning the Company debits the selling MoneyGram Agents' bank
accounts for the dollar value of all of the MoneyGram Agents' transactions
processed on the previous day and the corresponding transaction fees. All
selling MoneyGram Agents are required to maintain separate bank accounts for
use in connection with processing the MoneyGram service and the process of
debiting this bank account is done through an automated clearing house ("ACH")
transfer.
Receiving MoneyGram Agents are authorized to pay out the transferred funds to
the recipient customer through confirmation of a reference number for the
transaction. In most instances, the receive MoneyGram Agents are reimbursed for
this payment by depositing a pre-signed money transfer check into their bank
account. Typically, the Company provides the MoneyGram Agents with blank checks
and the MoneyGram Agents write the checks out to themselves following the
receipt of an authorization number from the Company and deposit them into their
bank accounts. Similar to selling MoneyGram Agents, all receive agents must
maintain separate bank accounts for use in connection with processing the
MoneyGram service. The Company pays selling MoneyGram Agents and receiving
MoneyGram Agents their commissions at the end of each month. The Company
assumes responsibility for information processing and the additional support
services necessary to complete a given transaction. The individual MoneyGram
Agents assume responsibility for both internal fraud and/or customer fraud for
any non-cash payment (e.g., checks) for services rendered. Currently, the
Company provides a free three-minute long distance telephone call with each
transaction within the United States or between the United States and the
Americas so that the sender may provide the recipient with notice of the
transaction.
The entire process generally is completed on a same day or next day basis.
The receipt of the transmitted funds is location independent; a customer can
retrieve funds from any MoneyGram Agent within most of the Company's MoneyGram
Agent network regardless of the sender's location. This capability provides
significant flexibility to the Company's customers. The Company's
identification requirements vary according to the principal amount sent and
the circumstances of the transaction, but, generally, domestic transactions
only require the recipient to present basic forms of identification to receive
the transferred funds. No pre-existing relationship between the Company and
the send or receive customer is required in any circumstance.
44
<PAGE>
[Chart depicting the money
transfer process detailed
in "Business -- The Money
Transfer Process."]
45
<PAGE>
The MoneyGram Agents are compensated through commissions with rates
determined by their Agent Contracts. Commissions for send transactions
typically are based on a percentage of each transaction fee and average
approximately 20% of the Company's gross fee per transaction. MoneyGram
Agents' commissions for receive transactions are either a flat fee or a
percentage fee, typically averaging approximately 16% of the Company's gross
fee per transaction.
MONEYGRAM PRICING AND FEES
The Company is compensated for its money transfer services through fees paid
by the sender and, in certain international transactions, revenues from
foreign exchange conversion. Transaction fees are charged to customers
according to a graduated schedule based upon the face amount of the
transaction. Prices are set to maximize transaction volume at certain
"frequent" face amounts. The average face amounts for the Company's
transactions during 1995 were $238, $302 and $446 for transactions from U.S.
to U.S., U.S. to Mexico and U.S. or international to international locations,
respectively, and the standard fees for such transactions were approximately
$20, $31 and $40 (depending on the location of the recipient), respectively.
The average face amounts for the Company's transactions during the first six
months of 1996 were $235, $267 and $393 for transactions from U.S. to U.S.,
U.S. to Mexico and U.S. or international to international locations,
respectively.
The Company's pricing policy has been an important part of its overall
strategy. In order to grow the Business, management actively pursued a policy
of maintaining its prices 20% to 30% below those of Western Union on each of
the most frequently sent face amounts and has featured numerous promotions
with even greater discounts on prices. Promotional discounting of prices has
reduced the Company's profit margins. Customers typically increase usage
during promotion periods, but also transmit smaller amounts of money per
transaction with a resulting lower average fee per transaction. Historically,
the Company's transaction volumes have increased during price promotions and,
although transaction volumes decline when the price promotion ends, they
consistently remain above pre-promotion levels. There can be no assurance as
to what the Company's competitors will do in the future in terms of pricing,
nor can there be any assurance that the Company will be able to continue to
price below such competitors or offer frequent and substantial promotions.
Future price competition could further reduce profit margins (without any
increase in transaction volume) and adversely effect the Company's business,
operating results or financial condition. As the MoneyGram service increases
its brand name recognition and transaction volumes increase, the Company has
in 1996, and currently intends to continue, to reduce the number, scope,
duration and level of discounting of its price promotions compared to 1995 and
1994.
In addition to fees charged for each transaction, certain international
money transfers generate revenues from foreign exchange conversions. The
foreign exchange revenues received for international money transfers are
determined by the Company's contract with the receiving agent and the spread
between the wholesale and retail exchange rates for the currency involved in
the transaction. The Company's total revenues from foreign exchange have
increased from $3.1 million in 1993, to $20.4 million in 1994 and $42.8
million in 1995. For the six-month period ended June 30, 1996 total foreign
exchange revenues were $15.8 million compared to $24.4 million for the same
period in 1995. The total and per transaction foreign exchange revenues
realized by the Company in 1995 were substantially larger than in prior years,
primarily due to the volatility of the value of the Mexican peso. As the
decrease in average foreign exchange revenue earned per transaction from
approximately $22 in the first six months of 1995 to approximately $13 in the
first six months of 1996 demonstrates, the Company's average foreign exchange
revenues per transaction in 1995 are not indicative of what the Company
expects to achieve in the future.
Both the Company and Banamex realize foreign exchange revenue on U.S. to
Mexico transactions with respect to the difference between the Company's
wholesale rates and the retail exchange rates charged to MoneyGram customers.
In addition to receive commissions, the Company pays Banamex fees in an amount
equal to one-half of the total foreign exchange revenues derived from U.S. to
Mexico MoneyGram transactions received at a Banamex location. Banamex
purchases Mexican pesos at a known rate for transactions that will be paid the
following day. Banamex and the Company then set the Mexican peso pricing to be
charged for those transactions based on competitive retail market rates. At a
minimum, the Company believes that its retail pricing will cover the currency
purchase cost and, in almost all cases, the transaction will generate income
due to the difference between wholesale and retail exchange rates.
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SALES AND MARKETING
The Company advertises primarily through spot television ads, radio, print
and other media including billboards and bus benches. The Company has
implemented advertising and promotion strategies intended to increase its
market share and broaden the brand recognition of the MoneyGram service in its
target markets. Management believes that these strategies have been effective
in increasing the Company's total transaction volume and the total amount of
funds processed through the MoneyGram system.
The major goals of the Company's advertising are to: (i) increase brand
awareness within the general market; (ii) generate customer trial and
continued usage of the service; (iii) convert customers of other consumer
money transfer providers to the Company; and (iv) create brand loyalty. The
Company's management has targeted its advertising in high usage markets (e.g.,
immigrants in the United States remitting funds to their native countries, the
Underbanked and the unbanked) by directly comparing the Company's price to the
prices charged by the Company's competitors or by focusing on speed and
security of funds transferred.
The Company seeks to focus its marketing strategies on targeted advertising
and on discounted price promotions. A typical promotional campaign entails the
lowering of the fees charged per face amount. The Company directs its
promotional materials to markets that it believes are most responsive to its
marketing strategy, such as price sensitive consumers and selected demographic
markets. The Company also provides secondary advertising in other markets
intended to increase consumer awareness of the benefits of its services. Each
of the Company's major promotions corresponded to a significant rise in
transaction volumes. Customers typically increase usage during promotion
periods, but also transmit smaller amounts of money per transaction with a
resulting lower average fee per transaction. Historically, the Company's
transaction volumes have increased during price promotions and, although
transaction volumes decline when the price promotion ends, they consistently
remain above pre-promotion levels.
The MoneyGram Agent network is supported by a nationwide field service team
which recruits and services MoneyGram Agents. The field service team is broken
into four segments: national accounts (large regional and national chains),
domestic individual accounts (small businesses), international accounts
(worldwide except U.S. and Canada) and Express Payment subscribers (primarily
commercial customers and collection agencies). The field service team provides
a variety of services to MoneyGram Agents including training, automation,
assistance with cooperative advertising and provision of signage. There are
currently 90 employees in the Sales and Service Department.
The Company introduced the MoneySaver program in April 1993 as a part of the
customer loyalty element of its marketing strategy. This program offers a 10%
discount on customer transaction fees (normal and promotional fees) and
utilizes pre-recorded "sender profiles" to save time for the MoneyGram Agent
and the customer during the send portion of a MoneyGram transaction.
MoneySaver cards are mailed to targeted customers after they have sent a
MoneyGram transaction, and currently there are approximately 2.8 million cards
in circulation. A significant number of those who have received MoneySaver
cards have used them in a subsequent transaction. In 1995 and the first six
months of 1996, 32% and 35%, respectively, of all send transactions were
initiated with a MoneySaver card. The cards also enable the Company to
maintain a customer database that facilitates the Company's direct marketing
campaigns.
Prior to the Transition, IPS has managed and operated the Business and other
IPS payment products under the TRS Management Agreement. Under the TRS
Management Agreement, IPS is permitted to use the American Express and TRS
name and logo in connection with the MoneyGram service. The TRS Management
Agreement contemplates that IPS would phase out the use of the American
Express name and logo by April 1997. IPS has already commenced such phase out,
for instance, in certain of its advertising and promotions of the MoneyGram
service. Upon the transfer of the Agent Contracts from TRS to IPS in
connection with the Transition, neither IPS nor the Company will be permitted
to use the American Express or TRS name or logo in connection with the
MoneyGram service, except in certain point-of-sale advertising at MoneyGram
locations for a limited period of time. No assurances can be given that the
loss of the use of the American Express or TRS name and logo will not have a
material adverse effect on the Company's business, operating results or
financial condition.
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SEASONALITY AND FLUCTUATION IN QUARTERLY RESULTS
The Company's Transaction Fee Revenues and foreign exchange revenues
fluctuate on a quarterly basis and, to a lesser extent, reflect some seasonal
variations in transaction volumes. Transaction Fee Revenues fluctuate based in
part upon whether the Company is offering a price discounting promotion. These
promotions are a part of the Company's growth strategy. Customers typically
increase usage during price promotions, but also usually transmit smaller
amounts of money per transaction, with a resulting lower average fee per
transaction. The lower average fee per transaction during promotions
historically has been partially offset by corresponding increases in
transaction volume. Foreign exchange revenues fluctuate based upon the
volatility in the spread earned between wholesale and retail exchange rates on
foreign exchange transactions (primarily to Mexico). These exchange rates are
affected by volatility of foreign currencies, particularly the Mexican peso,
and the face amount of transactions sent outside the United States, primarily
to Mexico.
The Company processes relatively higher volumes of MoneyGram transactions in
the months of May and December as a result of customers' increased use of the
MoneyGram service to send money to family members at the Mothers' Day and
Christmas holidays. Seasonal factors such as migrant worker remittances, which
are higher in the summer and fall, and emergency transfers to travelers, which
are higher during the summer, also affect the Company's quarterly results of
operations.
OPERATIONS
Overview
The Company's operations are headquartered at its Lakewood Facility. The
Lakewood Facility houses the Company's customer service center which processes
an average of 25,000 to 30,000 calls per day. The facility is staffed 24 hours
a day, 365 days a year. The Company has operators fluent in sixteen languages
and at least 50% of the operators are bilingual. The Lakewood Facility
currently is operating with 300 operator stations but is capable of operating
approximately 440 call operator stations simultaneously. As currently
configured, and assuming the same proportion of transactions are initiated by
MoneyGram Agents via personal computers, the Lakewood Facility can process the
voice transactions associated with an overall volume of 10 million
transactions per year. At peak capacity, the Lakewood Facility could handle
the voice calls associated with a total volume of approximately 13 million
transactions per year. However, in order to insure that the Company will have
adequate redundancy in its customer service system, the Company has decided
that pursuant to the Operations Agreement, up to 30% of the inbound voice
calls may be routed through the Corpus Christi Facility.
In order to assure that the Company can provide MoneyGram Agents with
uninterrupted service in the event of an emergency, the Operations Agreement
provides that First Data and its affiliates will provide disaster recovery
services for the Company's customer service center during the term of the
Operations Agreement at First Data facilities located in Englewood, Colorado,
and, for such time as the Company chooses to route inbound voice calls through
the Corpus Christi Facility, at the Corpus Christi Facility. The Company may
obtain disaster recovery services from a third party. See "Risk Factors--Risk
of Loss" and "Certain Relationships and Related Transactions--The Transition
Agreements--The Operations Agreement."
Voice Communications
Each call into the Company's customer service center is electronically
distributed by a Rockwell Spectrum Automatic Call Distributor ("ACD"). The ACD
informs the operator of the call type and forwards the calls to the
appropriate operator, based on the linguistic requirements of the caller. The
ACD also collects the detailed statistical information used by the Company to
help maximize the efficiency of the customer service center's operations,
including average time to answer, average call length, average number of
abandoned calls and the number of calls in queue.
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MoneyGram Agent Automation
During the six months ended June 30, 1996, approximately 72% of all send
transactions were processed through personal computers ("PCs") located at
selected MoneyGram Agent locations. PC usage reduces the Company's average
cost of a transaction. Currently, the Company's goal is to provide a personal
computer system, together with training and field support, to all MoneyGram
Agents who process more than 30 transactions per month. The PC enables the
MoneyGram Agent to enter customer and transaction data more quickly than
possible via the Company's customer service center and provides the MoneyGram
Agent with an on-line reference for inquiries, such as other MoneyGram Agent
locations and transaction procedures. The PCs currently at approximately 450
MoneyGram Agent locations process both MoneyGram wire transactions and IPS's
money order and other payment services. These PCs will be contributed to the
Company prior to the Offering. The Company has agreed, as part of the
Transition, to permit IPS to continue to offer its money order and other
payment services through these MoneyGram Agents on their PCs.
INTERNATIONAL TRANSACTIONS
Mexico
Although the Company only began processing transactions in Mexico in 1990,
it processed approximately 2.4 million transactions for receipt in Mexico
during 1995 and approximately 1.2 million transactions in the first six months
of 1996 compared to approximately 1.1 million transactions in the same period
in 1995. Management believes that this growth is the result of the development
of a Mexican-oriented agent network, targeted advertising and promotional
programs and its relationship with Banamex, a leading commercial bank in
Mexico.
TRS (an affiliate of American Express) and Banamex entered into the Banamex
Agreement on July 24, 1990, allowing Banamex to serve as MoneyGram's primary
receive agent in Mexico. Since the initial signing, the Banamex Agreement has
been extended three times. The Banamex Agreement is effective through April
17, 2002 and provides for an automatic renewal after April 17, 2002 for an
additional five-year term unless either party notifies the other of its intent
to cancel 90 days prior to the end of the term. The Banamex Agreement only
allows the Company to process or pay U.S. to Mexico MoneyGram money transfers
through Banamex as its receiving agent, except for the limited circumstances
in which the Company had a relationship with a MoneyGram Agent in Mexico prior
to September 1, 1994 or in specific regions of Mexico where Banamex does not
have a branch location. However, as a result of the assignment of the Banamex
Agreement by TRS to IPS in the Transition, Banamex is not prohibited from
processing, but is still prohibited from paying, money transfers in Mexico on
behalf of American Express or its affiliates and First Data or its affiliates
(including Western Union). Currently, Banamex processes or pays money
transfers in Mexico only on behalf of the Business.
A majority of the money transfers to Mexico are sent for next day pick-up.
For each transaction, Banamex receives a sliding percentage of the monthly
average transaction fee charged to customers. Banamex receives a higher
percentage of the fee for same day transactions. Banamex reserves the right
under certain circumstances to disapprove any Company proposed promotion or
discount and receive a minimum, agreed upon fee amount per transaction
regardless of what the Company charges the customer. The Company pays Banamex
fees in an amount equal to one-half of the total foreign exchange revenues
derived from U.S. to Mexico MoneyGram transactions received at a Banamex
location.
In order to encourage a high volume of U.S. to Mexico transactions, First
Data has agreed with Banamex, and the Company subsequently will be bound, to
spend a specified amount each year on Spanish language advertising.
Historically, the Company has spent significantly more than the amount
required by the agreement. In 1995, the Company spent over $8 million on
Spanish language advertising, signage and promotional activities.
The Americas, Asia and Europe
Management views the international markets other than Mexico as its next
area of potential transaction growth. Focusing on particular corridors, the
Company is currently seeking to expand its global presence. Send
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transaction volume to the Caribbean and Latin America has increased, and the
advent of send as well as receive capabilities by MoneyGram Agents in the
region is broadening the Company's customer base and fostering growth in this
market. While the Company previously offered receive-only service throughout
the Latin American region, MoneyGram Agents in approximately 10-15 countries
in the region will be offering both send and receive service by the end of
1996. The Company's agent network in Latin America is increasing, with new
MoneyGram Agents in Uruguay, the Cayman Islands, Dominica and the Bahamas,
increasing the scope of the Company's agent network in the region.
In Europe, the Company has added MoneyGram Agents in the U.K., Spain,
Switzerland, Belgium and Ireland. In addition, a bureau de change operation
with branches covering the Scandinavian countries has indicated it will
convert to MoneyGram at the start of 1997. Spain is a particularly promising
market due to the loosening of restrictions on money transmittal by the
Spanish Central Bank. Additional efforts are underway to work with Post Office
or PostBank organizations in several European countries to expand coverage.
Asian send transaction volume has also increased, and the Company has
initiatives to expand the number of MoneyGram Agents in Pakistan, Sri Lanka
and Bangladesh.
The Company believes that future growth should occur as migration patterns
continue and advertising and promotional efforts increase international
awareness of the MoneyGram service. Future markets of focus include those
countries with rapid growth rates or inefficient and expensive delivery
systems and, when permissible, countries that currently are subject to U.S.
trade embargoes. Such growth could be slowed, however, due to protectionist
policies practiced by some countries, the existence of bank relationships
between countries which effectively lock out competition with their low fees
and the lack of reliable market data. Competition between the Company and
Western Union in the international arena is very fragmented and varies by
country and region. While Western Union has agents in a greater number of
countries than the Company, the Company believes that the Western Union brand
name is not as established internationally as it is in the United States. In
order to effectively penetrate the international market, the Company will need
to develop enhancements such as direct conversion between non-U.S. currencies,
home delivery and an improved telecommunications and banking settlement
infrastructure.
COMPETITION
The consumer money transfer and other payment products industry is highly
competitive. The principal methods of competition are price and number and
quality of agents and agent locations. Quality of service and service
enhancements are, to a lesser extent, competitive factors. The Company faces
competition from other consumer money wire transfer service providers as well
as from other payment products which offer consumers the ability to transfer
funds to others. Non-bank consumer money wire transfer services are provided
primarily by two global companies, MoneyGram and Western Union. The Company
estimates that Western Union accounted for approximately 81% of the 33 million
non-bank consumer money wire transfers processed worldwide in 1995 (compared
to approximately 16% by the Company).
Recently, competition has increased through the entry of new competitors or
expanded services offered by existing competitors, particularly in the U.S. to
Mexico market. Orlandi Valuta, previously a competitor in the Los Angeles to
Mexico corridor, has expanded its U.S. presence to over 3,400 agents in
California, Illinois, Texas and Florida, now offers a 10-minute service to
Mexico and is contemplating offering a U.S. to U.S. service. The Company faces
additional competition from the U.S. Postal Service which announced plans to
offer two new money transfer products to Mexico in 1996. The U.S. Postal
Service has joined the Eurogiro Network AS, which allows the U.S. Postal
Service to send postal money order delivery information electronically to
participating partner postal administrations (such as Mexico's postal
service). Funds also may be wired to the receiving institution over this
network. This "electronic money order" service will allow customers to quickly
send their money orders to Mexico for pick up at the Mexican post office. In
addition, the U.S. Postal Service currently is testing an electronic funds
transfer system in California and Texas that will allow postal customers to
wire money to Mexico to be received at Bancomer. Niche competitors who serve
specific migratory corridors
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<PAGE>
also compete with the Company, including several Mexican banks (such as
Bancomer) which have recently begun to offer consumer money wire transfer
services from the United States to Mexico, focusing on specific geographic
locations with high densities of Mexican immigrants. Niche competitors are
able to focus on particular geographic corridors and eliminate the expenses
associated with maintaining nationwide and worldwide agent networks.
The Company also faces competition from providers of other payment products.
Banks, other financial institutions and credit card companies provide similar
services. Some financial institutions in the United States have announced
plans to expand such services or offer consumer money wire transfer services
for non-bank customers. The Company also faces competition from automated
teller machines and similar retail electronic networks that could allow
consumers to transfer funds to others. The Company also competes with
providers of money orders purchased through IPS, Western Union agents, the
United States Postal Service, currency exchanges, supermarkets, convenience
stores and other retail outlets. Money orders generally are less expensive
than consumer money wire transfer services and are available to customers
through more extensive distribution networks.
A significant portion of the Company's growth in revenues and transaction
volumes prior to 1996 resulted from promotional discounting of its prices,
which has reduced the Company's profit margins. Customers typically increase
usage during promotion periods, but also transmit smaller amounts of money per
transaction with a resulting lower average fee per transaction. Historically,
the Company's transaction volumes have increased during price promotions and,
although transaction volumes decline when the price promotion ends, they
consistently remain above pre-promotion levels. There can be no assurance as
to what the Company's competitors will do in the future in terms of pricing,
nor can there be any assurance that the Company will be able to continue to
price below such competitors (particularly niche competitors, such as Mexican
banks establishing consumer wire transfer service locations in high-use areas
in the United States) or offer frequent and substantial promotions. Future
price competition could further reduce the Company's profit margins (without
any increase in transaction volume). As the MoneyGram service increases its
brand name recognition and transaction volumes increase, the Company has in
1996, and currently intends to continue, to reduce the number, scope, duration
and level of discounting of its price promotions compared to 1995 and 1994.
Following the Offering, the Company will compete directly with First Data
and Western Union, subject only to limited non-solicitation protections
provided by the Consent Decree. Although the Consent Decree prohibits First
Data from entering into a consumer money wire transfer service contract with a
MoneyGram Agent prior to the scheduled expiration of the Agent Contract, First
Data and Western Union may sign a consumer money wire services contract with
any MoneyGram Agent whose Agent Contract is terminated in accordance with its
terms. If MoneyGram fails to comply with the terms of any Agent Contract,
including, in the case of certain significant MoneyGram Agents, achieving
certain minimum transaction volume and dollar levels, the MoneyGram Agent may
terminate the Agent Contract, in which case First Data and Western Union are
permitted under the Consent Decree to sign such agent to a Western Union agent
contract.
In addition, the scope of the Consent Decree is limited in certain respects.
Specifically, the non-solicitation provisions of the Consent Decree described
above do not limit First Data or Western Union from entering into contracts
with MoneyGram Agents to provide services utilizing automatic teller machines
and other point of sale devices, transactions involving debit cards, cash
advances utilizing credit cards, home banking, prepaid telephone and cash
cards, money orders and utility bill payment services. First Data and Western
Union therefore can offer such products in direct competition with the
Company, unrestricted by the Consent Decree. In addition, First Data is
unrestricted in its use of the IPS Application Software, including in
connection with conducting the operations of Western Union and developing
other products. Finally, certain senior managers of First Data who previously
exercised discretion and control over the Business will remain as senior
managers of First Data with responsibility for, among other things, the
operations of Western Union. Moreover, other than pursuant to the
confidentiality provisions of the Hold Separate Agreement, First Data is not
restricted or precluded from applying its historical knowledge of the Business
to its management of Western Union, which may enhance Western Union's ability
to compete with the Company.
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Western Union is likely to use its significantly greater financial,
technological and marketing resources to compete vigorously with the Company
in the consumer money wire transfer services industry, including by signing
terminated MoneyGram Agents, and may launch new products that compete with the
consumer money wire transfer service offered by the Company. Such competition
may have a material adverse effect on the Company's business, operating
results or financial condition.
Many of the Company's competitors have, and potential competitors may have,
significantly greater financial, technological and marketing resources than
the Company. No assurances can be given that such competitors will not use
such resources to compete more agressively by expanding their agent networks,
funding substantial advertising campaigns, adding enhanced customer services
and/or reducing prices, that the Company will be able to compete successfully
against current or future competitors or that such competition will not have a
material adverse effect on the Company's business, operating results or
financial condition.
PROPRIETARY RIGHTS AND TRADEMARKS
MoneyGram Marks
The Company uses certain service marks in the Business, including
"MoneyGram," "The Better Way to Wire Money," "Wire Money in Minutes" and
"Money in Minutes Worldwide." Many of these marks have been refused initial
registration by the U.S. Patent and Trademark Office or are concurrently being
used by Western Union, the Company's principal competitor.
IPS has registered "MoneyGram" in certain countries and has applications
pending to register the mark in the United States and in substantially all
other countries in which the Company is conducting, or intends imminently to
conduct, business. In the United States and in certain other countries, the
trademark examiners initially have refused to register "MoneyGram" on the
grounds that it is merely descriptive of the service. The Company intends to
defend vigorously the registrability of "MoneyGram." However, no assurance can
be given that "MoneyGram" will be registered in any country where applications
are pending.
Western Union is using, among other marks, "The Best Way to Send Money" and
"The Fastest Way to Send Money" and has registered these marks in the United
States and in other countries. IPS applied to register "The Better Way to Wire
Money" in the United States, and the U.S. trademark examiner rejected the
application due to Western Union's prior registrations for said marks.
Western Union uses "Money in Minutes" and has registered this mark in the
U.S. and has applied to register the mark in certain other countries. IPS
applied to register "Wire Money in Minutes" in the United States and expects
that the U.S. trademark examiner will reject IPS's application due to Western
Union's prior United States registration.
The Company and Western Union have no current dispute regarding the
Company's use of "The Better Way to Wire Money," "Wire Money in Minutes" or
"Money in Minutes Worldwide," and the two entities have concurrently used
these or similar marks for some time. However, the Company's and Western
Union's respective rights to these marks and to similar marks are unsettled.
Consequently, the Company and Western Union will enter into the Service Mark
License Agreement at or prior to the consummation of the Offering under which
Western Union will grant the Company a license to use "The Better Way to Wire
Money" and "Money in Minutes Worldwide" in English and in certain other
languages except Spanish in certain countries, always accompanied by the mark
"MoneyGram" and to use "Wire Money in Minutes" in the United States in
English, always accompanied by the word "MoneyGram." The Company will
relinquish to Western Union all other rights it may have in, and be prohibited
from otherwise using other marks used by Western Union, including, for
example, "Money in Minutes," "The Best Way to Send Money" and "The Fastest Way
to Send Money." Western Union will covenant not to use "The Better Way to Wire
Money" in English in certain countries, including the United States. Both the
Company and Western Union will have a six-month period, beginning at the
consummation of the Offering, during which non-conforming uses of the marks
covered by the agreement
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will be permitted. Any non-conforming signage, including non-conforming
signage installed during the transition period, may be used through the life
of such signage. No assurances can be given about the effect, if any, of
entering into such arrangements concerning such marks, or of the inability to
use certain marks in Spanish, may have on the Business or the Company's
operating results or financial condition. See "Certain Relationships and
Related Transactions--The Service Mark License Agreement."
No assurances can be given about the effect of any dispute between the
Company and Western Union over the use of one of these marks, an adverse
resolution of such a dispute, if any, or the loss of any service mark of the
Company, would have on the Business or the Company's operating results or
financial condition.
Pursuant to the Contribution Agreement, IPS will transfer to the Company the
registrations IPS has obtained and, to the extent possible prior to
registration, the pending applications to register these marks. IPS will
allow, to the extent permissible, the Company to continue to pursue pending
applications in the name of IPS. See "Certain Relationships and Related
Transactions--The Transition Agreements--The Contribution Agreement."
Software
IPS developed the MoneyGram and IPS Application Software and all
modifications and enhancements to it. IPS contracted with the General Electric
Company ("GE") in 1992 to develop the PC MoneyGram Software and subsequent
modifications and enhancements. GE transferred to IPS title to all PC
MoneyGram Software specifically developed for IPS, and GE granted a license to
IPS to use any pre-existing materials contained in the PC Based Software with
GE's teleprocessing services. Using the MoneyGram and IPS Application
Software, the Company and those MoneyGram Agents who use the PC MoneyGram
Software can record all transactions into an on-line database with ready
access. This information is summarized daily by each MoneyGram Agent for
remittance processing and for compliance with the respective Agent Contracts,
including calculation of MoneyGram Agent commissions. The MoneyGram and IPS
Application Software also allows for the creation of transaction reports
required for regulatory reporting purposes. Pursuant to the Contribution
Agreement, IPS will contribute the MoneyGram Application Software and the PC
MoneyGram Software to the Company. See "Certain Relationships and Related
Transactions--The Transition Agreements--The Contribution Agreement."
The Software License Agreement will provide that IPS will grant to the
Company, effective upon the termination of the data processing services under
the Operations Agreement, a perpetual, assignable, nonexclusive, royalty-free
license to reproduce, modify and use the IPS Application Software, provided
that the IPS Application Software may be used by the Company (i) only on a
computer system owned, leased or operated by the Company or by any third
person providing service bureau data processing services on behalf of the
Company and (ii) only for the data processing requirements of the Company
relating to the MoneyGram service and not for use in connection with other
payment products or services. IPS has agreed, at the request of the Company,
to negotiate in good faith the terms (including royalties) of an expansion of
such software licenses that would permit the Company to offer a money order
product through the MoneyGram Agents, but only for so long as IPS or its
affiliates provide data processing for such money order product. The Software
License Agreement also requires the Company to obtain IPS's consent (not to be
unreasonably withheld) prior to the assignment of its rights under the
Software License Agreement, other than to a purchaser of substantially all of
the Business. See "Certain Relationships and Related Transactions--The
Transition Agreements--The Software License Agreement."
REGULATION AND LICENSING
State Regulations
Forty-three states, the District of Columbia and Puerto Rico currently have
sale of checks or money transmission laws which require that firms which
engage in the business of transmitting funds by wire and/or issuing checks and
other payment instruments obtain a license prior to engaging in such
businesses. The licensing process requires the applicant to submit information
concerning its operations and management as well as
53
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financial information. Most U.S. jurisdictions also require the posting of a
bond to protect the public from insolvency or default by the issuer. Some U.S.
jurisdictions also require licensees to maintain highly-rated, liquid
investments in an amount equal to the amount of their outstanding payment
obligations and many require the issuer to maintain a minimum net worth.
Typically, the licensee is required to file annual reports with the applicable
banking department. Reporting requirements include the submission of updated
financial statements, revisions to agent lists, sales data and notification of
changes in the business. A growing number of U.S. jurisdictions also conduct
annual or semi-annual on-site examinations of licensees.
IPS currently holds all of the licenses necessary to conduct the operations
of the Business. Upon consummation of the Transition, it will be necessary for
the Company to apply for and obtain licenses from each of these forty-three
states, the District of Columbia and Puerto Rico with regard to its U.S.
operations. Normally, the licenses are granted by state regulatory authorities
after the filing of an application and some degree of investigation by the
pertinent state regulatory authorities. In many jurisdictions, licenses must
be renewed on an annual basis. While there is no guarantee that the Company
will obtain the aforementioned licenses in all jurisdictions, it is expected
that, within one year of the date hereof, the Company will be able to obtain
such licenses in all jurisdictions. Failure to obtain a license in a
particular state could preclude the Company from offering the service in that
state.
Federal Regulation
The BSA, and its accompanying regulations, and the MLCA, were adopted to
combat "money laundering" and apply to financial institutions including money
transmitters such as the Company and the MoneyGram Agents. The BSA requires
money transmitters to maintain certain records, verify the identity of
customers and periodically file certain reports. The MLCA criminalizes certain
transactions, including transfers of funds through money transmitters such as
the Company and the MoneyGram Agents, that involve funds derived from certain
specified unlawful activities and that are performed with the requisite
knowledge or intent. In addition, the Money Laundering Suppression Act of 1994
may require the Company to register with the Treasury Department as a money
transmitting business and to maintain a list of the MoneyGram Agents and
expresses the sense of Congress that each state should license and regulate
any money order transmitters' activity in that state.
The Company has developed an extensive BSA and Anti-Money Laundering
Compliance Program. Elements of this program include (i) preparation and
filing of currency transaction reports, (ii) real time review of transactions
exceeding certain amounts, (iii) daily review of transactions exceeding $1,000
and (iv) periodic review of transaction patterns by funds transfer corridor
(e.g., Los Angeles to Mexico or Amsterdam to Colombia).
Violations of the money laundering laws or regulations can result in civil
and/or criminal liability in varying amounts that can range from $500 or less
for negligent violations of BSA requirements, to $1 million for certain
aggravated offenses, to the greater of $500,000 or twice the amount involved
in the underlying transaction for certain money laundering and other offenses.
Forfeiture penalties also are applicable to violations of various provisions
of all three statutes. The failure to comply with the laws or regulations to
which the Business is subject, adverse changes in the interpretation thereof
or the adoption of more stringent laws or regulations could have a material
adverse effect on the Company's business, results of operations or financial
condition.
Non-U.S. Regulation
Some foreign countries have licensing requirements and other regulations
applicable to the Business. Such regulations may include both international
anti-money laundering initiatives and local regulation of money transmission.
On the international front, the world community has begun to focus on the
problem of money laundering through the adoption of a number of international
initiatives. These initiatives include the adoption of the 1988 U.N.
Convention Against Illicit Traffic in Narcotic Drugs, the creation of the
Financial Action Task Force on Money Laundering established by directive of
the 1989 G-7 Economic Summit and the enactment of
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the Directive on Prevention of the Use of the Financial System for the Purpose
of Money Laundering by the European Union. As a result of these initiatives,
money laundering has been criminalized in an increasing number of foreign
jurisdictions. Some jurisdictions now require customer identification,
recordkeeping and suspicious transaction reporting. In many instances,
however, the offense is limited to the laundering of proceeds of the sale of
illegal drugs.
Although the business of consumer money wire transfer is not separately
licensed as in the U.S., in some jurisdictions the local agent or the
transmitter must hold a banking or foreign exchange license. In these
instances, the Company generally requires proof of the appropriate permit from
the local agent prior to its offering the MoneyGram service. Certain countries
currently, or in the future may, limit consumer money transmission activities
(as principal and/or agent) to banks or similarly licensed financial
institutions. Such restrictions may limit who the Company can utilize as an
agent, require the Company to conduct the Business through a licensed entity
or prohibit the Company altogether from conducting the Business in such
country. While the Mexican government has recently enacted legislation which
criminalizes money laundering, Mexico currently does not require any special
licensing in connection with the offering of consumer money wire transfer
services. To the extent these requirements are applicable to the MoneyGram
service, the failure to comply may be a criminal offense under local law.
Future Regulation
The adoption of more stringent laws or regulations, or adverse changes or
interpretations of existing laws or regulations, could have a material adverse
effect upon the Company.
LITIGATION
The Company is currently not engaged in any material legal proceedings.
EMPLOYEES
The Company has approximately 541 employees, including approximately 99 in
sales, marketing and customer service, 346 in customer service center
operations and 76 in operational, general and administrative functions. None
of the Company's employees are represented by a labor union, and the Company
believes that its employee relations are good.
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MANAGEMENT
DIRECTORS
The Board of Directors currently consists of six members and is divided into
three classes serving staggered terms as follows: Class 1, comprised of two
persons and serving for a term expiring at the 1997 Annual Meeting of
Stockholders; Class 2, comprised of two persons and serving for a term
expiring at the 1998 Annual Meeting of Stockholders; and Class 3, comprised of
two persons and serving for a term expiring at the 1999 Annual Meeting of
Stockholders. Following the expiration of the initial term, directors will
serve for three-year terms. The Company may add one or more independent
directors following consummation of the Offering, who may serve on the Audit
Committee and/or the Compensation Committee of the Board of Directors.
Information with respect to those individuals who currently serve as directors
of the Company is set forth below:
<TABLE>
<CAPTION>
INITIAL TERM
NAME EXPIRES POSITION
---- ------------ --------
<S> <C> <C>
Robbin L. Ayers....... 1999 Executive Vice President and Director
James F. Calvano*..... 1999 Chairman and Chief Executive Officer
Brian J. Fitzpatrick*. 1998 Director
John M. Fowler*....... 1997 Executive Vice President and Director
William D. Guth*...... 1997 Director
Sanford Miller*....... 1998 Director
</TABLE>
--------
*Has agreed to serve, but has not yet been elected
Mr. Ayers, 44, has served as Executive Vice President and General Manager--
International since 1996. He previously served in the Office of the
President of the Company since September 1995. Mr. Ayers has responsibility
for the Company's international operations. Mr. Ayers has been a director
since January 1996. Prior to his appointment to the Office of the President,
Mr. Ayers served from January 1995 to September 1995 as Senior Vice President,
Europe and Pacific Rim Retail Services for the Business. From 1992 to 1994 Mr.
Ayers was Senior Vice President, Marketing of IPS and from 1985 to 1992, he
served in various management positions with IPS. Mr. Ayers founded the
MoneyGram service during 1987 and was its General Manager until 1991. He holds
a B.A. in Sociology and an M.B.A. in Marketing from the University of
Cincinnati.
Mr. Calvano, 60, has served as Chairman and Chief Executive Officer of the
Company since 1996. Prior to joining the Company, Mr. Calvano was
employed by the Travelers Group as Executive Vice President of Marketing and
by Travelers Insurance Companies as Executive Vice President & Chief
Administrative Officer from November 1993 until February 1995. Mr. Calvano
served as President and Chief Operating Officer of New Valley Corp./Western
Union from June 1991 through May 1993. Two months before he assumed this
position, New Valley Corp. suspended payments on its publicly held debt. New
Valley Corporation consented to an involuntary filing of a bankruptcy petition
under Title 11 of the U.S. Code effective November 15, 1991. From January 1989
until December 1990, Mr. Calvano was President and Chief Executive Officer of
Carlson Travel Group and Executive Vice President of Carlson Companies Inc.
Prior to that date, Mr. Calvano served in various management positions at
Primerica Corporation, American Express Travel Related Services, Avis, Inc.
and the Olivetti Corporation of America. Mr. Calvano serves on the Board of
Directors of Team Rental Group, Inc. Mr. Calvano holds an AMP from Harvard
Business School and a B.A. from the University of Chicago.
Mr. Fitzpatrick, 54, has served as a director of the Company since
1996. Mr. Fitzpatrick has been President and Chief Executive Officer of Fits
Systems, a computer software company, since 1972. Mr. Fitzpatrick also serves
on the Board of Directors of Jade Cricket Corporation. Mr. Fitzpatrick
received his A.B. in economics from Boston College.
Mr. Fowler, 47, has served as Executive Vice President and Chief Financial
Officer since 1996. Prior to joining the Company, Mr. Fowler worked as
a private consultant. From 1989 to 1994 Mr. Fowler was employed by the
Travelers Group, Inc. as Executive Vice President and Chief Administrative
Officer, responsible
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for operations and administration throughout the organization. Mr. Fowler held
the position of Chairman and Chief Executive Officer of Gulf Insurance Group,
a subsidiary of Travelers from 1987 to 1994 and served as Senior Vice
President, Corporate Development, for the Travelers Group from 1986 through
1989. Prior to that date, Mr. Fowler served in various management positions at
Warner Amex Cable, the U.S. Department of Transportation and Reading Company.
Mr. Fowler serves on the board of directors of Air Express International
Corporation, TransAtlantic Holdings, Inc. and Eastern Alliance Insurance
Company. Mr. Fowler holds a B.S. degree from Yale University and a J.D. from
the University of Pennsylvania Law School.
Dr. Guth, 63, has served as a director of the Company since 1996.
Dr. Guth is a professor of management and strategy at the Stern School of
Business at New York University. Dr. Guth also serves as a principal of
Faculty Practice Associates, a strategic management consulting firm. Dr. Guth
received his D.B.A. degree from Harvard University, his M.B.A. degree from
Indiana University and his B.S. degree from Washington University.
Mr. Miller, 43, has served as a director of the Company since 1996.
He has served as the Chairman of the Board of Directors and Chief Executive
Officer of Team Rental Group, Inc., which owns Budget Rent a Car franchises in
seven metropolitan regions in the United States, since December 1993. Between
1989 and 1991, Mr. Miller served as Director of Marketing, Special Accounts
for Budget Rent a Car Corporation. From 1981 to 1989, Mr. Miller was an
executive officer and principal stockholder of corporations that owned and
operated 30 Budget Rent a Car franchises. Mr. Miller holds a B.S. from the
State University of New York at Oswego.
Mr. Calvano, Chairman and the Chief Executive Officer of the Company, serves
as a director on Team Rental Group, Inc.'s Board of Directors and Mr. Miller,
a director of the Company, is Chief Executive Officer of Team Rental Group,
Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee will be responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Committee will review the qualifications of the Company's
independent auditors, make recommendations to the Board of Directors as to the
selection of independent auditors, review the scope, fees and results of any
audit and review non-audit services and related fees of the independent
auditors. The members of the Audit Committee have not yet been appointed,
however, the Company intends to appoint two independent directors to this
committee.
The Compensation Committee will be responsible for the administration of all
salary and incentive compensation plans for the officers and key employees of
the Company, including bonuses. The Committee also will administer the
Company's 1996 Stock Option Plan. The members of the Compensation Committee
have not yet been appointed, however, the Company intends to appoint two
independent directors to this committee (Mr. Miller will not serve on the
Compensation Committee).
The Board of Directors does not have a nominating committee. The selection
of nominees for the Board of Directors will be made by the entire Board of
Directors.
EXECUTIVE OFFICERS
Information with respect to those individuals who currently serve as
executive officers of the Company is set forth below. Information with respect
to Messrs. Ayers, Calvano and Fowler is set forth above under "Management--
Directors." Executive officers of the Company are appointed annually by the
Board of Directors and serve until their successors have been duly elected and
qualified.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
James F. Calvano.... Chairman and Chief Executive Officer
John M. Fowler...... Executive Vice President and Chief Financial Officer
Robbin L. Ayers..... Executive Vice President
Alan H. Friedman.... Executive Vice President--Operations
Andrea M. Kenyon.... Secretary and General Counsel
</TABLE>
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Mr. Friedman, 50, has served as Executive Vice President--Operations of the
Company since 1996. Prior to joining the Company, Mr. Friedman was
employed by Western Union as Senior Vice President and Chief Financial Officer
from November 1994 to March 1996. Mr. Friedman previously held various
financial management positions at Western Union Corporation. Mr. Friedman
served as Vice President and Comptroller of New Valley Corp/Western Union from
January 1991 until November 1994, and held that post in April 1991 when New
Valley Corporation suspended payments on its publicly held debt. New Valley
Corporation consented to an involuntary filing of a bankruptcy petition under
Title 11 of the U.S. Code effective November 15, 1991. Mr. Friedman holds a
B.B.A. from the Bernard M. Baruch College of the City University of New York.
Mr. Friedman is also a licensed CPA in New York state, a member of the
Financial Executives Institute and a member of the American Institute of
Certified Public Accountants.
Ms. Kenyon, 41, has served as General Counsel since 1996. Prior
to joining the Company, Ms. Kenyon spent six years in the general counsel's
office of American Express, where she provided bank regulatory and legislative
support for American Express, its domestic and international banks and
financial service subsidiaries. She also provided legal support to IPS on
payment product issues and anti-money laundering regulations when First Data
was a subsidiary of American Express. Prior to joining American Express, Ms.
Kenyon was an associate at a law firm in New Jersey where she specialized in
commercial banking. She is a 1976 graduate of Lafayette College and 1983
graduate of Villanova University School of Law.
COMPENSATION OF DIRECTORS
Directors currently do not receive an annual retainer or other compensation
for serving as directors. It is anticipated that, following consummation of
the Offering, directors who do not receive compensation as officers or
employees of the Company or any of its affiliates will be compensated for
serving as directors, including an annual retainer fee and a fee for each
meeting of the Board of Directors that they attend. All such compensation will
be determined by the Board of Directors.
EXECUTIVE COMPENSATION
The Company was incorporated as a subsidiary of IPS in January 1996. The
following table sets forth compensation information for each individual who
served in the capacity of an executive officer of the Business during 1995 and
who will continue to serve as an executive officer of the Company following
consummation of the Offering (the "Named Executives"). Mr. Calvano, the
Chairman and Chief Executive Officer of the Company, Mr. Fowler, the Chief
Financial Officer of the Company, Mr. Friedman, the Executive Vice President--
Operations of the Company and Ms. Kenyon, the General Counsel of the Company
did not begin to serve in such capacities until February, September, April and
July 1996, respectively. Prior to his appointment as Chief Executive Officer,
Mr. Calvano had a consulting contract with First Data.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
SECURITIES
BONUS OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) ($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)(2)
- ------------------ ---- --------- ------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Robbin L. Ayers......... 1995 $138,112 $60,000 $47,320 5,000(3) 14,100
Executive Vice President
</TABLE>
- --------
(1) Mr. Ayers will be paid a bonus of $75,000 upon consummation of the
Offering.
(2) Represents amounts contributed by First Data to defined contribution
plans.
(3) Represents shares prior to the two-for-one stock split recently announced
by First Data and effective November 1, 1996.
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OPTION GRANTS IN 1995
The following table sets forth information for the Named Executives
regarding grants in 1995 of options to purchase First Data common stock.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
------------------------------------------------- -----------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) 1995(1) ($/SH)(2) DATE 5% ($) 10% ($)
- ---- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Ayers... 5,000(4)(5) (6) $51.125 3/15/05 $160,775 $407,425
</TABLE>
- --------
(1) Based on options to purchase an aggregate of 5,385,176 shares of First
Data common stock granted.
(2) The exercise price is the fair market value on the date of grant.
(3) Potential realizable value is calculated based on an assumption that the
price of First Data common stock appreciates at the annual rate shown,
compounded annually, from the date of grant of the option until the
expiration date of the option. The value is net of the exercise price but
is not adjusted for the taxes that would be due upon exercise. The 5% and
10% assumed rates of appreciation are required by the rules of the
Securities and Exchange Commission and do not represent either First
Data's or the Company's estimate of future price. Actual gains, if any,
upon the exercise of these options will depend on the actual performance
of First Data common stock.
(4) Option becomes exercisable over a four-year period with 25% of the option
becoming exercisable on each of the first through fourth anniversaries of
the date of grant.
(5) Represents shares prior to the two-for-one stock split recently announced
by First Data and effective November 1, 1996.
(6) Less than 1/10 of 1 percent.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth information for the Named Executives
regarding the exercise in 1995 of options to purchase First Data common stock
and their holdings of unexercised options to purchase First Data common stock
as of December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED OPTIONS AT DECEMBER 31, 1995(#) OPTIONS AT DECEMBER 31, 1995($)(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Mr. Ayers(3)............ 2,500 $67,188 10,107 / 11,302 $ 314,876 / $213,570
</TABLE>
- --------
(1) The value realized is the excess of the fair market value on the date of
exercise over the exercise price, but is not adjusted for the taxes due on
exercise.
(2) The value is calculated based on the aggregate amount of the excess of
$66.9375 over the relevant exercise price(s).
(3) Represents shares prior to the two-for-one stock split recently announced
by First Data and effective November 1, 1996.
RETIREMENT PLAN
The Company does not maintain and currently does not plan to implement a
tax-qualified defined benefit pension plan.
First Data maintains a Retirement Plan (the "Retirement Plan") which is a
tax-qualified, funded, noncontributory, defined benefit pension plan that
provides benefits for eligible employees of First Data and its participating
subsidiaries. Eligible employees include all employees of First Data and its
participating subsidiaries located in the United States and certain employees
located outside the United States as of January 2, 1993. In 1994, employees
participating in the Retirement Plan were offered the option to cease accruing
benefits under the Retirement Plan in exchange for an enhanced benefit under
First Data's Incentive Savings Plan, a defined contribution pension plan. Mr.
Ayers elected to opt out of the Retirement Plan, resulting in a frozen defined
benefit of $23,111, upon retirement at age 65 (unreduced for survivor
protection) and assuming a straight life annuity on a monthly basis.
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STOCK PLANS
In connection with the Offering, the Board of Directors of the Company will
adopt, and IPS as the Company's sole stockholder will approve, the Company's
1996 Stock Option Plan (for executives and other key employees) and the
Company's 1996 Broad-Based Stock Option Plan (for all other employees). The
Company has reserved for issuance under the 1996 Stock Option Plan
shares of Common Stock. The Compensation Committee, which will administer the
1996 Stock Option Plan, is expected to grant, subject to consummation of the
Offering, options to purchase Common Stock as follows: options to Mr.
Ayers; options to Mr. Calvano; options to Mr. Fowler;
options to Mr. Friedman; options to Ms. Kenyon and options to
other employees of the Company. Each option will have an exercise price equal
to 100% of the initial public offering price, will have a four-year term and
will become exercisable with respect to 25% of the shares of Common Stock
subject to the option on each of the first four anniversaries of the
consummation of the Offering.
The Company has reserved for issuance under the 1996 Broad-Based Stock
Option Plan shares of Common Stock. The Company expects to grant
under the 1996 Broad-Based Stock Option Plan upon consummation of the Offering
options to purchase shares of Common Stock to each eligible employee of
the Company (other than certain officers and employees who are eligible under
the 1996 Stock Option Plan and certain employees who reside in foreign
countries) as of the date of the closing of the Offering. Each such option
will have an exercise price equal to 100% of the initial public offering
price, will have a four-year term and will become exercisable with respect to
25% of the shares of Common Stock subject to such option on each of the first
four anniversaries of the consummation of the Offering.
OWNERSHIP OF CAPITAL STOCK
SECURITY OWNERSHIP OF THE COMPANY BY MANAGEMENT
Prior to the consummation of the Offering, no director or executive officer
beneficially owned any equity securities of the Company. The Company expects
that, subject to consummation of the Offering, certain executive officers and
other employees of the Company will be granted options to purchase Common
Stock. See "Management--Stock Plans."
SOLE STOCKHOLDER OF THE COMPANY
The following table sets forth certain information regarding the beneficial
ownership by the Selling Stockholder of the Common Stock (i) immediately prior
to the Offering and (ii) as adjusted to reflect the sale of the shares of
Common Stock offered hereby (assuming the U.S. Underwriters' over-allotment
option is not exercised). The Selling Stockholder has sole voting and
investment power with respect to all shares indicated as beneficially owned by
the Selling Stockholder. If the U.S. Underwriters' over-allotment option is
not exercised in full, IPS will deposit any shares of Common Stock then-owned
by it into the Trust. IPS will be the beneficial owner of any such shares,
however, the Trustee will have sole voting and investment power with respect
to the shares of Common Stock subject to the Trust in accordance with the
terms of the Trust Agreement.
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING(1)
----------------- -----------------
PERCENT OF PERCENT OF
NAME AND ADDRESS NUMBER CLASS NUMBER CLASS
- ---------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Integrated Payment Systems Inc.............. 100% 13%
6200 South Quebec
Englewood, CO 80111
</TABLE>
- --------
(1) If the U.S. Underwriters' over-allotment option is exercised in full, the
Selling Stockholder's number of shares of Common Stock and percent of
class would be zero.
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<PAGE>
PRINCIPAL STOCKHOLDERS OF FIRST DATA
The following table sets forth, based on 223,517,389 shares of First Data
common stock outstanding as of December 31, 1995, the percentage of ownership
of First Data common stock by the persons who beneficially own more than 5% of
First Data common stock based solely upon filings with the Securities and
Exchange Commission:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- ------------------- ----------------------- ----------
<S> <C> <C>
American Express Company
American Express Tower
World Financial Center
New York, NY 10285......................... 27,227,310(2)(4) 12.2%
Janus Capital Corporation(3)
100 Fillmore Street, Suite 300
Denver, CO 80208........................... 14,802,043(4) 6.6%
</TABLE>
- --------
(1) Represents shares prior to the two-for-one stock split recently announced
by First Data and effective November 1, 1996.
(2) According to the Schedule 13G of American Express, 4,608,810 of these
shares were held by American Express Financial Advisers, which was a joint
filer of the Schedule 13G. Pursuant to the terms of an October 1993
offering by American Express of 6 1/4% Exchangeable Notes Due October 15,
1996 ("DECS"), American Express may, at its option, consummate the
mandatory exchange thereunder at maturity by delivering share of First
Data common stock. If American Express exercises such option and uses its
current holdings of First Data common stock without acquiring any
additional shares, its ownership interest in First Data would be
substantially reduced. However, American Express is under no obligation to
exercise such option to deliver First Data common stock pursuant to the
terms of the DECS or, if it so elects, that it will use all or any portion
of its current holdings of First Data common stock to make such delivery.
(3) The Schedule 13G dated February 13, 1996 of Janus Capital Corporation was
filed jointly with Thomas H. Bailey. As stated in Item 4 of this Schedule
13G, Mr. Bailey owns approximately 12.2% of Janus Capital. In addition to
being a stockholder of Janus Capital, Mr. Bailey serves as President and
Chairman of the Board of Janus Capital and filed the joint statement with
Janus Capital as a result of such stock ownership and positions which may
be deemed to enable him to exercise control over Janus Capital. According
to this Schedule 13G, Mr. Bailey does not own of record any shares of
First Data common stock; however, as a result of his position, Mr. Bailey
may be deemed to have the power to exercise or to direct the exercise of
such voting and/or dispositive power that Janus Capital may have with
respect to First Data common stock held by investment companies registered
under section 8 of the Investment Company Act of 1940 and individual and
institutional clients (the "Managed Portfolios"). According to this
Schedule 13G, all shares reported herein have been acquired by the Managed
Portfolios and Mr. Bailey specifically disclaims beneficial ownership over
any shares of First Data common stock that he or Janus Capital may be
deemed to beneficially own. Furthermore, according to this Schedule 13G,
Mr. Bailey does not have the right to receive any dividends from, or the
proceeds from the sale of, the securities held in the Managed Portfolios
and disclaims any ownership associated with such rights.
(4) Shared voting and dispositive power.
BENEFICIAL OWNERSHIP OF FIRST DATA COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY
The following table sets forth, as of July 31, 1996, the number of shares of
common stock of First Data beneficially owned by each director of the Company,
each of the Named Executives and by all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(1) CLASS
- ---- ----------------------- ----------
<S> <C> <C>
DIRECTORS
EXECUTIVE OFFICERS
Robbin L. Ayers............................. 10,162(2) (4)
James F. Calvano............................ 5,000 (4)
John M. Fowler.............................. -- (4)
Alan H. Friedman............................ 30 (4)
Andrea M. Kenyon............................ -- (4)
All directors and executive officers as a
group (5 persons).......................... 15,162(3) (4)
</TABLE>
- --------
(1) The number of shares reported includes options that are exercisable within
60 days of July 31, 1996.
(2) Includes 10,107 shares issuable upon exercise of options.
(3) Includes 10,107 shares issuable upon exercise of options.
(4) Less than one percent.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH FIRST DATA
On June 12, 1995, First Data entered into a merger agreement with FFM, the
parent of Western Union. Western Union is the principal competitor of the
Company. The Company estimates that of the 33 million non-bank consumer money
wire transfers processed worldwide in 1995, Western Union and the Company
accounted for approximately 81% and 16%, respectively, of all such
transactions. In order to obtain the FTC's approval of its merger with FFM
under federal antitrust law, First Data and the FTC entered into the Consent
Decree and the Hold Separate Agreement. The Consent Decree requires First Data
to divest the sales and marketing functions of either the Business or Western
Union, but allows First Data to perform processing services for both
businesses. First Data decided to divest itself of at least the sales and
marketing functions associated with the Business and retain Western Union.
First Data identified those operations and functions necessary to operate the
Business as a stand-alone entity, including those assets and personnel to be
dedicated solely to the Business, began reconfiguring the shared customer
service centers so that the Lakewood Facility would be used exclusively in the
Business and commenced the separation of information and services related to
the Business within the IPS data center in Englewood, Colorado.
THE TRANSITION AGREEMENTS
Pursuant to the Transition, the Company will enter into the Transition
Agreements, which consist of the Contribution Agreement, the Operations
Agreement, the Software License Agreement, the Facility, the Service Mark
License Agreement, the Human Resources Agreement, the Telecom Agreement and
the Registration Rights Agreement. Under the Transition Agreements, First Data
or its affiliates will provide a source of liquidity for working capital
purposes, certain licenses and services that are necessary to the operation of
the Business, including data processing services and services in respect of
compliance with applicable licensing and other legal requirements regarding
the provision of a consumer money wire transfer service. See "The Business--
Regulation and Licensing." While management of the Company has participated in
the preparation and negotiation of the Transition Agreements, none of the
Transition Agreements were the result of third-party, arm's-length
negotiations and there can be no assurance that the Company would not be able
to obtain services provided thereunder from a third party at a lower cost. For
additional information concerning the relationship of, and competition and
potential conflicts between, the Company and First Data, see "Risk Factors--
Factors Relating to Independence and Sale of the Company" and "The Business--
Competition."
The following summary description of the Transition Agreements does not
purport to be complete and is qualified in its entirety by reference to the
Contribution Agreement, the Operations Agreement, the Software License
Agreement, the Facility, the Service Mark License Agreement, the Human
Resources Agreement, the Telecom Agreement and the Registration Rights
Agreement, copies of which are filed as exhibits to the Registration Statement
of which this Prospectus is a part. See "Available Information."
The Contribution Agreement
MoneyGram Assets. Pursuant to the Contribution Agreement, (i) IPS will
contribute the $12 million IPS Cash Contribution and (ii) IPS and certain of
its affiliates will contribute to the Company all right, title and interest in
the MoneyGram Assets, including (a) the MoneyGram Marks, which consist of
certain copyrights and trademarks owned by First Data or IPS that are material
to the conduct of the Business, including the MoneyGram service mark; (b) the
PC MoneyGram and the MoneyGram Application Software; (c) the economic benefits
under the Agent Contracts; (d) the real estate lease and leasehold
improvements and certain items of personal property and personal property
leases related to the Lakewood Facility; and (e) certain items of personal
property, including PCs, printers and signage, that are provided to MoneyGram
Agents for use in connection with the MoneyGram service and certain contracts
with third persons related thereto. The MoneyGram Assets will be transferred
to the Company prior to the consummation of the Offering "as is, where is,"
and in consideration therefor, the Company will issue and deliver to IPS
shares of Common Stock.
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<PAGE>
Notwithstanding the transfer of the economic benefits under certain Agent
Contracts, in order to comply with applicable licensing requirements, IPS will
not assign to the Company title to any Agent Contract. Those Agent Contracts
that are not assignable by their terms from TRS will be terminated, and the
Company will be free to seek a new contract with the applicable agent. Those
Agent Contracts that are in the name of IPS will remain with IPS and the
economic benefits will be assigned to the Company pursuant to the Contribution
Agreement and the Operations Agreement. Upon satisfaction of the conditions to
the Company's owning and operating the Business in its own name, IPS will
assign all Agent Contracts to the Company, and the Company will assume all
liabilities and obligations related thereto.
The PCs currently located at approximately 450 MoneyGram Agent locations are
used to process both MoneyGram wire transactions and IPS's money order and
other payment services. These PCs will be contributed to the Company prior to
the Offering. The Company has agreed, as part of the Transition, to maintain
such PCs and to permit IPS to continue to offer its money order and other
payment services through these MoneyGram Agents on those PCs.
Assumed Liabilities. Pursuant to the Contribution Agreement, the Company
will assume and has agreed to discharge all liabilities and obligations to be
paid or performed in respect of the MoneyGram Assets, except in respect of the
Agent Contracts, which, as described above, cannot be assigned to the Company
until the satisfaction of certain conditions. Nevertheless, the Company will
assume the economic liabilities under the Agent Contracts and agree to
indemnify First Data and certain persons affiliated with First Data for losses
or expenses suffered by First Data or any such person in respect of such Agent
Contracts as if the Company were the owner of, and had primary liability
under, the Agent Contracts (except with respect to any loss or expense
incurred as a direct result of the gross negligence or willful misconduct of
First Data or its affiliates).
Taxes. The Contribution Agreement provides that First Data will be liable
for and will pay all taxes imposed upon or applicable to the Business or the
MoneyGram Assets with respect to periods ending at or prior to the time of the
Contribution and the Company will be liable for and will pay taxes imposed on
or applicable to the Business or the MoneyGram Assets with respect to periods
after the Contribution. Any sales tax, use tax, real property transfer or
gains tax, documentary stamp tax or similar tax attributable to the transfer
of the MoneyGram Assets shall be shared equally by the Company and IPS.
As a result of the Transition, the tax basis (for federal income tax
purposes) of the MoneyGram Assets is expected to increase from the tax basis
in the hands of IPS and its affiliates at the time of the Contribution to
their fair market value at that time. Subject to the discussion below, such
tax basis is generally expected to produce a tax benefit to the Company in
future years through depreciation or amortization deductions or through
decreased gain or increased loss.
In general, under Section 197 of the Code the tax basis of certain
intangible assets (including goodwill and going concern value) of the Company
is amortizable over a fifteen-year period. However, if the "anti-churning"
rules under Section 197(f)(9) of the Code apply, no amortization under Section
197 of the Code will be allowed with respect to the tax basis of goodwill,
going concern value and any other intangible assets for which depreciation or
amortization would not have been allowed but for Section 197. If applicable,
the anti-churning rules would disallow amortization with respect to a
significant portion of the MoneyGram Assets. In general, the "anti-churning"
rules will apply if (among other possibilities not believed to be relevant)
IPS and the Company are treated as being related either immediately before or
immediately after the Contribution. In form, IPS will own all of the
outstanding stock of the Company immediately before and immediately after the
Contribution and therefore might be considered to be related to the Company
for this purpose. However, tax counsel to First Data has advised First Data
that, in its opinion, although not clear, the Company should not be treated as
being related to IPS either immediately before or immediately after the
Contribution and therefore the anti-churning rules should not apply as a
result of the Contribution. No authority directly supports tax counsel's
opinion. Tax counsel's advice is based on the reasoning that (i) the Company
will conduct no meaningful business activity before the Transition, (ii) both
immediately before and immediately after the Contribution IPS will be under a
binding obligation to sell to the Underwriters an amount of stock of the
Company that will cause IPS to no longer
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<PAGE>
be related to the Company for purposes of the above rules and such sale is
expected to take place days following the Contribution and (iii) the
application of the anti-churning rules to the Contribution would, under tax
counsel's understanding of the purpose of the anti-churning rules, be
inconsistent with such purpose. Tax counsel's reasoning is consistent with the
reasoning of authority under unrelated provisions of the Code.
The Company currently intends to claim amortization deductions with respect
to the intangible assets described above. However, changes in applicable tax
law may eliminate the Company's ability to do so. In that regard, the IRS is
expected to issue Treasury regulations under Section 197 in the near future
which could set forth rules precluding such deductions. Furthermore, based on
the advice of its own tax advisors, the Company may determine that it is not
permitted to claim such amortization deductions on its tax returns. Also, the
Company may choose, following the Transition, to request a ruling from the IRS
confirming that the anti-churning rules will not apply to the Contribution
(although there is no assurance that such a ruling will be sought), and a
decision by the IRS not to issue a favorable ruling would cast doubt on the
Company's ability to claim such deductions. Finally, with respect to any
amortization deductions claimed by the Company, the IRS could successfully
assert a position on the audit of the Company's tax returns or in litigation
disallowing such deductions, and interest might be imposed by the IRS.
For financial accounting and reporting purposes, the Company will record a
deferred tax asset (with a corresponding credit to capital surplus) for the
tax effect of the difference between the net book value of the assets
contributed and liabilities assumed in the Contribution and their fair market
value. The amount of the net deferred tax asset which will be recorded at the
time of the Contribution may be reduced by a valuation allowance which will be
based upon management's judgment as to the likelihood of the Company
generating sufficient taxable income to realize the asset through future tax
deductions. Based upon an assumed initial public offering price of $
per share, the excess of the tax basis of the Company's net assets over their
net book value at the time of the Contribution would be $ million
resulting in a gross deferred tax asset of $ million. Based upon
preliminary management assessments, a valuation allowance of % or
$ million will be established resulting in a net deferred tax asset
of $ million.
The Operations Agreement
Under the Operations Agreement, which has an initial two-year term, IPS or
its affiliates will perform for the Company data processing services,
management services, disaster recovery services for the Lakewood Facility's
customer service center, voice center services and certain corporate support
services. Under the Operations Agreement, the Company and First Data have
agreed to schedules of fees and expenses which reflect First Data's good faith
estimate of the actual cost of providing such services (including reasonable
allocations of overhead expenses) calculated on a basis consistent with the
determinations made in preparing the Financial Statements appearing elsewhere
in this Prospectus. No assurances can be made, however, that the Company could
not obtain such services at lower cost from a third party.
Data Processing Services. Data processing services include, among other
things, on-line and batch processing of MoneyGram transactions, database
management, data security and telecommunications and account management.
Management Services. The management services are functions that IPS must
perform in order for the Business to be in compliance with applicable
licensing and other legal requirements (including anti-fraud and anti-money
laundering functions) until such time as the Company is fully licensed in all
applicable jurisdictions to own and operate a consumer money wire transfer
service in its own name (the "Management Services"). IPS will issue to
MoneyGram Agents its own financial paper and send and receive forms. IPS also
will be responsible for collecting all monies related to MoneyGram
transactions. Fiduciary Funds related to MoneyGram transactions, except those
related to transactions that are subject to the TRS Management Agreement, will
be held by IPS and invested, in accordance with applicable law, in a portfolio
of investments at least equal to the principal amount of MoneyGram
transactions that, from time to time, have been initiated but not yet paid to
the recipient. IPS will be entitled to investment income on the Fiduciary
Funds until such time as the Company
64
<PAGE>
operates the Business in its own name. Under the Operations Agreement, IPS
will continue to be a party to the Agent Contracts and to hold all necessary
licenses to operate the Business. All other activities relating to the
Business, including pricing, selecting and negotiating with MoneyGram Agents,
determining commissions to be paid to MoneyGram Agents and substantially all
customer service center services, will be conducted by the Company.
Disaster Recovery Services. IPS and its affiliates will provide disaster
recovery services for the Lakewood Facility customer service center during the
term of the Operations Agreement at First Data's facilities in Englewood,
Colorado in the event the customer service center is damaged by fire,
earthquake, power loss, telecommunications failure or similar events, and, for
such time as the Company chooses to route inbound voice calls through the
Corpus Christi Facility, at the Corpus Christi Facility.
Voice Center Services. Voice Center Services may be provided, pursuant to
the Company's request, for up to 30% of the Company's inbound voice calls
through the Corpus Christi Facility.
Corporate Support Services. Corporate support services such as payroll,
operations support, treasury and accounting services will be provided by IPS
and its affiliates until the Company can administratively assume performance
of such services itself.
Economic Rights under the Agent Contracts. Under the Operations Agreement,
IPS will pay to the Company on a daily basis the aggregate amount of fees paid
by customers in respect of all MoneyGram transactions. Foreign exchange
revenues in respect of all such transactions will be paid by IPS to the
Company on a monthly basis, as such revenues are collected from Banamex
monthly. The Company will pay the MoneyGram Agents the commissions and other
amounts payable on account of MoneyGram transactions in accordance with the
terms of the applicable Agent Contracts and, on a monthly basis, will pay IPS
the amount due or payable to First Data under the Operations Agreement.
Confidentiality. Both the Company and First Data will agree to keep
confidential certain information concerning the other party's business,
technical data or computer software, documentation and systems to which a
party has access under the Operations Agreement. In addition, any confidential
information that the Operations Agreement requires the Company to provide to
First Data will be provided only to a designated representative of First Data.
Such designated representative will be obligated to keep such information
confidential and to provide it only to those persons within First Data who
have a need to know such information in order for First Data to perform its
obligations under the Operations Agreement. The designated representative also
will take reasonable steps to keep any confidential information of the Company
separated from First Data personnel involved in the management of the Western
Union business.
Term. The Operations Agreement will have a two-year term, unless earlier
terminated as described below. The Company is obligated to obtain all
necessary licenses to commence owning and operating the Business in its own
name on or prior to the expiration of the two-year term or within 180 days
after termination of the Operations Agreement in accordance with its terms.
Thereafter, IPS will have no further obligation to provide the Management
Services or to allow the Company or any MoneyGram Agent to continue to sell an
IPS denominated consumer money wire transfer product. However, the Operations
Agreement provides that, at the request of the Company in its sole discretion,
IPS will negotiate in good faith to extend the term of the Operations
Agreement or negotiate a similar arrangement with the Company, in either case
upon such terms and conditions, including prices, to be agreed upon by the
Company and IPS.
Termination. The Company may terminate the Operations Agreement in its
entirety or may terminate certain related groups of services offered under the
Operations Agreement, including the data processing services or, if the
Company has obtained the Required Licenses and has converted its selling
MoneyGram Agents, the management services, upon prior written notice within
specified periods of varying lengths, none of which exceeds 90 days. The
Company may terminate the voice center services on 30 days notice. In the
event the Company terminates the data processing services the Company is
obligated to provide IPS with certain
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<PAGE>
information required by IPS to perform the Management Services. In addition,
the Company or IPS will have the right to terminate the Operations Agreement
in the event of, among other things, (i) the failure of the other party or any
of its affiliates to perform any material obligation thereunder (after notice,
an opportunity to cure and satisfaction of certain dispute resolution
procedures), (ii) certain bankruptcy related events of the other party, (iii)
the enjoinment of the other party from performing any of its material
obligations thereunder and (iv) the insolvency of the other party.
Continuing Obligations After Termination. The Operations Agreement will
provide that prior to the termination thereof, IPS and the Company will
expeditiously and in good faith agree upon and document a plan providing for
an orderly transition to a successor of the obligations of IPS under the
Operations Agreement over a period of not less than 180 days from the date of
such termination. During such transition period, IPS will provide reasonable
transition assistance to the Company. The Company will compensate IPS, on a
time and materials basis, for such assistance, at IPS's then-prevailing rates
(plus reimbursement of expenses) in addition to all other payment obligations
of the Company pursuant to and in accordance with the Operations Agreement.
Indemnification. IPS and the Company will agree to indemnify and hold
harmless each other in respect of certain matters arising in connection with
the Operations Agreement. The indemnification obligations of IPS and the
Company under the Operations Agreement will be limited in the certain
respects, including in respect of the maximum amounts of indemnification.
Money Order Product. During the term of the Operations Agreement, IPS has
agreed, upon the request of the Company, to negotiate in good faith the terms
of additional data processing and other services to be provided by IPS and its
affiliates in respect of a money order product offered by the Company,
initially, in the names of IPS (as the licensed entity) and the Company and,
at such time as the Company has obtained all necessary licenses to offer such
product, a money order product offered by the Company in its own name. Any
agreement between the Company and IPS in respect of such product will be on
terms agreed to by the parties, provided that IPS has agreed that its fees and
reimbursable expenses will not be greater than then-current market rates.
The Software License Agreement
Pursuant to the Software License Agreement, IPS will grant to the Company,
effective upon the termination of the data processing services under the
Operations Agreement, a perpetual, assignable, nonexclusive, royalty-free
license to reproduce, modify and use the IPS Application Software, provided
that IPS Application Software may be used by the Company (i) only on a
computer system owned, leased or operated by the Company or by any third
person who provides service bureau data processing services on behalf of the
Company and (ii) only for the data processing requirements of the Company
relating to the MoneyGram service and not for use in connection with other
payment products or services, unless in each case IPS gives its prior
approval.
In the event that the Company desires expanded use of the IPS Application
Software, IPS has agreed to negotiate the price and terms thereof in good
faith. In the event such desired expansion is in connection with the money
order product described above under the Operations Agreement, IPS has agreed
to negotiate such expansion in good faith so long as IPS or its affiliates
provide the data processing services to the Company for such product. The
Software License Agreement also requires the Company to obtain IPS's consent
(not to be unreasonably withheld) prior to the assignment of its rights
thereunder, other than an assignment to a purchaser of substantially all of
the Business.
Pursuant to the Software License Agreement, IPS will indemnify, defend and
hold the Company harmless against certain claims arising out of or related to
any claim that the Company's use or possession of the IPS Application
Software, or the license to such software granted thereunder, infringes or
violates the intellectual property of any third person. If a final injunction
is obtained against the Company's use of the IPS Application Software by
reason of such infringement or if in IPS's opinion such software is likely to
become the subject of a claim for such infringement, IPS may procure for the
Company the right to continue using such software in the manner permitted
under the Software License Agreement or replace or modify such software so
that it becomes noninfringing.
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IPS will have the right to terminate the Software License Agreement and the
license granted thereunder if the Company breaches any of its material
obligations thereunder, which breach is not substantially cured within a
specified time period after notice is given by IPS to the Company.
The Short-Term Working Capital Facility
Prior to the consummation of the Offering, First Data and the Company will
enter into the Facility with the Company pursuant to which the Company may
borrow from time to time, on a revolving basis, up to $20 million. Borrowings
under the Facility will be unsecured and may be used by the Company only to
fund working capital requirements. The Facility will terminate on January 15,
1997, at which time all outstanding borrowings thereunder would have to be
repaid or refinanced by the Company. See "Risk Factors--Liquidity."
Borrowings under the Facility bear interest at the prime rate, as announced
by Chase Manhattan Bank, N.A. (the "Prime Rate"), plus one percent. Any
overdue amounts under the Facility will bear an interest rate equal to the
Prime Rate plus three percent. The Company, upon proper notice to First Data,
may make prepayments on the outstanding balance under the Facility at any
time. No commitment or other fees are charged to the Company under the
Facility.
The Facility contains certain negative covenants that limit or restrict the
Company, without the consent of First Data (not to be unreasonably withheld),
from (i) creating or permitting any lien or other encumbrance on its assets or
properties, other than purchase money security interests or pre-existing liens
on after-acquired property; (ii) paying any dividend on or making any
distribution with respect to, or acquiring, shares of its capital stock other
than (x) dividends or distributions payable in shares of its Common Stock, (y)
acquisitions of Common Stock with proceeds from a concurrent issuance of
Common Stock or (z) cash dividends to the extent that the aggregate amount of
all such cash dividends in excess of 10% of net income of the Company on a
cumulative consolidated basis after September 30, 1996; (iii) selling, leasing
or otherwise disposing of any property (other than in the ordinary course of
business) that is material to the Company's business or operations; (iv)
merging or consolidating; (v) acquiring all or substantially all of the assets
of any other person, except for acquisitions that in the aggregate do not
exceed $5 million; (vi) Investments (as defined in the Facility) in excess of
$5 million in the aggregate; (vii) any transactions with an affiliate other
than on an arm's length basis and (viii) prepaying or repaying the principal
of any indebtedness for money borrowed unless such payment is a regularly
scheduled payment, in which case the Company concurrently shall reduce the
commitment under the Facility in an amount equal to such payment (and repay
any outstanding indebtedness under the Facility in excess of such reduced
commitment). The Facility also will include terms, conditions, representations
and warranties, indemnities and events of default and other provisions which
are customary in such agreements. In addition, in the event the Company or any
of its subsidiaries receives cash proceeds from the issuance of any
indebtedness for money borrowed, the Company must repay outstanding borrowings
under the Facility in an amount equal to such cash proceeds and the
outstanding commitment under the Facility shall be reduced concomitantly.
The Service Mark License Agreement
Pursuant to the Service Mark License Agreement, Western Union will grant to
the Company a non-exclusive and royalty-free license to use "The Better Way to
Wire Money" and "Money in Minutes Worldwide" in English and certain other
languages (but not Spanish) in certain countries, always accompanied by the
word "MoneyGram" and to use "Wire Money in Minutes" in the United States in
English, always accompanied by the word "MoneyGram" (the "Licensed Marks").
The Company will relinquish to Western Union any rights it may have in, and
will be prohibited from otherwise using, the Licensed Marks. In addition, the
Company will relinquish any rights it may have in, and be prohibited from
using, other marks used by Western Union, including, for example, "Money in
Minutes," "The Best Way to Send Money" and "The Fastest Way to Send Money."
Western Union will covenant not to use "The Better Way to Wire Money" in
English in certain countries, including the United States. Both the Company
and Western Union will have a six-month period, beginning at the consummation
of the Offering, during which non-conforming uses of the marks covered by the
agreement will be permitted. Any non-conforming signage, including non-
conforming signage
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installed during the transition period, may be used through the life of such
signage. The Company is required to use the Licensed Marks in compliance with
laws and in accordance with quality control and other guidelines agreed to by
the parties. In the event the Company breaches any material obligation of the
Company under the Service Mark License Agreement (which breach is not cured
within 60 days of notice by Western Union of such breach), Western Union may
terminate the license with respect to all licensed Marks in each Territory (as
defined therein) in which such breach occurred and was not cured. The Company
has six months after any such termination to discontinue use of the Licensed
Marks. The Service Mark License Agreement also contains limited
representations and warranties by Western Union, mutual indemnities and
certain other terms customary in such licensing agreements.
The Human Resources Agreement
First Data, IPS and the Company will enter into the Human Resources
Agreement which defines the duties, obligations and liabilities of First Data,
IPS and the Company with respect to the transition of employees from First
Data and IPS to the Company. The Human Resources Agreement addresses the
termination of such employees under First Data's pension, profit sharing and
stock plans and welfare benefit plans (medical, dental, etc.) and their
benefits as newly hired employees of the Company. Pursuant to the Human
Resources Agreement, First Data, IPS and the Company have each agreed, for a
one-year period from the consummation of the Offering, not to solicit or hire
each other's employees.
The Telecommunications Services Sharing Agreement
First Data and the Company will enter into the Telecom Agreement which
provides that First Data shall cooperate and use reasonable efforts to
facilitate the provision of telecommunication services under First Data's
agreements with its various long-distance telecommunication service providers
to the Company and its affiliates, if any. The Telecom Agreement permits the
Company to choose among such long-distance providers and to benefit from First
Data's tariff rates. The Company, in exchange, will agree to use the
telecommunication services provided by First Data's telecommunication
providers exclusively for all of the Company's and its affiliates' person-to-
person telephone calls (both incoming and outgoing). The Telecom Agreement
expires on December 31, 1998, unless earlier terminated for, among other
things, breach by either party of its representations, warranties or
agreements therein, bankruptcy or insolvency of a party or, at the Company's
option, upon 60 days written notice.
Registration Rights Agreement
In connection with the Offering, the Company and IPS will enter into a
Registration Rights Agreement, which, among other things, provides that upon
the request of IPS, the Company will register under the Securities Act any of
the shares of Common Stock (and any other securities issued in respect thereof
or in exchange therefor) held by IPS (or the Trustee) and certain transferees
for sale in accordance with IPS's intended method of disposition thereof, and
will take such other actions necessary to permit the sale thereof in other
jurisdictions. IPS has the right to request three such registrations (one of
which may be a "shelf" registration pursuant to Rule 415 under the Securities
Act), subject to certain limitations specified in the Registration Rights
Agreement. IPS also has the right, which it may exercise at any time and from
time to time in the future, to include the shares of Common Stock (and any
other securities issued in respect thereof or in exchange therefor) held by
IPS (or the Trustee) and certain transferees in certain other registrations of
common equity securities of the Company initiated by the Company on its own
behalf or on behalf of its other stockholders. Subject to certain limitations
specified in the Registration Rights Agreement, such registration rights are
assignable by IPS and its assigns.
OTHER RELATIONSHIPS
For a description of certain transactions between IPS and American Express
that related to the Business prior to the Offering, see Note 3 of the Notes to
Financial Statements.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.01 per share. The following summary description
of the capital stock, Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and By-laws of the Company does not purport
to be complete and is qualified in its entirety by reference to the Company's
Certificate of Incorporation and By-laws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part (see
"Available Information"), and to the Delaware General Corporation Law
("DGCL").
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. See "Dividend Policy." Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock offered by the Selling Stockholder in the Offering will
be fully paid and nonassessable.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and By-
laws, summarized in the following paragraphs, may be considered to have an
anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.
Delaware Anti-takeover Law. Section 203 of the DGCL ("Section 203")
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which such person became an interested
stockholder unless: (i) prior to such date, the Board of Directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon becoming an
interested stockholder, the stockholder then owned at least 85% of the voting
stock, as defined in Section 203; or (iii) subsequent to such date, the
business combination is approved by both the Board of Directors and by holders
of at least 66 2/3% of the corporation's outstanding voting stock, excluding
shares owned by the interested stockholder. For these purposes, the term
"business combination" includes mergers, asset sales and other similar
transactions with an "interested stockholder." An "interested stockholder" is
a person who, together with affiliates and associates, owns (or, within the
prior three years, did own) 15% or more of the corporation's voting stock.
Pursuant to the Certificate of Incorporation, the Company has expressly
elected not to be governed by Section 203.
Classified Board of Directors. The Company's Certificate of Incorporation
provides for the Board of Directors to be divided into three classes of
directors serving staggered three-year terms. As a result, approximately one-
third of the Board of Directors will be elected each year. Classification of
the Board of Directors expands the time required to change the composition of
a majority of directors and may tend to discourage a proxy contest or other
takeover bid for the Company. Moreover, under the DGCL in the case of a
corporation having a classified board of directors, the stockholders may
remove a director only for cause. These provisions, when coupled with
provisions of the Company's Certificate of Incorporation authorizing only the
Board of Directors to fill vacant directorships, will preclude stockholders of
the Company from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the vacancies with their
own nominees.
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Special Meetings of Stockholders. The Company's By-laws provide that special
meetings of stockholders may be called by the Chairman of the Board, if any,
or the President and shall be called by the President or the Secretary at the
request in writing of a majority of the Board of Directors of the Company.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Company's By-laws provide that stockholders seeking to bring
business before a meeting of stockholders, or to nominate candidates for
election as directors at a meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to,
or mailed and received at, the principal executive office of the Company, not
less than 60 days nor more than 90 days prior to the scheduled meeting (or, if
a special meeting, not later than the close of business on the tenth day
following the earlier of (i) the day on which such notice of the date of the
meeting was mailed, or (ii) the day on which public disclosure of the date of
the special meeting was made). The By-laws also specify certain requirements
pertaining to the form and substance of a stockholder's notice. These
provisions may preclude some stockholders from making nominations for
directors at an annual or special meeting or from bringing other matters
before the stockholders at a meeting.
No Action by Written Consent of the Stockholders. The Company's Certificate
of Incorporation does not allow the stockholders of the Company to take action
by written consent except during periods when all of the Company's outstanding
stock is owned by a single stockholder.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation contains a provision that is
designed to limit the directors' liability to the extent permitted by the DGCL
and any amendments thereto. Specifically, directors will not be held liable to
the Company or its stockholders for an act or omission in such capacity as a
director, except for liability as a result of: (i) a breach of the duty of
loyalty to the Company or its stockholders, (ii) actions or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) payment of an improper dividend or improper repurchase of the
Company's stock under Section 174 of the DGCL, or (iv) actions or omissions
pursuant to which the director will receive an improper personal benefit. The
principal effect of the limitation of liability provision is that a
stockholder is unable to prosecute an action for monetary damages against a
director of the Company unless the stockholder can demonstrate one of the
specified bases for liability. This provision, however, does not eliminate or
limit director liability arising in connection with causes of action brought
under the federal securities laws. The Company's Certificate of Incorporation
does not eliminate its directors' duty of care. The inclusion of this
provision in the Company's Certificate of Incorporation may, however,
discourage or deter stockholders or management from bringing a lawsuit against
directors for a breach of their fiduciary duties, even though such an action,
if successful, might otherwise have benefited the Company and its
stockholders. This provision should not affect the availability of equitable
remedies such as injunction or rescission based upon a director's breach of
the duty of care.
Indemnification. The Company's By-laws also provide that the Company will
indemnify its directors and officers to the fullest extent permitted by
Delaware law. The Company generally is required to indemnify its directors and
officers for all judgments, fines, settlements, legal fees and other expenses
incurred in connection with pending or threatened legal proceedings because of
the director's or officer's position with the Company or another entity that
the director or officer serves at the Company's request, subject to certain
conditions, and to advance funds to its directors and officers to enable them
to defend against such proceedings. To receive indemnification, the director
or officer must have been successful in the legal proceedings or acted in good
faith and in what was reasonably believed to be a lawful manner and in the
Company's best interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust.
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SELLING STOCKHOLDER
Immediately prior to the sale of the shares of Common Stock in the Offering,
IPS will own all of the issued and outstanding shares of Common
Stock. After giving effect to the sale of shares of Common Stock to be sold in
the Offering, the Selling Stockholder will own shares of Common
Stock, representing 13% of the outstanding shares of Common Stock. The
foregoing percentage of ownership of the Selling Stockholder does not give
effect to the shares of Common Stock which may be sold by the
Selling Stockholder if the U.S. Underwriters over-allotment option is
exercised in full and does not give effect to the dilution arising from the
possible exercise of stock options.
SHARES ELIGIBLE FOR FUTURE SALE
Giving effect to the Transition, the Company will have outstanding
shares of Common Stock. Of these shares, the shares sold
in the Offering (or shares if the U.S. Underwriters' over-allotment
option granted by the Selling Stockholder is exercised in full) will be freely
tradeable without restrictions or further registration under the Securities
Act, except for any shares purchased by an "affiliate" of the Company which
will be subject to the resale limitations of Rule 144 under the Securities Act
("Rule 144"). Any shares held by the Selling Stockholder after completion of
the Offering (up to shares of Common Stock assuming the over-
allotment option granted by IPS is not exercised in full) will be "restricted
securities" within the meaning of Rule 144. These "restricted securities" may
not be sold in absence of registration under the Securities Act other than in
accordance with Rule 144 or another exemption from registration. IPS has
certain rights to have the Common Stock owned by it (or held by the Trustee)
subsequent to the Offering, if any, registered by the Company under the
Securities Act. See "Certain Relationships and Related Transactions--The
Transition Agreements--The Registration Rights Agreement."
In general, under Rule 144 as currently in effect, a person (including an
"affiliate" (as that term is defined under the Securities Act)) who
beneficially owns shares that are "restricted securities" as to which at least
two years have elapsed since the later of the date of acquisition of such
securities from the issuer or from an affiliate of the issuer, and any
affiliate who owns shares that are not "restricted securities," is entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of one percent of the then outstanding shares of Common Stock or
the average weekly trading volume in the Company's Common Stock in composite
trading on all exchanges and the New York Stock Exchange during the four
calendar weeks preceding such sale. A person (or persons whose shares are
aggregated) who is not deemed an "affiliate" of the Company and who has
beneficially owned restricted securities as to which at least three years have
elapsed since the later of the date of the acquisition of such securities from
the issuer or from an affiliate of the issuer is entitled to sell such shares
under Rule 144 without regard to the volume limitations described above. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
Prior to the Offering, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that market sales of
shares of Common Stock, or the availability of such shares for sale, will have
on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. Under the terms of the Trust
Agreement, the Trustee has the duty and the authority on behalf of IPS to
dispose of any shares owned by IPS on or prior to January 23, 1997 or to
donate such shares to a designated charity or charities on January 23, 1997
(unless the Trust is extended). In connection with the Offering, subject to
certain exceptions, the Company, the Selling Stockholder and the Trustee
pursuant to the Trust Agreement have agreed not to sell or otherwise dispose
of, directly or indirectly, any shares of Common Stock (or any security
convertible into or exchangeable or exercisable for Common Stock) for a period
of 180 days (in the case of the Company) and prior to December 31, 1996 (in
the case of the Selling Stockholder and the Trustee) after the date of this
hereof without the prior written consent of Morgan Stanley & Co. Incorporated
on behalf of the Underwriters other than (i) the shares of Common Stock
offered hereby, (ii) any grant of stock options that vest subsequent to 180
days after the date of
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this Prospectus or (iii) one or more registration statements relating to the
Company's 1996 Stock Option Plan, the 1996 Broad-Based Stock Option Plan or
the MoneyGram Agent Stock Option Plan or the Company's obligations under the
Registration Rights Agreement or (d) the deposit, if any, of any shares of
Common Stock with Wachovia Bank of North Carolina, N.A. as trustee pursuant to
the Irrevocable Voting Trust Agreement. See "Underwriters."
In connection with the Offering, the Company expects to grant to certain
officers options to acquire up to an aggregate shares of Common
Stock under the 1996 Stock Option Plan and to grant to certain other employees
options to acquire up to an aggregate shares of Common Stock under
the 1996 Broad-Based Stock Option Plan, in each case at a price equal to 100%
of the initial public offering price set forth on the cover page of this
Prospectus. An additional and shares of Common Stock would
be available for future grants under the Company's 1996 Stock Option Plan and
1996 Broad-Based Stock Option Plan. See "Management--Stock Plans." The Company
intends to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable pursuant to the
Company's 1996 Stock Option Plan and 1996 Broad-Based Stock Option Plan, and
such registration statements are expected to become effective upon filing.
Shares of Common Stock covered by these registration statements will thereupon
be eligible for sale in the public markets.
In order to retain and sign certain significant MoneyGram Agents and to
provide those MoneyGram Agents an opportunity to share in the growth of the
Company, subsequent to the Offering, the Company currently expects to
implement the MoneyGram Agent Stock Option Plan pursuant to which the Company
would reserve shares of Common Stock. If implemented, the Company
may grant options to certain key MoneyGram Agents (exercisable at the price of
the Common Stock on the date any such option is granted) in connection with
the extension of existing or the negotiation of new Agent Contracts. Such
options, if granted, generally would not be exercisable until the expiration
of the initial term of such Agent Contracts. The Company expects that any such
stock options (and the shares of Common Stock issuable upon exercise of such
options) would be registered under the Securities Act. Therefore, any shares
of Common Stock issued upon exercise of an option would be freely tradeable
without restriction. No assurance can be given that the Company will adopt
such a MoneyGram Agent Stock Option Plan (which may require stockholder
approval) or that, if adopted, any options would be granted thereunder.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of shares
of Common Stock by a beneficial owner of Common Stock that, for United States
federal income or estate tax purposes, as the case may be, is a nonresident
alien individual, a foreign corporation or a foreign partnership or a foreign
trust or estate (a "non-U.S. holder"). The following discussion is based on
current provisions of the Code, existing and proposed regulations promulgated
thereunder and judicial and administrative interpretations thereof (any of
which may be changed either retroactively or prospectively) and is for general
information only. The following discussion does not address tax consequences
that may be relevant in light of any specific facts or circumstances that
might apply to a particular non-U.S. holder and does not address tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction or the application or effect of any tax treaty.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, could affect the United States
taxation of dividends on Common Stock paid to a non-U.S. holder. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. It cannot
be predicted at this time whether the Proposed Regulations will become
effective as proposed or what modifications, if any, may be made to them. The
discussion below is not intended to include a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged to
consult their tax advisors with respect to the effect the Proposed Regulations
may have if adopted.
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PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES, AS WELL AS THE
STATE, LOCAL AND OTHER TAX CONSEQUENCES, OF ACQUIRING, HOLDING AND DISPOSING
OF SHARES OF COMMON STOCK.
Dividends
Dividends paid to a non-U.S. holder will be subject to United States
withholding tax at a 30 percent rate, or such lower rate as may be specified
by an applicable tax treaty, unless the dividends are effectively connected
with the conduct of a trade or business of the non-U.S. holder in the United
States and the non-U.S. holder provides the payor with proper documentation.
Dividends which are effectively connected with such a United States trade or
business generally are subject to United States federal income tax on a net
income basis at regular graduated rates applicable to U.S. persons. A non-U.S.
holder may claim exemption from withholding under the effectively connected
income exception by filing IRS Form 4224 with the Company or its paying agent
at the times required by federal income tax law. The Proposed Regulations
would replace Form 4224 with Form W-8. Under certain circumstances, a non-U.S.
holder which is a corporation also may be subject to an additional "branch
profits tax" at a rate of 30%, or such lower rate as may be specified by an
applicable income tax treaty, of the non-U.S. holder's effectively connected
earnings and profits, subject to certain adjustments. Effectively connected
dividends might be subject to different treatment under an applicable tax
treaty depending on whether such dividends are attributable to a permanent
establishment of the non-U.S. holder in the United States.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of
such country for purposes of the withholding discussed above (unless the payor
has knowledge to the contrary) and, under current interpretation of United
States Treasury regulations, for purposes of determining the applicability of
a tax treaty rate. A non-U.S. holder of Common Stock eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for
refund with the United States Internal Revenue Service ("IRS").
The Proposed Regulations would provide for certain presumptions (which
differ from those described above) upon which the Company generally may rely
to determine whether, in the absence of certain documentation, a holder should
be treated as a non-U.S. holder for purposes of the 30% withholding tax
described above. The presumptions would not apply for purposes of granting a
reduced rate of withholding under a treaty. Under the Proposed Regulations, to
obtain a reduced rate of withholding under a treaty a non-U.S. holder
generally would be required to provide an Internal Revenue Service Form W-8
certifying such non-U.S. holder's entitlement to benefits under a treaty
together with, in certain circumstances, additional information. The Proposed
Regulations also would provide rules to determine whether, for purposes of
determining the applicability of a tax treaty and for purposes of the 30%
withholding tax described above, dividends paid to a non-U.S. holder that is
an entity should be treated as paid to the entity or those holding an interest
in that entity.
Sale of Common Stock
Generally, a non-U.S. holder will not be subject to United States federal
income tax on any gain recognized upon the sale or exchange or other
disposition of shares of Common Stock unless (i) the gain is effectively
connected with a trade or business carried on by the non-U.S. holder within
the United States, (ii) the non-U.S. holder is a nonresident alien individual
who holds Common Stock as a capital asset, is present in the United States for
183 or more days in the taxable year of the sale or disposition and either (a)
such individual's "tax home" for United States federal income tax purposes is
in the United States or (b) the sale is attributable to an office or other
fixed place of business maintained by such individual in the United States, or
(iii) subject to certain exceptions, the Company is or has been a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code at any time during the five year period ending on the
date of disposition, or, if shorter, the period during which the non-U.S.
holder held the Common Stock. The Company believes that it is not, nor has it
ever been, a "United States real property holding corporation" and does not
anticipate becoming such a corporation.
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The 183-day rule summarized above only applies in limited circumstances
because generally an individual present in the United States for 183 days in
the taxable year of the sale, exchange, or other disposition will be treated
as a resident for United States federal income tax purposes and therefore will
be subject to United States federal income tax at graduated rates applicable
to individuals who are United States persons for such purposes.
Non-U.S. holders should consult applicable treaties, which may result in
United States federal income tax treatment on the sale or exchange or other
disposition of the Common Stock different than as described above.
Backup Withholding and Information Reporting
The Company must report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, each non-U.S. holder. These reporting requirements apply
regardless of whether withholding was reduced by an applicable tax treaty.
Copies of these information returns also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the non-U.S. holder resides.
Unless the Company has actual knowledge that a holder is a non-U.S. holder,
dividends paid to such non-U.S. holder at an address within the United States
may be subject to backup withholding at a rate of 31% if the holder is not an
"exempt recipient" as defined in the existing Treasury regulations (which
includes corporations) and fails to provide a correct taxpayer identification
number and other information to the Company. United States backup withholding
generally will not apply to (i) the payment of dividends paid on Common Stock
to a non-U.S. holder at an address outside the United States (unless the
Company has knowledge that the holder is a United States person for United
States federal income tax purposes) or (ii) the payment of proceeds of a sale
or other disposition of Common Stock effected by or through the foreign office
of a broker. In the case of the payment of proceeds from such a sale or other
disposition of Common Stock effected by or through a foreign office of a
broker that is a United States person (for United States federal income tax
purposes) or a "U.S. related person," however, information reporting (but not
backup withholding) is required with respect to the payment unless the broker
has documentary evidence in its files that the owner is a non-U.S. holder (and
has no actual knowledge to the contrary) and certain other requirements are
met or the holder otherwise establishes an exemption. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for United
States federal income tax purposes, or (ii) a foreign person 50% or more of
whose gross income is from a United States trade or business for a specified
three-year period. The payment of the proceeds of a sale or other disposition
of Common Stock effected by or through the United States office of a broker is
subject to information reporting and backup withholding at a rate of 31
percent unless the non-U.S. holder certifies, among other things, as to its
non-United States status under penalties of perjury or otherwise establishes
an exemption.
If adopted, the Proposed Regulations would alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions and other rules under which non-U.S. holders may be
subject to backup withholding in the absence of required certifications and
would revise the definition of an "exempt recipient" in the case of a
corporation.
Backup withholding is not an additional tax. Rather, any amounts withheld
under the backup withholding rules from a payment to a non-U.S. holder will be
allowed as a refund or a credit against such non-U.S. holder's United States
federal income tax liability, provided that the required information is
furnished to the Internal Revenue Service.
Estate Tax
Shares of Common Stock owned or treated as owned, or which were the subject
of certain lifetime transfers, by an individual who is not a citizen or
resident (as specifically defined for United States federal estate tax
purposes) of the United States at the time of death will be includible in the
individual's gross estate for United States federal estate tax purposes,
unless an applicable tax treaty provides otherwise. Such individual's estate
may be subject to United States federal estate tax on the property includible
in the estate for United States federal estate tax purposes.
74
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, CS First Boston
Corporation, Lehman Brothers Inc. and Smith Barney Inc. are acting as U.S.
Representatives, and the International Underwriters named below, for whom
Morgan Stanley & Co. International Limited, CS First Boston Limited, Lehman
Brothers International (Europe) and Smith Barney Inc. are acting as the
International Representatives, have severally agreed, to purchase from the
Selling Stockholder, and the Selling Stockholder has agreed to sell to them,
severally, the respective number of shares of Common Stock set forth opposite
the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................
CS First Boston Corporation..................................
Lehman Brothers Inc..........................................
Smith Barney Inc.............................................
----------
Subtotal...................................................
----------
International Underwriters:
Morgan Stanley & Co. International Limited...................
CS First Boston Limited......................................
Lehman Brothers International (Europe).......................
Smith Barney Inc.............................................
----------
Subtotal.....................................................
----------
Total........................................................
==========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively
referred to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the U.S. Underwriters' over-allotment option described below)
if any such shares are taken.
75
<PAGE>
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that with certain exceptions: (a)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below), and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.
Shares outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions, (i) it is not purchasing any
International Shares (as defined below) for the account of any United States
or Canadian Person and (ii) it has not offered or sold, and will not offer or
sell, directly or indirectly, any International Shares or distribute any
prospectus relating to the International Shares in the United States or in any
province or territory of Canada or to any United States or Canadian Person.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or of any province or
territory of Canada, or any corporation, pension, profit sharing or other
trust or other entity organized under the laws of the United States or Canada
or of any political subdivision thereof (other than a branch located outside
the United States and Canada of any United States or Canadian Person) and
includes any United States or Canadian branch of a person who is otherwise not
a United States or Canadian Person. All shares of Common Stock to be purchased
by the U.S. Underwriters and the International Underwriters are referred to
herein as the U.S. Shares and the International Shares, respectively.
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares of Common Stock sold shall be the Price to Public set forth on the
cover page hereof, in United States dollars, less an amount not greater than
the per share amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any shares of Common Stock, directly or
indirectly, in any province or territory of Canada in contravention of the
securities laws thereof and has represented that any offer of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to file
a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance
that, by purchasing such Common Stock, such dealer represents and agrees that
it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such Common Stock in any province or territory of Canada or
to, or for the benefit of, any resident of Canada in contravention of the
securities laws thereof and that any offer of Common Stock in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer is made, and that
such dealer will deliver to any other dealer to whom it sells any of such
Common Stock a notice to the foregoing effect.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that: (i) it has not
offered or sold and during the period of six months after the date hereof will
not offer or sell any shares of Common Stock to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their business or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock offered
hereby in, from or otherwise involving the United Kingdom; and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issue of the
shares of Common Stock if that person is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995, or to any person to whom the document may otherwise lawfully be
issued or passed on.
76
<PAGE>
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the Price to Public set forth on the cover
page hereof, and part to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering price. The
Underwriters may allow and such dealers may reallow a concession not in excess
of $ per share to other Underwriters or certain dealers. After the initial
offering of the shares of Common Stock, the offering price, and other selling
terms may from time to time, be varied by the Representatives.
Pursuant to the Underwriting Agreement, the Selling Stockholder has granted
to the U.S. Underwriters an option exercisable for 30 days from the date of
this Prospectus, to purchase up to an additional shares of Common
Stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of Common Stock
offered hereby. To the extent such option is exercised, each U.S. Underwriter
will be committed, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such U.S. Underwriter's name in the preceding table bears to the total number
of shares of Common Stock offered by the U.S. Underwriters hereby.
Each of the Company, the Selling Stockholder and the Trustee pursuant to the
Trust Agreement has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, it will not, subject to certain exceptions, (i)
offer, issue, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, file a registration statement (in the case of the Company) or make
any demand for or exercise any right with respect to (in the case of the
Selling Stockholder and the Trustee) any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by such person or
are thereafter acquired directly from the Company) or (ii) enter into any swap
or similar agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) of this paragraph is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, for a period
of 180 days after the date of this Prospectus, in the case of the Company, and
December 31, 1996, in the case of the Selling Stockholder and the Trustee,
other than (i) the shares of Common Stock offered hereby, (ii) any grant of
stock options that vest subsequent to 180 days after the date of this
Prospectus or (iii) one or more registration statements relating to the
Company's 1996 Stock Option Plan, the 1996 Broad-Based Stock Option Plan or
the MoneyGram Agent Stock Option Plan or the Company's obligations under the
Registration Rights Agreement or (d) the deposit, if any, of any shares of
Common Stock with Wachovia Bank of North Carolina, N.A. as trustee pursuant to
the Irrevocable Voting Trust Agreement.
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock offered hereby for sale to certain directors, officers
and employees of the Company. Sales of shares of Common Stock to such persons
will be at the initial public offering price. The number of shares available
for sale to the general public will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered to the general public in the Offering on the same terms as the other
shares offered hereby. All purchasers of the shares of Common Stock reserved
pursuant to this paragraph who are also directors or senior officers of the
Company will be required to enter into agreements identical to those described
in the immediately preceding paragraph restricting the transferability of such
shares for a period of 180 days after the date of this Prospectus.
The Underwriters have informed the Selling Stockholder that they do not
intend sales to discretionary accounts to exceed five percent of the total
number of shares of Common Stock offered hereby.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Morgan Stanley & Co. Incorporated, CS First Boston Corporation, Lehman
Brothers Inc. and Smith Barney Inc. provide from time to time certain
financial advisory services to First Data and its affiliates for which they
have received customary fees and commissions.
77
<PAGE>
PRICING OF THE OFFERING
Prior to the Offering there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiations between the Selling Stockholder and the U.S. Representatives.
Among the factors to be considered in determining the initial public offering
price, in addition to prevailing market conditions, are the sales, earnings
and other financial and operating information of the Company in recent
periods, the future prospects of the Company and its industry in general, and
certain ratios, market prices of securities and certain financial and
operating information of companies engaged in activities similar to that of
the Company.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Selling Stockholder by Sidley & Austin, Chicago, Illinois.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The Financial Statements of the Company at December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, appearing
in this Prospectus and the Registration Statement of which this Prospectus is
a part have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein and in such
Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in auditing and accounting. With
respect to the unaudited interim financial information as of and for the six-
month period ended June 30, 1996 appearing in this Prospectus and the
Registration Statement of which this Prospectus is a part, Ernst & Young LLP
have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report, appearing elsewhere herein and in such Registration
Statement, states that they did not audit and they do not express an opinion
on that interim financial information. Accordingly, the degree of reliance on
their report on such information should be restricted considering the limited
nature of the review procedures applied. The independent auditors are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the Registration Statement prepared or
certified by the auditors within the meaning of Sections 7 and 11 of the
Securities Act.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits and schedules
thereto), pursuant to the Securities Act and the rules and regulations
promulgated thereunder, with respect to the Offering. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted from the Prospectus in accordance with the rules and regulations
of the Commission, and to which reference is hereby made.
After consummation of the Offering, the Company will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and, in accordance therewith will be required to file, proxy
statements, reports and other information with the Commission. The
Registration Statement, as well as any such report, proxy statement and other
information filed by the Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison
78
<PAGE>
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Upon listing of the Common Stock on the
New York Stock Exchange, Inc. (the "NYSE"), reports, proxy statements and
other information concerning the Company may be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to such exhibit or
other filing for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference. Copies of the
exhibits are available upon request made to John S. Zieser, Secretary,
MoneyGram Payment Systems, Inc. 10825 Farnam Drive, Omaha, Nebraska 68154,
telephone number (402) 222-7215.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent accounting firm and quarterly
reports containing unaudited financial information for the first three
quarters of each fiscal year.
79
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AUDITED FINANCIAL STATEMENTS PAGE
- ---------------------------- ----
<S> <C>
Report of Independent Auditors............................................ F-2
Balance Sheets as of December 31, 1994 and 1995........................... F-3
Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995..................................................................... F-4
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995..................................................................... F-5
Statement of Changes in Stockholder's (Deficit)/Equity for the Years Ended
December 31, 1993, 1994 and 1995......................................... F-6
Notes to Financial Statements............................................. F-7
<CAPTION>
UNAUDITED INTERIM FINANCIAL STATEMENTS
- --------------------------------------
<S> <C>
Independent Accountants' Review Report.................................... F-15
Balance Sheet as of June 30, 1996......................................... F-16
Statements of Income for the Six Months Ended June 30, 1995 and 1996...... F-17
Statements of Cash Flows for the Six Months Ended June 30, 1995 and 1996.. F-18
Statement of Changes in Stockholder's Equity for the Six Months Ended June
30, 1996................................................................. F-19
Notes to Financial Statements............................................. F-20
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors of
MoneyGram Payment Systems, Inc.
We have audited the accompanying balance sheets of MoneyGram Payment
Systems, Inc. as of December 31, 1994 and 1995, and the related statements of
operations and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MoneyGram Payment Systems,
Inc. at December 31, 1994 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Denver, Colorado
February 2, 1996, except as to Notes 1 and 9, as to which
the date is .
* * * *
The foregoing report is in the form that will be signed upon the completion
of the transactions and restatement of capital accounts described in Note 1 to
the financial statements under the caption "Formation of the Company."
Denver, Colorado
October 4, 1996
Ernst & Young LLP
F-2
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1994 1995
- ----------------------------------------------------------- -------- --------
<S> <C> <C>
Cash and cash equivalents.................................. $ -- $ --
Assets restricted to settlement of MoneyGram transactions.. 20,927 26,010
Fee revenue receivable..................................... 910 1,165
Prepaid and other current assets........................... 90 271
-------- --------
Total current assets................................... 21,927 27,446
Fixed assets at cost, net of depreciation: 1994--$2,231;
1995--$3,953.............................................. 3,084 6,000
Deferred income taxes...................................... 171 193
Costs of acquiring Agent Contracts, net of amortization:
1994--$3,535;
1995--$1,952.............................................. 3,401 7,979
-------- --------
Total assets........................................... $28,583 $ 41,618
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT)
- -----------------------------------------------------------
<S> <C> <C>
Liabilities relating to unsettled MoneyGram transactions... $20,927 $ 26,010
Accounts payable........................................... 2,178 1,393
Commissions payable........................................ 6,418 6,696
Accrued advertising........................................ 4,457 2,786
Employee-related liabilities............................... 507 1,280
Accrued and other liabilities.............................. 924 2,284
-------- --------
Total current liabilities.............................. 35,411 40,449
Stockholder's equity/(deficit):
Common stock, $.01 par value, authorized 100,000,000
shares; issued and outstanding shares........ -- --
Capital surplus.......................................... 21,922 11,625
Accumulated deficit...................................... (28,750) (10,456)
-------- --------
Total stockholder's equity/(deficit)................... (6,828) 1,169
-------- --------
Total liabilities and stockholder's equity/(deficit)... $28,583 $ 41,618
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
Revenues
Fee and other...................................... $48,815 $71,015 $ 94,242
Foreign exchange................................... 3,070 20,373 42,826
------- ------- --------
Total revenue ................................... 51,885 91,388 137,068
------- ------- --------
Expenses:
Agent commissions and amortization of Agent
Contract acquisition costs........................ 22,112 28,742 34,801
Processing......................................... 12,361 15,334 25,542
Advertising and promotion.......................... 13,708 19,523 33,822
Selling and service................................ 2,996 3,700 7,525
General and administrative......................... 3,904 4,678 5,722
------- ------- --------
Total expenses................................... 55,081 71,977 107,412
------- ------- --------
Income (loss) before income taxes.................... (3,196) 19,411 29,656
Income tax (benefit) expense......................... (1,119) 7,235 11,362
------- ------- --------
Net income (loss).................................... $(2,077) $12,176 $ 18,294
======= ======= ========
Pro forma net income (loss) per common share......... $ $ $
======= ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................ $(2,077) $ 12,176 $ 18,294
Adjustments to reconcile net income to net cash
provided by operating activities:
Direct depreciation and amortization expense*.. 1,518 1,889 3,762
Other noncash charges.......................... (160) 25 (22)
Changes in operating assets and liabilities:
Assets restricted to settlement of MoneyGram
transactions................................ 1,254 (8,100) (5,083)
Accounts receivable.......................... (103) (773) (255)
Prepaid and other assets..................... 268 21 (181)
Liabilities relating to unsettled MoneyGram
transactions................................ (1,254) 8,100 5,083
Accounts payable and other liabilities....... 1,108 9,953 (189)
------- -------- --------
Net cash provided by operating activities........ 554 23,291 21,409
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of signage and equipment................ (762) (2,739) (4,638)
Costs of acquiring Agent Contracts............... -- (2,404) (6,474)
------- -------- --------
Net cash used by investing activities............ (762) (5,143) (11,112)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net transfer from/(to) IPS....................... 208 (18,148) (10,297)
------- -------- --------
Net cash provided/(used) by financing activities. 208 (18,148) (10,297)
------- -------- --------
Net change in cash and cash equivalents.......... $ -- $ -- $ --
======= ======== ========
</TABLE>
- --------
* Relates only to MoneyGram assets as reflected on the accompanying balance
sheet.
See accompanying notes.
F-5
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S
EQUITY/(DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON CAPITAL ACCUMULATED STOCKHOLDER'S
STOCK SURPLUS DEFICIT EQUITY/(DEFICIT)
------ -------- ----------- ---------------
<S> <C> <C> <C> <C>
Balance January 1, 1993........... $-- $ 39,862 $(38,849) $ 1,013
Net loss........................ -- -- (2,077) (2,077)
Capital contribution from IPS... -- 208 -- 208
---- -------- -------- --------
Balance December 31, 1993......... -- 40,070 (40,926) (856)
Net income...................... -- -- 12,176 12,176
Return of capital to IPS........ -- (18,148) -- (18,148)
---- -------- -------- --------
Balance December 31, 1994......... -- 21,922 (28,750) (6,828)
Net income...................... -- -- 18,294 18,294
Return of capital to IPS........ -- (10,297) -- (10,297)
---- -------- -------- --------
Balance December 31, 1995......... $-- $ 11,625 $(10,456) $ 1,169
==== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
MoneyGram Payment Systems, Inc. (the "Company") is a wholly owned subsidiary
of Integrated Payment Systems Inc. ("IPS"), which is a wholly owned subsidiary
of First Data Corporation ("First Data"). First Data was a wholly owned
subsidiary of American Express Company ("American Express") prior to an
initial public offering of its common stock (the "1992 IPO") in April 1992.
Nature of Business
IPS' principal business involves providing payment instruments transaction
processing to institutional clients and retail consumers. These services
principally have involved the marketing and processing of the following types
of payment instruments: American Express(R) Official Checks, American
Express(R) Money Orders and the MoneyGram service ("MoneyGram" or the
"Business"). Pursuant to a management agreement (the "TRS Management
Agreement") among First Data, IPS and American Express Travel Related Services
Company, Inc., a wholly owned subsidiary of American Express ("TRS"), IPS has
managed the TRS payment instruments business, although TRS has been and
currently is the state-licensed issuer and provider of such payment
instruments. Throughout the periods presented in the accompanying financial
statements, the MoneyGram service has been conducted through an extensive
network of TRS selling agents. In accordance with the TRS Management
Agreement, the contracts with these selling agents were negotiated and managed
by IPS but executed in the name of TRS. Furthermore, IPS and First Data agreed
to indemnify TRS against any losses, damages and costs with respect to the
payment instruments of TRS; therefore, IPS' financial statements have been
prepared as if it were the issuer of the payment instruments. Pursuant to the
terms of the TRS Management Agreement, IPS became a licensed issuer of payment
instruments during 1993 and, in addition, acquired the MoneyGram service mark
at no cost from American Express in 1994. As discussed immediately below, the
Company was formed with the intention of it assuming the Business from IPS
pursuant to the various agreements described below.
Formation of the Company
On October 27, 1995, First Data consummated a merger transaction with First
Financial Management Corporation ("FFM"). FFM, through a subsidiary, Western
Union Financial Services, Inc. ("Western Union"), provides money transfer
services similar to MoneyGram. On January 19, 1996, First Data entered into a
consent decree with the Federal Trade Commission ("FTC") regarding MoneyGram
and Western Union. Under the terms of the consent decree, First Data is
allowed to perform processing services for each of MoneyGram and Western
Union, but it is permitted to retain the sales and marketing functions of only
one of the two businesses. The required divestiture must occur no later than
January 23, 1997. In addition, First Data and the FTC entered into a "hold
separate" agreement whereby the MoneyGram business must be managed and
maintained as a separate, ongoing business, independent of all other First
Data businesses and independent of the Western Union business. Among its
provisions the "hold separate" agreement requires that, prior to consummation
of the required divestiture, IPS expend not fewer than $24 million annually on
MoneyGram advertising and promotion with no less than $10 million to be
expended for any two consecutive quarterly periods. This agreement further
requires that, during the "hold separate" period, IPS pay the MoneyGram sales
force 120% of the standard 1995 sales commission rates. The hold separate
arrangement will continue until the requisite divestiture is consummated.
First Data has decided to comply with the divestiture requirements of the
consent decree through a public stock offering of the Company's common stock
consisting of a secondary offering by IPS (the "Offering"). In conjunction
with the Offering, the Company was formed as a wholly owned subsidiary of IPS
in January 1996. In accordance with the Contribution Agreement among the
Company, First Data and IPS, certain assets necessary to operate the Business
(the "MoneyGram Assets") were transferred, subject to certain liabilities, to
the
F-7
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Company in exchange for shares of the Company's common stock. The
accompanying financial statements have been prepared as if this exchange had
been consummated prior to January 1, 1993 and the assets and liabilities are
reflected therein at their historical IPS cost basis. The transferred assets
included certain proprietary rights and trademarks material to the conduct of
the Business; the net economic benefits under certain MoneyGram Agent
contracts; certain applications software; the leases, leasehold improvements,
personal property and third party contracts associated with First Data's
Lakewood, Colorado customer service center; and certain personal property and
leases related to property, such as computers and signage, provided to
MoneyGram Agents for their use in providing MoneyGram services. In addition,
pursuant to the Contribution Agreement, IPS will contribute $12 million in
cash to the Company prior to the Offering (the "IPS Cash Contribution"). Such
capital contribution will be reflected in the Company's financial statements
during the period in which it is received.
In conjunction with the Offering, the Company, IPS and affiliates of IPS
have also entered into an operations agreement (the "Operations Agreement"), a
software license agreement (the "Software License Agreement"), a short-term
working capital facility (the "Facility"), with a commitment in an amount
equal to $20 million, a service mark license agreement (the "Service Mark
License Agreement"), a human resources agreement (the "Human Resources
Agreement") and a telecommunications services sharing agreement (the "Telecom
Agreement"). The Operations Agreement requires IPS to provide the Company with
certain data processing services, including the processing of MoneyGram
transactions for a period of two years, certain management services necessary
for the Company to comply with state licensing requirements until such time as
the Company is fully licensed in all states to offer consumer money transfer
services in its own name and certain additional support services. These
services are to be provided to the Company at First Data's good faith estimate
of its actual cost of providing such services (including reasonable
allocations of overhead expenses). The Software License Agreement provides the
Company with a perpetual, assignable, nonexclusive, royalty free license to
use certain software used in operating the Business. Under the Facility, the
Company may borrow from time-to-time, on a revolving, unsecured basis, to fund
its working capital requirements. Any borrowings thereunder will bear interest
of the prime rate, as announced by Chase Manhattan Bank, N.A., plus 1% per
annum. The Facility will terminate on January 15, 1997 and includes customary
terms, conditions, restrictive covenants and events of default. Pursuant to
the Service Mark License Agreement, Western Union licenses the Company the use
of certain service marks in certain languages that were previously subject to
conflicting use between the Company and Western Union. The Human Resource
Agreement provides for the transfer of employees from First Data to the
Company and the Telecom Agreement provides the Company access to
telecommunications services provided to First Data at First Data's tariff
rates.
Financial Statement Presentation
The accompanying financial statements have been prepared as if the
transaction and agreements described immediately above were consummated and/or
entered into prior to January 1, 1993. These financial statements present the
financial position, results of operations and cash flows attributable to
MoneyGram, which was operated as a product line of IPS, during each of the
periods presented. The following paragraphs set forth the methodologies and
assumptions utilized in preparing the accompanying financial statements.
Balance Sheets
The balance sheet caption "Liabilities relating to unsettled MoneyGram
transactions" represents the face value of all unsettled MoneyGram
transactions. It includes amounts attributable to transactions where proceeds
have been received from selling agents as well as an estimate of amounts due
from selling agents for customer
F-8
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
transactions occurring on or prior to the statement date but not yet settled.
Because IPS did not maintain specific cash or investment portfolio accounts
for its products, the accompanying balance sheet reflects zero balances for
cash and cash equivalents and the balance sheet caption "Proceeds including
proceeds due from/(to) IPS relating to unsettled MoneyGram transactions"
represents the amount necessary to fund the liability. Specific fiduciary
assets maintained by IPS for MoneyGram and the consequent amounts due to or
from IPS relative to the liability are included in the accompanying balance
sheet under the caption "Assets restricted to settlement of MoneyGram
transactions," which is comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1994 1995
----------- -----------
<S> <C> <C>
Cash and advances to certain receive agents...... $13,831 $11,446
Receivables from selling agents, including $2,421
and $1,055, respectively, from TRS.............. 11,903 9,809
Due (to) from IPS................................ (4,807) 4,755
------- -------
$20,927 $26,010
======= =======
</TABLE>
Statements of Operations
The statements of operations reflect revenues and related commission
expenses that are distinct and separately identifiable to MoneyGram as well as
an estimate of allocable investment earnings based upon IPS investment returns
applied to an estimated average cash position. Allocable investment earnings
included in revenues amounted to $.1 million, $.2 million and $.4 million
during the years ended December 31, 1993, 1994 and 1995, respectively.
During the periods presented, MoneyGram was a part of IPS' retail services
product group; accordingly, with the exception of agent commission and
advertising expenses, a substantial portion of the expenses in the
accompanying statements of operations represents allocations of IPS costs.
IPS' accounting systems provide for the capturing of costs on a functional
cost center basis. Certain cost centers relate exclusively to the MoneyGram
service and have been 100% allocated to the Company and others relate
substantially, and have been allocated substantially, to the Company. The
expenses, included in the accompanying statements of operations, attributable
to these cost centers amounted to $11.5 million, $13.7 million and $26.0
million for the years ended December 31, 1993, 1994 and 1995, respectively.
These expenses relate principally to IPS' two customer service centers. The
remaining $7.8 million, $10.0 million and $12.8 million of expenses, excluding
agent commissions and advertising, represent allocations that are based upon
various factors which, in the opinion of management, approximate actual usage.
These allocated expenses relate to data processing, facilities, legal, finance
and accounting, treasury, human resources, sales and other support functions.
Included in these allocated expenses are allocations of IPS general and
administrative expenses, based upon the Company's proportion of IPS' gross
revenues, of $0.8 million for each of years ended December 31, 1993 and 1994
and $1.0 million for the year ended December 31, 1995. The statements of
operations do not include any allocations of First Data general and
administrative expenses as such costs are not considered to be variable as a
result of the Company's operations. Management of the Company believes that
costs have been determined and allocated on a reasonable basis and all costs
attributable to conducting the Business have been included in the accompanying
statements of income.
In the opinion of the Company's management, the Company's expenses, as
reflected in the accompanying statements of operations, will not be materially
affected as a result of it becoming a stand-alone entity and its execution of
the Contribution Agreement, the Operations Agreement and the Facility.
F-9
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Fee revenue represents the transaction fee charged by the selling agent to
the consumer and is recognized at the date of sale. Foreign exchange revenue
represents the Company's share of amounts attributable to favorable spreads
between wholesale foreign currency purchase rates and the retail exchange rate
charged to consumers, principally with respect to Mexican pesos. Commissions
to agents are either a percentage of the transaction fee charged to the
consumer or a fixed dollar amount per transaction and also include amounts
attributable to minimum commission guarantees with respect to certain agents.
Commissions to agents, including guaranteed commissions, are expensed as
incurred.
Fixed Assets
Fixed assets are comprised of agent location signage and personal computers,
equipment, furniture and fixtures, and leasehold improvements and are
depreciated over their estimated useful lives ranging from 3 to 8 years.
Depreciation is computed using the straight-line method.
Income Taxes
The Company has accounted for income taxes under the liability method
required by SFAS No. 109, Accounting for Income Taxes. The taxable income of
the Company is included in the taxable income of IPS, which is included in the
consolidated U.S. federal income tax return of First Data. Except as described
below, the Company's provision for income taxes has been computed as if it
were a separate tax-paying entity.
During the periods presented there was no formal tax-sharing agreement
between the Company, IPS and First Data, however, First Data subsidiaries
remit current taxes payable to First Data and they are entitled to
reimbursement from First Data for current tax benefits. The provision for
income taxes has been computed as if the Company were a subsidiary of First
Data and, therefore, the tax benefits resulting from taxable losses incurred
by the Company during and prior to 1993 have been recorded in those years. As
a result, the accompanying financial statements do not reflect any benefit for
utilization of tax loss carryforwards.
As a result of the Transition, the tax basis (for federal income tax
purposes) of the MoneyGram Assets will increase from their tax basis in the
hands of IPS and its affiliates at the time of the Contribution to their fair
market value at that time. Such tax basis is generally expected to produce a
tax benefit to the Company in future years through depreciation or
amortization deductions or through decreased gain or increased loss on a
disposition of any MoneyGram Asset. However, the "anti-churning" rules under
Section 197 of the Code might apply to disallow such amortization with respect
to certain intangible assets of the Company.
Pursuant to the requirements of SFAS No. 109 the Company will record a
deferred tax asset (with a corresponding credit to capital surplus) for the
tax effect of the difference between the net book value of the assets
contributed and liabilities assumed in the Contribution and their tax basis.
The amount of the deferred tax asset which will be recorded at the time of the
Contribution may be reduced by a valuation allowance which will be based upon
management's judgment as to the likelihood of the Company realizing the asset
through future tax deductions, under the "more likely than not" criteria
prescribed by SFAS No. 109.
Costs of Acquiring Agent Contracts
Amounts paid to acquire multi-year exclusive contracts with agents are
capitalized and amortized on a straight-line basis over the life of the
related contract (3 to 5 years).
F-10
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Per Share Data
Pro forma net (loss) income per share has been computed as if the Company
had shares of its common stock outstanding during each of the
periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
In addition to the relationships set forth and the other information
described in Note 1, IPS, and consequently the Company, have other
transactions and relationships with American Express and First Data.
American Express
Travel Services Offices of TRS ("TSOs") act as agents with respect to
MoneyGram. MoneyGram Transaction Fee Revenues (revenues excluding foreign
exchange revenues and allocated investment income) derived from TSO
transactions amounted to approximately $10.1 million, $10.9 million and $5.1
million for the years ended December 31, 1993, 1994 and 1995, respectively.
Commissions paid to TRS for send and receive transactions amounted to
approximately $5.3 million, $5.6 million and $3.3 million for the respective
years.
In conjunction with the 1992 IPO, an intercompany agreement was entered into
by IPS and First Data with American Express (the "Intercompany Agreement") the
provisions of which included:
(i) An annual license fee of $1.0 million for use of the American Express
name by IPS. The amounts allocated to the Company in the 1993 and 1994
statements of operations amounted to $0.4 million and $0.1 million,
respectively. No allocation of such cost was made subsequent to March 1994
when the American Express name was deleted from MoneyGram's media
advertising.
(ii) An agreement by American Express to reimburse First Data and/or IPS
for expenses of up to $10.6 million relating to the change of First Data's
name, its change in status to a publicly owned corporation and advertising
IPS' payment instruments under a new name. During 1993, IPS was reimbursed
$0.8 million under the Intercompany Agreement for 1993 advertising and
related expenses incurred, of which $0.2 million related to the deletion of
the American Express name from MoneyGram. During 1994, IPS was reimbursed
$5.2 million, substantially all of which related to MoneyGram. This
reimbursement of expenses incurred has been treated similar to a capital
contribution in the accompanying financial statements.
First Data
The allocated expenses in the accompanying statements of operations, as
described in Note 1, include allocations from First Data and affiliates of
$2.9 million, $2.6 million and $3.9 million for the years ended December 31,
1993, 1994 and 1995, respectively. The First Data allocations relate
principally to the Company's estimated portion of IPS' participation in
certain First Data insurance, benefit and incentive plans, as well as certain
other services provided during those periods, including the Company's
estimated portion of charges to IPS for data processing services provided by
First Data Technologies, Inc., a wholly owned subsidiary of First Data, of
$1.7 million, $1.6 million and $2.2 million for the years ended December 31,
1993, 1994 and 1995, respectively.
F-11
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INCOME TAXES
The income tax (benefit)/provision consists of the following (thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Federal........................................... $(1,119) $6,556 $ 9,850
State and local................................... -- 679 1,512
------- ------ -------
Total............................................. $(1,119) $7,235 $11,362
======= ====== =======
</TABLE>
Deferred income taxes result from the recognition of temporary differences.
Temporary differences are differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements that will
result in differences between income for tax purposes and income for financial
statement purposes in future years. The income tax (benefit)/provision is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Current.......................................... $ (959) $7,210 $11,384
Deferred......................................... (160) 25 (22)
------- ------ -------
Total............................................ $(1,119) $7,235 $11,362
======= ====== =======
</TABLE>
The Company's net deferred tax assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
---------
1994 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued and other liabilities................................ $197 $303
---- ----
Total deferred tax assets.................................. 197 303
Valuation allowance............................................ -- --
---- ----
Deferred tax assets, net of valuation allowance................ 197 303
Deferred tax liabilities:
Depreciation and amortization................................ -- 82
Other........................................................ 26 28
---- ----
Total deferred tax liabilities............................. 26 110
---- ----
Net deferred tax assets.................................... $171 $193
==== ====
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to income tax (benefit)/expense is (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Tax at U.S. statutory rate....................... $(1,119) $6,794 $10,379
Increases in taxes resulting from
State and local taxes, net of federal income
tax benefit................................... -- 441 983
------- ------ -------
Income tax (benefit)/expense................. $(1,119) $7,235 $11,362
======= ====== =======
</TABLE>
F-12
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. RETIREMENT PLANS
First Data sponsors a defined benefit and a defined contribution retirement
plan covering full-time employees of First Data and its participating
subsidiaries, of which IPS is one. Retirement benefits under the defined
benefit plan are based primarily upon length of service and compensation. The
defined contribution plan allows eligible employees to contribute a percentage
of their compensation to the plan and provides for certain employer matching,
service-related and other contributions. During 1994, First Data restructured
these plans to allow employees to elect to cease accruing benefits under the
defined benefit plan in exchange for enhanced employer contributions under the
defined contribution plan. Employees hired subsequent to 1994 do not
participate in the defined benefit plan.
Included in the allocated expenses from First Data discussed in Note 3 are
$0.2 million, $0.2 million and $0.3 million for the years ended December 31,
1993, 1994 and 1995, respectively, relative to MoneyGram's estimated portion,
based on gross salary costs, of amounts charged by First Data to IPS for
participation of its employees in the plans.
Pursuant to the terms of the Human Resources Agreement among First Data, IPS
and the Company, employees transitioning from First Data to the Company have
been fully vested in their First Data retirement benefits. During 1996 the
Company plans to adopt and implement a defined contribution plan and does not
plan to provide a defined benefit plan.
6. OPERATING LEASE COMMITMENTS
Certain facilities and operating equipment utilized in the operations of the
Business are leased under cancelable and noncancelable agreements. A portion
of the rent expense attributable to IPS' two customer service centers, which
has been allocated to the Company, amounted to $0.4 million, $0.4 million and
$0.8 million for the years ended December 31, 1993, 1994 and 1995,
respectively. A portion of the rent expense relates to a sublease from an
affiliate of IPS. At December 31, 1995, the minimum allocated calendar year
rental commitment for these facilities was: 1996--$0.4 million; 1997--$0.1
million.
7. COMMITMENTS AND CONTINGENCIES
In certain instances, certain MoneyGram Agents have been guaranteed minimum
commissions. As of December 31, 1995, the remaining maximum commitment amounts
to approximately $68.0 million as follows on a calendar year basis: 1996--
$10.0 million; 1997--$12.0 million; 1998--$13.0 million; 1999--$14.0 million;
2000--$15.0 million; and years following--$4.0 million. Historically,
MoneyGram's volume growth has been sufficient to mitigate required performance
under these guarantees, and net payments under these guarantees amounted to
$2.5 million, $2.0 million and $1.3 million during the years ended December
31, 1993, 1994 and 1995, respectively.
IPS is involved in litigation primarily arising in the normal course of its
business. In the opinion of management, IPS' recovery or liability, if any,
under any pending litigation relating to MoneyGram would not materially affect
the Company's financial condition or operations.
8. CREDIT RISK AND CERTAIN RELATIONSHIPS
Credit risk results from the possibility that a loss may occur from the
failure of another party to perform according to the terms of a contract. In
the case of MoneyGram, the principal risk centers around that of a selling
agent failing to remit the proceeds of a transaction to the Company. The
Company mitigates this risk through extensive credit evaluations prior to
entering into a contractual relationship and thereafter monitors performance
F-13
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
to ensure compliance. MoneyGram Agents conduct business in thousands of
locations. Further, the nature of the agents' principal businesses is diverse
and the agent base includes supermarkets, department and convenience stores,
travel agents and check cashing establishments. Other than TSOs with respect
to the years ended December 31, 1993 and 1994, no Transaction Fee Revenues
attributable to a single MoneyGram Agent accounted for more than 8% of
MoneyGram's total Transaction Fee Revenues during the periods presented.
However, during the years ended December 31, 1993, 1994 and 1995,
approximately 17%, 16% and 15% of total Transaction Fee Revenues were derived
from a consortium of Chicago MoneyGram Agents.
Approximately 49%, 60% and 64% of MoneyGram's total revenues (including
foreign exchange revenues and allocated investment income) were derived from
money transfer transactions from the United States to Mexico during the years
ended December 31, 1993, 1994 and 1995, respectively. The Mexican receive
agent for substantially all of these transactions is a major Mexican financial
institution under the terms of a contract expiring in April 2002. The caption
"cash and advances to certain receive agents" in Note 1 to the accompanying
Financial Statements includes IPS' funding of these transactions pursuant to
the terms of this contract. Many MoneyGram Agents also act as agents with
respect to the sale of American Express(R) Money Orders. One such agent has
entered into a financing agreement with IPS (the "Financing Agreement"). The
Financing Agreement provides for, among other items:
--a deferred remittance schedule with respect to proceeds from the sale of
American Express(R) Money Orders.
--the agent to receive interest bearing working capital and long-term
advances.
The Financing Agreement contains various restrictive covenants, limitations
on the amount of deferred remittances and working capital advances and a $18.5
million limit on long-term advances. Working capital advances are based upon
the agent's money order sales. The amount of long-term advances outstanding as
of December 31, 1995 was $9.4 million. No portion of the long-term advances
has been included in the accompanying balance sheets due to the commingled
nature of the agent relationship and the resulting inability to segregate that
which would be attributable to MoneyGram.
9. SUBSEQUENT EVENTS
On , 1996, the Company filed an amended registration statement
with the Securities and Exchange Commission relating to the Offering.
Including the percent underwriters over-allotment option,
shares of the Company's common stock are being registered for sale by IPS, as
selling stockholder.
In connection with the Offering, the Board of Directors of the Company will
adopt, and IPS as the Company's sole stockholder will approve, the Company's
1996 Stock Option Plan (the "1996 Stock Option Plan") and the Company's 1996
Broad-Based Stock Option Plan. The Company has reserved for issuance under the
1996 Stock Option Plan and the 1996 Broad-Based Stock Option Plan
and shares of common stock, respectively.
F-14
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors of
MoneyGram Payment Systems, Inc.
We have reviewed the accompanying balance sheet of MoneyGram Payment
Systems, Inc. as of June 30, 1996, and the related statements of income and
cash flows for the six-month period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. We did not make
a similar review of the statements of income and cash flows for the
corresponding period of the prior year.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards with the
objective of expressing an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements at June 30, 1996 and
for the six-month period then ended for them to be in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Denver, Colorado
August 6, 1996
****
The foregoing report is in the form that will be signed upon the completion
of the transactions and restatement of capital accounts described in Note 1 to
the audited financial statements as of and for the year ended December 31,
1995, under the caption "Formation of the Company".
Ernst & Young LLP
Denver, Colorado
October 4, 1996
F-15
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE
30,
ASSETS 1996
- ---------------------------------------------------------------------- -------
<S> <C>
Cash and cash equivalents............................................. $ --
Assets restricted to settlement of MoneyGram transactions............. 22,533
Fee revenue receivable................................................ 1,330
Prepaid and other current assets...................................... 295
-------
Total current assets.............................................. 24,158
Fixed assets at cost, net of depreciation: $5,334..................... 6,721
Deferred income taxes................................................. 231
Costs of acquiring Agent Contracts, net of amortization: $3,188....... 14,594
-------
Total assets...................................................... $45,704
=======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ----------------------------------------------------------------------
<S> <C>
Liabilities relating to unsettled MoneyGram transactions.............. $22,533
Accounts payable...................................................... 1,344
Commissions payable................................................... 6,641
Accrued advertising................................................... 1,527
Employee-related liabilities.......................................... 1,210
Accrued and other liabilities......................................... 1,814
-------
Total current liabilities......................................... 35,069
Stockholder's equity:
Common stock, $.01 par value, authorized 100,000,000 shares; issued
and outstanding shares.................................. --
Capital surplus..................................................... 12,743
Accumulated deficit................................................. (2,108)
-------
Total stockholder's equity........................................ 10,635
-------
Total liabilities and stockholder's equity........................ $45,704
=======
</TABLE>
See accompanying notes.
F-16
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------
1995 1996
------- -------
<S> <C> <C>
Revenues
Fee and other................................................ $47,319 $57,253
Foreign exchange............................................. 24,408 15,775
------- -------
Total revenue.............................................. 71,727 73,028
Expenses:
Agent commissions and amortization of Agent Contract
acquisition costs........................................... 16,245 22,615
Processing................................................... 11,627 12,728
Advertising and promotion.................................... 16,002 16,763
Selling and service.......................................... 3,252 4,776
General and administrative................................... 2,685 2,616
------- -------
Total expenses............................................. 49,811 59,498
------- -------
Income before income taxes..................................... 21,916 13,530
Income tax expense............................................. 8,397 5,182
------- -------
Net income..................................................... $13,519 $ 8,348
------- -------
Pro forma net income per common share.......................... $ $
======= =======
</TABLE>
See accompanying notes.
F-17
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------
1995 1996
------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................... $13,519 $8,348
Adjustments to reconcile net income to net cash provided by
operating activities:
Direct depreciation and amortization expense*.............. 1,445 2,448
Other noncash charges...................................... (27) (38)
Changes in operating assets and liabilities:
Assets restricted to settlement of MoneyGram
transactions............................................ (1,213) 3,477
Accounts receivable...................................... (202) (165)
Prepaid and other assets................................. (78) (24)
Liabilities relating to unsettled MoneyGram transactions. 1,213 (3,477)
Accounts payable and other liabilities................... (3,323) (1,903)
------- ------
Net cash provided by operating activities.................... 11,334 8,666
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of signage and equipment............................ (3,127) (1,781)
Costs of acquiring Agent Contracts........................... (1,214) (8,003)
------- ------
Net cash used by investing activities........................ (4,341) (9,784)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net transfer from/(to) IPS................................... (6,993) 1,118
------- ------
Net cash provided/(used) by financing activities............. (6,993) 1,118
------- ------
Net change in cash and cash equivalents...................... $ -- $ --
======= ======
</TABLE>
- --------
*Relates only to MoneyGram assets as reflected on the accompanying balance
sheet.
See accompanying notes.
F-18
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON CAPITAL ACCUMULATED STOCKHOLDER'S
STOCK SURPLUS DEFICIT EQUITY
------ ------- ----------- -------------
<S> <C> <C> <C> <C>
Balance December 31, 1995.............. $-- $11,625 $(10,456) $ 1,169
Net income........................... -- -- 8,348 8,348
Capital contribution from IPS........ -- 1,118 -- 1,118
---- ------- -------- -------
Balance June 30, 1996.................. $-- $12,743 $ (2,108) $10,635
==== ======= ======== =======
</TABLE>
See accompanying notes.
F-19
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. The financial statements of MoneyGram Payment Systems, Inc. ("the
Company") should be read in conjunction with the Company's financial
statements for the year ended December 31, 1995. Significant accounting
policies disclosed therein have not changed. For interim reporting purposes
during 1995, the Company allocated advertising and promotion expenses based on
transaction volumes. For the six months ended June 30, 1996, advertising and
promotion expenses reflect actual expenses incurred during the period as the
Company believes this is a more objective method of accounting under its
current circumstances, which circumstances include the minimum spending on
advertising and promotion required under the Hold Separate Agreement with the
Federal Trade Commission and the Company's emergence as an independent
publicly-held entity. Advertising and promotion expenses for the six months
ended June 30, 1996 would have been approximately $1.5 million less if the
Company continued to allocate these costs for interim reporting purposes based
on transaction volumes. The impact of this change was to decrease net income
and pro forma net income per common share by approximately $0.9 million and
$ , respectively.
The financial statements are unaudited; however, in the opinion of
management, they include all normal recurring adjustments necessary for a fair
presentation of the financial position of the Company at June 30, 1996 and the
results of its operations and cash flows for the six months ended June 30,
1996 and 1995. Results of operations reported for interim periods are not
necessarily indicative of results for the entire year.
F-20
<PAGE>
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued October 4, 1996
LOGO
Shares
MoneyGram Payment Systems, Inc.
COMMON STOCK
----------
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY, ARE
BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND ARE BEING OFFERED INITIALLY IN
THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. ALL OF THE SHARES
OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY INTEGRATED PAYMENT
SYSTEMS, INC. ("IPS" OR THE "SELLING STOCKHOLDER"), A WHOLLY OWNED
SUBSIDIARY OF FIRST DATA CORPORATION. SEE "SELLING STOCKHOLDER." THE
COMPANY WILL NOT RECEIVE ANY OF THE NET PROCEEDS FROM THE SALE OF
SHARES OF COMMON STOCK OFFERED HEREBY. PRIOR TO THE OFFERING, THERE
HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT
IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER
SHARE WILL BE BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
----------
THE COMMON STOCK HAS BEEN APPROVED FOR
LISTING ON THE NEW YORK STOCK
EXCHANGE ("NYSE"), SUBJECT TO
OFFICIAL NOTICE OF ISSUANCE, UNDER
THE SYMBOL "MNE."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER(2)
-------- -------------- -------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
(2) Before deducting expenses payable by the Selling Stockholder estimated
at $2,100,000.
(3) The Selling Stockholder has granted to the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of additional shares of Common Stock at the price to
public less underwriting discounts and commissions, for the purpose of
covering over-allotments, if any. If the U.S. Underwriters exercise such
option in full, the total price to public, underwriting discounts and
commissions and proceeds to Selling Stockholder will be $ ,
$ , and $ , respectively. See "Underwriters."
----------
The shares of Common Stock are offered,subject to prior sale, when as and if
accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1996 at the office of Morgan Stanley & Co. Incorporated, New York, NY,
against payment therefor in immediately available funds.
----------
MORGAN STANLEY & CO.
International
CS FIRST BOSTON
LEHMAN BROTHERS
SMITH BARNEY INC.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (other than underwriting discounts and commissions) payable in
connection with the sale of the Common Stock offered hereby (including the
Common Stock which may be issued pursuant to the over-allotment option) are as
follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC registration fee......................................... $ 182,691
NASD filing fee.............................................. 30,500
New York Stock Exchange listing fee.......................... 200,000*
Printing and engraving expenses.............................. 150,000*
Legal fees and expenses...................................... 700,000*
Accounting fees and expenses................................. 700,000*
Blue Sky fees and expenses (including legal fees and
expenses)................................................... 15,000*
Transfer agent and registrar fees and expenses............... 25,000*
Miscellaneous................................................ 96,809*
----------
Total.................................................... $2,100,000
==========
</TABLE>
--------
*Estimated
The Selling Stockholder will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person was an officer or director of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided that such officer or director acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests, and, for criminal proceedings, had no
reasonable cause to believe his conduct was illegal. A Delaware corporation
may indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to
be liable to the corporation in the performance of his duty. Where an officer
or director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually and reasonably incurred.
In accordance with Section 102(b)(7) of the DGCL, the Company's Certificate
of Incorporation provides that directors shall not be personally liable for
monetary damages for breaches of their fiduciary duty as directors except for
(i) breaches of their duty of loyalty to the Company or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or
knowing violations of law, (iii) certain transactions under Section 174 of the
DGLC (unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) transactions from which a director derives an improper
personal benefit. The effect of this provision is to eliminate the personal
liability of directors for monetary damages for actions involving a breach of
their fiduciary duty of care, including any actions involving gross
negligence.
The Certificate of Incorporation and the By-laws of the Company provide for
indemnification of the Company's officers and directors to the fullest extent
permitted by applicable law, except that the By-laws
II-1
<PAGE>
provide that the Company is required to indemnify an officer or director in
connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Company. In addition, the
Company maintains insurance policies which provide coverage for its officers
and directors in certain situations where the Company cannot directly
indemnify such officers or directors.
The Underwriting Agreement provides for indemnification of directors and
officers of the Company by the Underwriters against certain liabilities.
Pursuant to Section 145 of the DGCL and the Certificate of Incorporation and
the By-laws of the Company, the Company maintains directors' and officers'
liability insurance coverage.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this Registration Statement, the
Company has issued the following securities that were not registered under the
Securities Act of 1933, as amended (the "Securities Act").
In connection with the incorporation and organization of the Company on
January 4, 1996, 100 shares of Common Stock were issued to IPS, the sole
stockholder of the Company, in exchange for $2,000. In connection with the
Contribution Agreement, prior to the consummation of the Offering, the Company
will issue shares of Common Stock to IPS.
No Underwriters were involved in the foregoing sales of Common Stock. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to
transactions by an issuer not involving any public offering or the rules and
regulations thereunder. All of such shares of Common Stock are deemed
restricted securities within the meaning of Rule 144 under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* --Form of Underwriting Agreement.
2.1* --Form of Contribution Agreement among the Company, First Data Corporation
and Integrated Payment Systems Inc.
3.1* --Certificate of Incorporation of the Company, as amended.
3.2** --By-laws of the Company.
5.1* --Form of Opinion of Sidley & Austin as to the legality of the shares of
Common Stock being offered.
8.1*** --Opinion of Sidley & Austin as to certain tax matters.
9.1* --Form of Irrevocable Voting Trust Agreement.
10.1* --Form of Operations Agreement among the Company and Integrated Payment
Systems Inc. and First Data Technologies, Inc.
10.2* --Form of Software License Agreement between the Company and Integrated
Payment Systems Inc.
10.3* --Form of Registration Rights Agreement between the Company and Integrated
Payment Systems Inc.
10.4* --Form of Service Mark License Agreement among Western Union Financial
Services, Inc., Integrated Payment Systems Inc. and MoneyGram Payment
Systems, Inc.
10.5* --Form of Human Resources Agreement among the Company, Integrated Payment
Systems Inc. and First Data Corporation.
10.6* --Form of Telecommunications Services Sharing Agreement between the
Company and First Data Corporation.
10.7*** --Agreement among American Express Travel Related Services Company, Inc.,
Banco Nacional de Mexico, S.N.C., and California Commerce Bank, as
amended.
10.8* --Form of 1996 Stock Option Plan of the Company.
10.9* --Form of 1996 Broad-Based Stock Option Plan.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.10* --Lease Agreement between the Company and the Mutual Life Insurance
Company of New York in respect of certain facilities located in Lakewood,
Colorado.
10.11* --Form of Short-Term Working Capital Facility between First Data
Corporation and the Company.
15.1* --Letter from Ernst & Young LLP re: unaudited interim financial
information
18.1** --Letter from Ernst & Young LLP re: change in accounting principle
23.1* --Consent of Ernst & Young LLP.
23.2 --Consent of Sidley & Austin (included in Exhibit 5.1).
24.1 --Powers of Attorney (see page II-4).
27.1* --Financial Data Schedule.
99.1** --Agreement containing Consent Order dated August 28, 1995 and Hold
Separate Agreement dated September 20, 1995, each between First Data
Corporation and the Federal Trade Commission.
99.2* --Consent of Brian J. Fitzpatrick.
99.3* --Consent of William Guth.
99.4* --Consent of Sanford Miller.
99.5* --Consent of James F. Calvano.
99.6* --Consent of John M. Fowler.
</TABLE>
- --------
*Filed herewith.
**Previously filed.
***To be filed.
(b) FINANCIAL STATEMENT SCHEDULES:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required under the related instructions, are not
applicable or the information has been provided in the Financial Statements,
or the notes thereto, included in this Registration Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and (3) that for the
purpose of determining any liability under the Securities Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York on October 4, 1996.
MONEYGRAM PAYMENT SYSTEMS, INC.
/s/ Paul A. Seader
By: _________________________________
Paul A. Seader
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of MoneyGram Payment Systems,
Inc. hereby severally constitute and appoint David Treinen and John Zieser,
and each of them singly, our true and lawful attorneys, with full power to
them and each of them singly, to sign for us in our names in the capacities
indicated below, all pre-effective and post-effective amendments to this
registration statement, and generally to do all things in our names and on our
behalf in such capacities to enable the Company to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ Paul A. Seader Chairman of the Board and Chief 10/4/96
____________________________________ Executive (Principal Executive
Paul A. Seader Officer)
/s/ Robbin Ayers Director and President 10/4/96
____________________________________
Robbin Ayers
/s/ David Treinen Director and Vice President and 10/4/96
____________________________________ Chief Financial Officer (Principal
David Treinen Financial and Accounting Officer)
/s/ John Zieser Director and Vice President and 10/4/96
____________________________________ Secretary
John Zieser
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
------- ----------- ----------
<C> <C> <S> <C>
1.1* -- Form of Underwriting Agreement.
2.1* -- Form of Contribution Agreement among the Company,
First Data Corporation and
Integrated Payment Systems Inc.
3.1* -- Certificate of Incorporation of the Company, as
amended.
3.2** -- By-laws of the Company.
5.1* -- Form of Opinion of Sidley & Austin as to the legal-
ity of the shares of Common Stock being offered.
8.1*** -- Opinion of Sidley & Austin as to certain tax mat-
ters.
9.1* -- Form of Irrevocable Voting Trust Agreement.
10.1* -- Form of Operations Agreement among the Company and
Integrated Payment Systems Inc. and First Data
Technologies, Inc.
10.2* -- Form of Software License Agreement between the Com-
pany and Integrated Payment Systems Inc.
10.3* -- Form of Registration Rights Agreement between the
Company and Integrated Payment Systems Inc.
10.4* -- Form of Service Mark License Agreement among West-
ern Union Financial Services, Inc., Integrated
Payment Systems Inc. and MoneyGram Payment Sys-
tems, Inc.
10.5* -- Form of Human Resources Agreement among the Compa-
ny, Integrated Payment
Systems Inc. and First Data Corporation.
10.6* -- Form of Telecommunications Services Sharing Agree-
ment between the Company and First Data Corpora-
tion.
10.7*** -- Agreement among American Express Travel Related
Services Company, Inc., Banco Nacional de Mexico,
S.N.C., and California Commerce Bank, as amended.
10.8* -- Form of 1996 Stock Option Plan of the Company.
10.9* -- Form of 1996 Broad-Based Stock Option Plan.
10.10* -- Lease Agreement between the Company and the Mutual
Life Insurance Company of New York in respect of
certain facilities located in Lakewood, Colorado.
10.11* -- Form of Short-Term Working Capital Facility between
First Data Corporation and the Company.
15.1* -- Letter from Ernst & Young LLP re: unaudited interim
financial information.
18.1** -- Letter from Ernst & Young LLP re: change in ac-
counting principle.
23.1* -- Consent of Ernst & Young LLP.
23.2 -- Consent of Sidley & Austin (included in Exhibit 5.1).
24.1 -- Powers of Attorney (see page II-4).
27.1* -- Financial Data Schedule.
99.1** -- Agreement containing Consent Order dated August 28,
1995 and Hold Separate
Agreement dated September 20, 1995, each between
First Data Corporation and the Federal Trade Com-
mission.
99.2* -- Consent of Brian J. Fitzpatrick.
99.3* -- Consent of William Guth.
99.4* -- Consent of Sanford Miller.
99.5* -- Consent of James F. Calvano.
99.6* -- Consent of James M. Fowler.
</TABLE>
- --------
* Filed herewith.
** Previously filed.
***To be filed.
<PAGE>
Exhibit 1.1
_____________, 1996
Morgan Stanley & Co.
Incorporated
CS First Boston Corporation
Lehman Brothers Inc.
Smith Barney Inc.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
CS First Boston Limited
Lehman Brothers International (Europe)
Smith Barney Inc.
c/o Morgan Stanley & Co. International
Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs:
Integrated Payment Systems Inc., a Delaware corporation (the "Selling
Stockholder"), proposes to sell to the several Underwriters (as defined below)
______________ shares of common stock, par value $.01 per share (the "Firm
Shares") of MoneyGram Payment Systems, Inc., a Delaware corporation (the
"Company").
It is understood that, subject to the conditions hereinafter stated,
_______________ Firm Shares (the "U.S. Firm Shares") will be sold to the several
U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters") in
connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and _____________ Firm Shares (the "International Shares") will
be sold to the several International Underwriters named in Schedule II hereto
(the "International Underwriters") in connection with the offering and sale of
such International Shares outside the United States and
<PAGE>
Canada to persons other than United States and Canadian Persons. Morgan Stanley
& Co. Incorporated, CS First Boston Corporation, Lehman Brothers Inc., and Smith
Barney Inc. shall act as representatives (the "U.S. Representatives") of the
several U.S. Underwriters, and Morgan Stanley & Co. International Limited, CS
First Boston Limited, Lehman Brothers International (Europe) and Smith Barney
Inc. shall act as representatives (the "International Representatives") of the
several International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the "Underwriters".
The Selling Stockholder also proposes to sell to the several U.S.
Underwriters not more than an additional ________________ shares of its common
stock, par value $.01 per share (the "Additional Shares") if and to the extent
that the U.S. Representatives shall have determined to exercise, on behalf of
the U.S. Underwriters, the right to purchase such shares of common stock granted
to the U.S. Underwriters in Article II hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the Shares. The
shares of common stock, par value $.01 per share, of the Company are hereinafter
referred to as the Common Stock.
It is further understood that immediately prior to the sale of the
Firm Shares to the Underwriters, the Selling Stockholder will transfer to the
Company certain assets and liabilities of its consumer money wire transfer
service marketed under the name "MoneyGram" (the "Business") (such transfer of
assets and liabilities being referred to herein as the "Transition"). Pursuant
to the Transition, the Company will enter into a Contribution Agreement to be
dated as of the date hereof among the Company, First Data Corporation, a
Delaware corporation and the sole stockholder of the Selling Stockholder ("First
Data"), and the Selling Stockholder, an Operations Agreement to be dated as of
the date hereof among the Company, First Data Technologies Inc., a Delaware
corporation and a wholly owned subsidiary of First Data, and the Selling
Stockholder, a Software License Agreement to be dated as of the date hereof
between the Company and the Selling Stockholder, a Short-Term Working Capital
Facility to be dated as of the date hereof between the Selling Stockholder and
the Company, a Service Mark License Agreement to be dated as of the date hereof
among the Company, the Selling Stockholder and Western Union Financial Services,
Inc., a Human Resources Agreement to be dated the date hereof among the Company,
the Selling Stockholder, and First Data Corporation, a Telecommunications
Services Sharing Agreement to be dated the date hereof between the Company and
First Data
2
<PAGE>
Corporation, and a Registration Rights Agreement dated the date hereof between
the Company and the Selling Stockholder (collectively, the "Transition
Agreements").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A, under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the Registration Statement; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the Prospectus. If the
Company has filed an abbreviated registration statement to register additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
I.
1. Each of the Company and the Selling Stockholder represents and
warrants to each of the Underwriters that:
(a) The Registration Statement has become effective or will become
effective not later than 9:30 a.m. on the next business day following the
date hereof (the "Effective Time")/1/; no stop order suspending the
effectiveness of the Registration Statement is or will
- ----------------
/1/ This assumes the Underwriting Agreement is signed after the close of
business on the date hereof, and a pre-effective pricing amendment is filed.
3
<PAGE>
be, as of the Effective Time, in effect, and no proceedings for such
purpose are or will be, as of the Effective Time, pending before or
threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such part
became or becomes effective, did not or will not contain and each such
part, as amended or supplemented, if applicable, will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) on and after the Effective Time, the Registration
Statement and the Prospectus will comply and, as amended or supplemented,
if applicable, will comply in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder and
(iii) on and after the Effective Time, the Prospectus will not include and,
as amended or supplemented, if applicable, will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph 1(b) do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company or the
Selling Stockholder in writing by any U.S. Representative, International
Representative or Underwriter expressly for use therein.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware; the
Company has the requisite corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect
on the Company or the Business, as the case may be.
(d) As of the date hereof and as of the Closing Date, the Company
does not, and will not, have any subsidiaries.
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(e) The authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof contained
in the Prospectus under the caption "Description of Capital Stock."
(f) The Shares have been duly authorized and are validly issued,
fully paid and non-assessable.
(g) This Agreement has been duly authorized, executed and delivered
by the Company.
(h) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or by-
laws of the Company or any agreement or other instrument binding upon the
Company or the Business that is material to the Company or the Business, or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or the Business including, without
limitation, the U.S. Federal Trade Commission, and no consent, approval,
authorization or order of or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or
Blue Sky laws of the various states or foreign securities laws or
regulations in connection with the offer and sale of the Shares.
(i) The consummation of the Transition and the execution and delivery
by the Company of, and the performance by the Company of its obligations
under, the Transition Agreements will not result in a violation of the
provisions of the certificate of incorporation or by-laws of the Company or
any statute, rule or regulation or any judgment, or decree of any
governmental body, agency or court, including, without limitation, the U.S.
Federal Trade Commission, having jurisdiction over the Company or the
Business, or conflict with or result in a breach or the violation of any of
the terms or provisions of, or constitute a default under, any agreement or
other instrument binding upon the Company or the Business (except for such
conflicts, breaches, violations and defaults that, individually or in the
aggregate, would not have a material adverse effect on the Company or the
Business) and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Company of its obligations under the Transition
Agreements or pursuant
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to the Transition (except for such consents, authorizations, orders or
qualifications that, individually or in the aggregate, would not have a
material adverse effect on the Company or the consummation of the
Transition).
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company or the Business, from that set forth or
contemplated in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Selling Stockholder or the Company, threatened to which
the Company or the Business is a party or to which any of the properties of
the Company or the Business is subject that are required to be described in
the Registration Statement or the Prospectus and are not so described or
any contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Except as described in the Prospectus, the Company has all
necessary consents, authorizations, approvals, orders, certificates and
permits of and from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-
regulatory organizations and all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its business in
the manner described in the Prospectus, except to the extent that the
failure to so have, obtain or file would not have a material adverse effect
on the Company or the Business.
(m) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the rules and regulations
of the Commission thereunder.
(n) The Company is not and, after the consummation of the Transition,
will not be, an
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"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as
amended.
(o) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly in all material respects the
financial condition and results of operations of the entities purported to
be shown thereby, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
otherwise stated therein.
(p) Except as disclosed in the Prospectus, the Company possesses the
rights described in the Prospectus to use the Licensed Marks (as defined in
the Prospectus), and the Company owns or possesses adequate rights to use
all material patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights and
licenses (other than the Licensed Marks) necessary for the conduct of its
business in the manner described in the Prospectus and the Company has no
reason to believe that the conduct of its business will conflict with any
such rights of others, and neither the Business nor the Company has
received any notice of any claims of conflict with any such rights of
others, which claims, if determined adversely to the Business or the
Company, would or could reasonably be expected to have a material adverse
effect on the Business or the Company.
(q) No material labor dispute with the employees of the Company
exists, except as described in or contemplated by the Prospectus, or, to
the knowledge of the Company, is imminent.
(r) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company or any of its affiliates
and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
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(s) The Company has complied with or is exempt from all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
2. The Selling Stockholder represents and warrants to and agrees
with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Selling Stockholder.
(b) The execution and delivery by the Selling Stockholder of, and the
performance by such Selling Stockholder of its obligations under, this
Agreement, will not contravene any provision of applicable law, or the
certificate of incorporation or by-laws of the Selling Stockholder, or any
material agreement or other instrument binding upon the Selling Stockholder
or any of the Selling Stockholder's subsidiaries or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Selling Stockholder or any of the Selling Stockholder's subsidiaries,
and no consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Selling Stockholder of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the various states or
foreign securities laws or regulations in connection with the offer and
sale of the Shares.
(c) The consummation of the Transition and the execution and delivery
by the Selling Stockholder of, and the performance by the Selling
Stockholder of its obligations under, the Transition Agreements will not
result in a violation of the provisions of the certificate of incorporation
or by-laws of the Selling Stockholder, or any statute, rule or regulation
or any judgment or decree of any governmental body, agency or court,
including, without limitation, the U.S. Federal Trade Commission, having
jurisdiction over the Selling Stockholder or any of the Selling
Stockholder's subsidiaries, or conflict with or result in a breach or the
violation of any of the terms or provisions of, or constitute a default
under, any agreement or other instrument binding upon the Selling
Stockholder or any of the Selling Stockholder's subsidiaries (except for
such conflicts, breaches, violations and defaults that, individually or in
the aggregate, would not have a material adverse effect on the Selling
Stockholder and its subsidiaries taken as a whole) and no consent,
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approval, authorization or order of or qualification with any governmental
body or agency is required for the performance by the Selling Stockholder
of its obligations under the Transition Agreements or pursuant to the
Transition (except for such consents, authorizations, orders or
qualifications that, individually or in the aggregate, would not have a
material adverse effect on the Selling Stockholder, the Business or the
consummation of the Transition).
(d) On the Closing Date, the Selling Stockholder will have valid
title to the Shares to be sold by such Selling Stockholder and the legal
right and power, and all authorization and approval required by law, to
enter into this Agreement and to sell, transfer and deliver the Shares to
be sold by the Selling Stockholder to the Underwriters pursuant to this
Agreement.
(e) Title to the Shares to be sold by the Selling Stockholder
pursuant to this Agreement will, upon delivery of such Shares and payment
therefor as provided herein, pass to the Underwriters free and clear of any
security interests, claims, liens, equities and other encumbrances.
(f) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in the stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares.
II.
The Selling Stockholder hereby agrees to sell to the several
Underwriters, and the Underwriters, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agree, severally and not jointly, to purchase from the Selling Stockholder the
respective numbers of Firm Shares set forth in Schedules I and II hereto
opposite their names at $_____ a share -- the purchase price.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Selling Stockholder
agrees to sell to the U.S. Underwriters the Additional Shares, and the U.S.
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Underwriters shall have a one-time right to purchase, severally and not jointly,
up to _____________ Additional Shares at the purchase price. Additional Shares
may be purchased as provided in Article IV hereof solely for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. If any Additional Shares are to be purchased, each U.S. Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the U.S.
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased as the number of U.S. Firm Shares
set forth in Schedule I hereto opposite the name of such U.S. Underwriter bears
to the total number of U.S. Firm Shares. The Additional Shares to be purchased
by the U.S. Underwriters hereunder and the U.S. Firm Shares are hereinafter
collectively referred to as the U.S. Shares.
The Company and the Selling Stockholder hereby agree that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, each will not, during the period ending 180 days after the date of
the Prospectus, in the case of the Company, and, during the period ending on
December 31, 1996, in the case of the Selling Stockholder, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, file a registration
statement (in the case of the Company) or make any demand for or exercise any
right with respect to (in the case of the Selling Stockholder and the Trustee)
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by such person or are thereafter acquired directly from the Company)
or (ii) enter into any swap or similar agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) of this paragraph is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) any grant of stock options which vest subsequent to the period
ending 180 days after the date of the Prospectus, (C) one or more registration
statements relating to the Company's 1996 Stock Option Plan, the 1996 Broad-
Based Stock Option Plan or the MoneyGram Agent Stock Option Plan or the
Company's obligations under the Registration Rights Agreement or (D) the
deposit, if any, of any Shares with Wachovia Bank of North Carolina, N.A., as
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trustee (the "Trustee") pursuant to the Irrevocable Trust Agreement among First
Data, the Selling Stockholder and the Trustee.
III.
The Company and the Selling Stockholder are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company and the Selling
Stockholder are further advised by you that the Shares are to be offered to the
public initially at U.S.$_____ a share (the public offering price) and to
certain dealers selected by you at a price that represents a concession not in
excess of U.S.$____ a share under the public offering price, and that any
Underwriter may allow, and such dealers may reallow, a concession, not in excess
of U.S.$____ a share, to any Underwriter or to certain other dealers.
Each U.S. Underwriter hereby makes to and with each of the Company and
the Selling Stockholder the representations and agreements of such U.S.
Underwriter contained in the fifth and sixth paragraphs of Article III of the
Agreement Between U.S. and International Underwriters of even date herewith.
Each International Underwriter hereby makes to and with each of the Company and
the Selling Stockholder the representations and agreements of such International
Underwriter contained in the seventh, eighth, ninth and tenth paragraphs of
Article III of such Agreement.
IV.
Payment for the Firm Shares shall be made by wire transfer of federal
funds or other immediately available funds payable to the order of the Selling
Stockholder. The Closing shall be held at the office of Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York, at 10:00 A.M., local time, on
____________, 1996, or at such other time on the same or such other date, not
later than _________, 1996, as shall be agreed to by the Selling Stockholder and
you. The time and date of such payment are hereinafter referred to as the
Closing Date.
Payment for any Additional Shares shall be made by wire transfer of
federal funds or other immediately available funds payable to the order of the
Selling
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Stockholder. The Closing of any sale of Additional Shares shall be held at the
office of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, at
10:00 A.M., local time, on such date (which may be the same as the Closing Date
but shall in no event be earlier than the Closing Date nor earlier than the
second business day after the giving of the notice hereinafter referred to nor
later than ten business days after the giving of the notice hereinafter referred
to) as shall be designated in a written notice from the U.S. Representatives to
the Selling Stockholder of their determination, on behalf of the U.S.
Underwriters, to purchase a number, specified in said notice, of Additional
Shares, or on such other date, in any event not later than _______, 199_, as
shall be designated in writing by the U.S. Representatives. The time and date
of such payment are hereinafter referred to as the Option Closing Date. The
notice of the determination to exercise the option to purchase Additional Shares
and of the Option Closing Date may be given at any time within 30 days after the
date of this Agreement.
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the purchase price therefor.
V.
The obligations of the Company, the Selling Stockholder and the
several obligations of the Underwriters hereunder are subject to the condition
that the Registration Statement shall have become effective not later than the
Effective Time.
The several obligations of the Underwriters hereunder are subject to
the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any change, or any
development involving a prospective change, in the condition,
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<PAGE>
financial or otherwise, or in the earnings, business or operations, of the
Company, from that set forth or contemplated in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement), that is material and adverse and that makes it, in your
reasonable judgment, impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct (x) insofar as
they relate to the Business, as if made immediately prior to the
consummation of the Transition and (y) insofar as they relate to the
Company, as if made on and as of such Closing Date after the consummation
of the Transition and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be performed
or satisfied hereunder on or before the Closing Date.
(c) The Underwriters shall have received a certificate, dated the
Closing Date, of an executive officer of the Selling Stockholder to the
effect that the representations and warranties of the Selling Stockholder
contained in this Agreement are true and correct (x) insofar as they relate
to the Business, as if made immediately prior to the consummation of the
Transition and (y) insofar as they relate to the Company, as if made on and
as of such Closing Date after the consummation of the Transition and that
the Selling Stockholder has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied on
or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his knowledge as to proceedings threatened.
(d) You shall have received on the Closing Date, after the
consummation of the Transition, an opinion of Sidley & Austin, special
counsel for the Company, dated the Closing Date, to the effect that
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of
Delaware,
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and has all requisite corporate power and authority to own its
property and to conduct its business as described in the Prospectus;
(ii) the authorized capital stock of the Company conforms as to
legal matters in all material respects to the description thereof
contained in the Prospectus under the caption "Description of Capital
Stock";
(iii) the Shares have been duly authorized and validly issued,
and are fully paid and non-assessable;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not result in a violation of any provision of Federal or New York
law or the General Corporation Law of Delaware or the certificate of
incorporation or by-laws of the Company or, to such counsel's
knowledge, result in a breach or violation of any term or provision
of, or constitute a default under, any agreement or other instrument
binding upon the Company that is material to the Company, or, to such
counsel's knowledge, result in a violation of any judgment, or decree
of any governmental body, agency or court, including, without
limitation, the U.S. Federal Trade Commission, having jurisdiction
over the Company, and no consent, approval, authorization or order of
or qualification with any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue
Sky laws of the various states or foreign securities laws or
regulations in connection with the offer and sale of the Shares by the
U.S. Underwriters;
(vi) the statements contained in the Prospectus under the
captions "Description of Capital Stock", "Shares Eligible for Future
Sale" and "Certain U.S. Federal Income Tax Considerations for Non-U.S.
Holders of Common Stock," to the extent that they constitute
descriptions of statutes, rules and regulations, have been reviewed by
such counsel and constitute
14
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fair summaries of the provisions of the statutes, rules and
regulations purported to be summarized, and the provisions of the
contracts, agreements and instruments summarized under such captions
and under the captions "The Transition and Ongoing Relationship with
First Data" and "Certain Relationships and Related Transactions"
conform in all material respects to the descriptions thereof in the
Prospectus; and
(vii) the Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel
has considered the information set forth therein in light of the matters
required to be set forth therein and that such counsel has participated in
conferences with officers and representatives of the Selling Stockholder
and the Company, including the Company's independent public accountants,
and representatives of and counsel for the U.S. Underwriters and
International Underwriters, during the course of which the contents of the
Registration Statement and the Prospectus and related matters were
discussed and, although such counsel shall not have independently checked
the accuracy or completeness of, or otherwise verified, and accordingly are
not passing upon, and shall not assume responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectus (except as set forth in subparagraph (vi)
above), and that such counsel has relied as to materiality, to a large
extent, upon the judgement of officers and representatives of the Company,
as a result of such consideration and participation, nothing has come to
the attention of such counsel which causes such counsel to believe that the
Registration Statement, at the time it became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of the date of such opinion,
includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(except in each case such counsel need express no comment with respect to
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<PAGE>
the financial statements, financial data, statistical data and supporting
schedules included in the Registration Statement or the Prospectus or
statements made in the exhibits to the Registration Statement).
In rendering such opinion, such counsel may (i) state that their
opinion is limited to the Federal laws of the United States of America, the
laws of the State of New York and the General Corporation Law of the State
of Delaware, and (ii) rely as to matters of fact upon the representations
contained in this Agreement and certificates of officers of the Company and
of public officials; provided that such counsel shall furnish copies of any
such certificates to the Representatives.
(e) You shall have received, on the Closing Date, after the
consummation of the Transition, an opinion of Andrea Kenyon, General
Counsel of the Company, to the effect that:
(i) the Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company;
(ii) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company
is a party or to which any of the properties of the Company is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
(iii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not result in a violation of any provision of applicable law;
(iv) except as described in the Prospectus, to such counsel's
knowledge, there are no
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contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Securities Act;
(v) there are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any of the Shares pursuant to the Company's certificate of
incorporation or by-laws, and there are no such other rights or
restrictions in any agreement or other instrument to which the Company
is a party or by which the Company is bound and which is known to such
counsel;
(vi) the statements contained in the Prospectus under the
caption "Business--Regulation and Licensing", to the extent that they
constitute descriptions of statutes, rules and regulations, have been
reviewed by such counsel and constitute fair summaries of the
provisions of the statutes, rules and regulations purported to be
summarized;
(vii) except as described in the Prospectus, the Company
possesses all certificates, authorizations, permits and licenses
issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and, to such counsel's
knowledge, the Company has not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization of permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company, except as described in or
contemplated by the Prospectus;
(viii) the consummation of the Transition and the execution and
delivery by the Company of, and the performance by the Company of its
obligations under, the Transition Agreements will not result in a
violation of the provisions of the certificate of incorporation or by-
laws of the
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Company or any statute, rule or regulation or any judgment, or decree
of any governmental body, agency or court, including, without
limitation, the U.S. Federal Trade Commission, having jurisdiction
over the Company, or conflict with or result in a breach or the
violation of any of the terms or provisions of, or constitute a
default under, any agreement or other instrument binding upon the
Company (except for such conflicts, breaches, violations and defaults
that, individually or in the aggregate, would not have a material
adverse effect on the Company) and no consent, approval, authorization
or order of or qualification with any governmental body or agency is
required for the performance by the Company of its obligations under
the Transition Agreements or pursuant to the Transition (except for
such consents, authorizations, orders or qualifications that,
individually or in the aggregate, would not have a material adverse
effect on the Company or the consummation of the Transition).
(ix) such counsel (1) believes that (except for financial
statements, financial data, statistical data and supporting schedules
as to which such counsel need not express any belief) the Registration
Statement and the Prospectus included therein at the time the
Registration Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (2) believes that (except for financial statements,
financial data, statistical data and supporting schedules as to which
such counsel need not express any belief) the Prospectus does not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(f) You shall have received on the Closing Date, after the
consummation of the Transition, an opinion of Sidley & Austin, counsel for
the Selling Stockholder, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder;
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(ii) the execution and delivery by the Selling Stockholder of,
and the performance by the Selling Stockholder of its obligations
under, this Agreement will not result in a violation of any provision
of Federal or New York law, or the General Corporation Law of
Delaware, or the certificate of incorporation or by-laws of the
Selling Stockholder;
(iii) Immediately prior to the consummation of the sale of the
Shares pursuant to this Agreement, (i) the Shares were owned of record
by the Selling Stockholder and (ii) such counsel has no reason to
believe that the Shares were not owned beneficially by the Selling
Stockholder free and clear of any security interests, claims, liens,
equities or other encumbrances (other than those arising under this
Agreement). The Selling Stockholder has all requisite corporate power
and authority to enter into this Agreement and to sell, transfer and
deliver the Shares as contemplated by this Agreement and this
Agreement has been duly and validly executed and delivered by the
Selling Stockholder; and
(iv) Upon registration of the Shares in the names of the
applicable Underwriters in the stock records of the Company, such
Underwriters will, assuming that such Underwriters are purchasing the
Shares in good faith and without notice of any adverse claim within
the meaning of the Uniform Commercial Code, as currently in effect
under the laws of the State of Delaware, have acquired all rights of
the Selling Stockholder in the Shares free and clear of any such
adverse claim.
(g) You shall have received on the Closing Date, after the
consummation of the Transition, an opinion of Jeff Leventhal, counsel for
the Selling Shareholder, dated the Closing Date, to the effect that:
(i) the execution and delivery by the Selling Stockholder of,
and the performance by the Selling Stockholder of its obligations
under, this Agreement will not result in a violation of any agreement
or other instrument binding upon the Selling Stockholder or any of its
subsidiaries, that is individually or in the aggregate material to the
Selling Stockholder or any of its subsidiaries or, to such counsel's
knowledge, any
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judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Selling Stockholder, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Selling Stockholder of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the
various states or foreign securities laws or regulations in connection
with offer and sale of the Shares;
(ii) the consummation of the Transition and the execution and
delivery by the Selling Stockholder of, and the performance by the
Selling Stockholder of its obligations under, the Transition
Agreements will not result in a violation of the provisions of the
certificate of incorporation or by-laws of the Selling Stockholder or
any statute, rule or regulation or any judgment, or decree of any
governmental body, agency or court, including, without limitation, the
U.S. Federal Trade Commission, having jurisdiction over the Selling
Stockholder or any subsidiary of the Selling Stockholder, or conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any agreement or other
instrument binding upon the Selling Stockholder of any of its
subsidiaries (except for such conflicts, breaches, violations and
defaults that, individually or in the aggregate, would not have a
material adverse effect on the Selling Stockholder or any of its
subsidiaries) and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Selling Stockholder of its obligations under the
Transition Agreements or pursuant to the Transition (except for such
consents, authorizations, orders or qualifications that, individually
or in the aggregate, would not have a material adverse effect on the
Selling Stockholder or the consummation of the Transition; and
(iii) such counsel (1) believes that (except for financial
statements, financial data, statistical data and supporting schedules
as to which such counsel need not express any belief) the Registration
Statement and the Prospectus included therein at the time the
Registration
20
<PAGE>
Statement became effective did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
(2) believes that (except for financial statements, financial data,
statistical data and supporting schedules as to which such counsel
need not express any belief) the Prospectus does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(h) You shall have received on the Closing Date an opinion of Davis
Polk & Wardwell, special counsel for the Underwriters, dated the Closing
Date, in such form as is reasonably satisfactory to the Underwriters.
With respect to subparagraph (ix) of paragraph (e) above, Andrea
Kenyon may state, and with respect to subparagraph (iii) of paragraph (g) above,
Jeff Leventhal may state, that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification, except as
specified and accordingly such counsel are not passing upon, and shall not
assume responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus except as
set forth in subparagraph (vi) with respect to the opinion of Andrea Kenyon.
The opinions of Sidley & Austin described in paragraph (d) and (f)
above shall be rendered to you at the request of the Company and the Selling
Stockholder, and shall so state therein.
(i) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Ernst & Young,
LLP, independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
21
<PAGE>
(j) The Transition (as defined and described in the Prospectus) shall
have been consummated in accordance with all applicable law.
(k) The Registration Statement shall have become effective not later
than 9:30 a.m. on the next business day following the date hereof.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as they may
reasonably request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other matters related to
the issuance of the Additional Shares.
VI.
1. In further consideration of the agreements of the Underwriters
herein contained, the Company covenants as follows:
(a) To furnish to you, without charge, 2 signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and, during the period mentioned in paragraph
(c) below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and to file no such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the reasonable opinion of your counsel the
Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
22
<PAGE>
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the reasonable opinion of your counsel, it is necessary to amend or
supplement the Prospectus to comply with law, forthwith to prepare, file
with the Commission and furnish, at its own expense, to the Underwriters
and to the dealers (whose names and addresses you will furnish to the
Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent
to service or process in any jurisdiction or to subject itself to taxation
in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending December 31, 1997 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) For a period of five years following the Closing Date, to furnish
to you copies of all materials furnished by the Company to its shareholders
and all public reports and all reports and financial statements furnished
by the Company to the NYSE or the principal national securities exchange
upon which the Common Stock may be listed pursuant to requirements of or
agreements with such exchange or to the Commission pursuant to the Exchange
Act or any rule or regulation of the Commission thereunder.
(g) To use its best efforts to accomplish the listing of the Common
Stock on the New York Stock Exchange.
2. Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is
23
<PAGE>
terminated, the Selling Stockholder agrees to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and the
Selling Stockholder under this Agreement, including: (i) the fees, disbursements
and expenses of the counsel and the accountants for the Company and the Selling
Stockholder in connection with the registration and delivery of the Shares under
the Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of producing any Blue Sky or
Legal Investment memorandum in connection with the offer and sale of the Shares
under state securities laws and all reasonable expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
provided in Section VI 1(d) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
Offering by the National Association of Securities Dealers, Inc., (v) all fees
and expenses in connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and expenses
incident to listing the Shares on the NYSE, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the Offering, including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging expense
of the representatives and officers of the Company and any such consultants, and
the cost of any aircraft chartered in connection with the road show, and (ix)
all other costs and expenses incident to the perfor mance of the obligations of
the Company and the Selling Stockholder hereunder for which provision is not
otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section VII, and the third paragraph of Section IX
below, the Underwriters will
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pay all of their costs and expenses, including fees and disbursements of their
counsel, stock transfer taxes payable on resale of any of the Shares by them,
any advertising expenses connected with any offers they may make and their costs
and expenses with respect to the "road show."
VII.
The Company and the Selling Stockholder, jointly and severally agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), from and against any and all losses, claims, damages and
liabilities (including, to the extent hereinafter provided, any legal or other
expenses reasonably incurred by any Underwriter or any such controlling person
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in writing
by any U.S. Representative, International Representative or Underwriter through
you expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus or supplement thereto shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities.
25
<PAGE>
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Selling Stockholder, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or the Selling Stockholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, and
liabilities (including, to the extent hereinafter provided, any legal or other
expenses reasonably incurred by the Company, the Selling Stockholder, the
directors of the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company or the Selling
Stockholder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act in connection with defending or investigating any such
claim) arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendment or supplement
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by any U.S. Representative, International Representative or Underwriter
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus, or any amendments or supplements thereto and (ii) the failure of
such Underwriter to deliver a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) to any person to whom a copy of any preliminary prospectus (or any
supplement thereto) shall have been delivered by or on behalf of such
Underwriter and to whom Shares shall have been sold by such Underwriter, if
required by law to have been so delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have fully cured the defect giving rise to
such loss, claim, damage or liability.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to any of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the
26
<PAGE>
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (a) the reasonable fees and expenses of more than one separate
firm (other than local counsel which shall be engaged only for purposes of
appearing with such firm in such jurisdictions in which such firm is not
licensed to practice) for all Underwriters and all persons, if any, who control
any Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, (b) the reasonable fees and expenses of more
than one separate firm (other than local counsel which shall be engaged only for
purposes of appearing with such firm in such jurisdictions in which such firm is
not licensed to practice) for the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either such Section and (c) the reasonable fees and
expenses of more than one separate firm (other than local counsel which shall be
engaged only for purposes of appearing with such firm in such jurisdictions in
which such firm is not licensed to practice) for all Selling Stockholder and all
persons, if any, who control any Selling Stockholder within the meaning of
either such Section, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Underwriters
and such control persons of Underwriters, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In the case of any such separate
firm for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the case of
any such separate firm for the Selling Stockholder and such controlling persons
of the Selling Stockholder, such firm shall be designated in writing by the
Selling Stockholder. The indemnifying party shall not be liable for
27
<PAGE>
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first two paragraphs of
this Article VII is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Stockholder on the one hand and the Underwriters on the other
hand in connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Selling Stockholder and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate public offering price of the Shares. The relative fault of the Company
and the Selling Stockholder on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to
28
<PAGE>
information supplied by the Company and the Selling Stockholder or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Article VII
are several in proportion to the respective number of Shares they have purchased
hereunder, and not joint.
The Company, the Selling Stockholder and the Underwriters agree that
it would not be just or equitable if contribution pursuant to this Article VII
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Article VII, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Article VII are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Article
VII and the representations and warranties of the Company and the Selling
Stockholder contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Selling Stockholder or any person controlling the Selling
Stockholder, or the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
29
<PAGE>
VIII.
This Agreement shall be subject to termination by notice given by you
to the Company, if (a) after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event singly or together with any other such
event makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
IX.
This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Article II be increased pursuant to this Article IX by an
amount in excess of
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one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to you and
the Company for the purchase of such Shares are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter, the Company or the Selling Stockholder. In any
such case either you or the Selling Stockholder shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of either the Company or the
Selling Stockholder to comply with the terms or to fulfill any of the conditions
of this Agreement, or if for any reason either the Company or the Selling
Stockholder shall be unable to perform its obligations under this Agreement, the
Company and the Selling Stockholder will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
This Agreement may be signed in two or more counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York.
Very truly yours,
MONEYGRAM PAYMENT SYSTEMS, INC.
By_____________________________
INTEGRATED PAYMENT SYSTEMS INC.
By_____________________________
Accepted, ____________, 1996
MORGAN STANLEY & CO.
INCORPORATED
CS FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
Acting severally on behalf of themselves
and the several U.S. Underwriters
named in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By______________________________________
32
<PAGE>
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
CS FIRST BOSTON LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
SMITH BARNEY INC.
Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.
By Morgan Stanley & Co. International Limited
BY
--------------------------------------------
33
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Exhibit 2.1
CONTRIBUTION AGREEMENT
DATED AS OF ___________ , 1996
AMONG
FIRST DATA CORPORATION
INTEGRATED PAYMENT SYSTEMS INC.
AND
MONEYGRAM PAYMENT SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS.............................................................. 1
Section 1.1. Definitions..................................................... 1
ARTICLE II
CONTRIBUTION............................................................. 7
Section 2.1. Contributed Assets.............................................. 7
Section 2.2. Excluded Assets.................................................10
Section 2.3. Assumed Liabilities.............................................10
Section 2.4. Excluded Liabilities............................................11
Section 2.5. Transfer of Title to Agent Contracts............................11
Section 2.6. Representation and Warranty Regarding Contributed Assets........12
ARTICLE III
ISSUANCE OF SHARES.......................................................12
Section 3.1. Issuance of Shares..............................................12
ARTICLE IV
CLOSING..................................................................13
Section 4.1. Closing Date....................................................13
Section 4.2. Amendment of Schedules..........................................13
Section 4.3. The Company's Closing Date Deliveries...........................13
Section 4.4. IPS' Closing Date Deliveries....................................13
ARTICLE V
ADDITIONAL AGREEMENTS....................................................14
Section 5.1. Use of Names....................................................14
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<PAGE>
Section 5.2. Collection of Accounts..........................................15
Section 5.3. Taxes...........................................................15
Section 5.4. Allocation of Consideration.....................................17
Section 5.5 Tax Contests....................................................17
Section 5.6. Right to Use MoneyGram Agent Assets.............................19
Section 5.7. Employees.......................................................19
Section 5.8. Pending Service and Trademarks..................................20
Section 5.9. Lakewood Lease..................................................20
Section 5.10. Financial Systems...............................................21
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF IPS..............................21
Section 6.1. FTC Approval....................................................21
Section 6.2. No Restraint....................................................21
Section 6.3. Underwriting Agreement..........................................21
ARTICLE VII
INDEMNIFICATION.........................................................21
Section 7.1. Indemnification by IPS..........................................21
Section 7.2. Indemnification by the Company..................................23
Section 7.3. Notice of Claims................................................24
Section 7.4. Third Person Claims.............................................25
Section 7.5. Limitations.....................................................27
ARTICLE VIII
TERMINATION.............................................................27
Section 8.1. Termination.....................................................27
ARTICLE IX
GENERAL PROVISIONS......................................................28
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<PAGE>
Section 9.1. Survival of Obligations.........................................28
Section 9.2. Notices.........................................................28
Section 9.3. Successors and Assigns..........................................28
Section 9.4. Access to Records after Closing.................................29
Section 9.5. Entire Agreement; Amendments....................................30
Section 9.6. Partial Invalidity..............................................30
Section 9.7. Execution in Counterparts.......................................30
Section 9.8. Further Assurances..............................................31
Section 9.9. Governing Law...................................................31
EXHIBITS
Exhibit 1 Facility
Exhibit 2 Human Resources Agreement
Exhibit 3 Instrument of Assumption
Exhibit 4 Instrument of Contribution
Exhibit 5 Operations Agreement
Exhibit 6 Registration Rights Agreement
Exhibit 7 Service Mark License Agreement
Exhibit 8 Software License Agreement
Exhibit 9 Telecommunications Services Sharing Agreement
Exhibit 10 Instrument of Assignment (Western Union)
Exhibit 11 Covenant Not to Sue
SCHEDULES
Schedule 1.1A Assignable Pending Applications
Schedule 1.1B Lakewood Lease
Schedule 1.1C MoneyGram Application Software
Schedule 1.1D Nonassignable Pending Applications
Schedule 1.1E PC MoneyGram Application Software
Schedule 2.1B Lakewood Assets
Schedule 2.1C MoneyGram Agent Assets
Schedule 2.1D MoneyGram Marks
Schedule 2.1E Agent Contracts
Schedule 2.1F Help Desk Assets
Schedule 2.1G Express Payment Assets
Schedule 2.1H Cash Advance Assets
Schedule 5.1 Restricted FDC Tradenames and Trademarks
Schedule 5.7A MoneyGram Business Employees
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CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of ____________, 1996, among First Data
Corporation, a Delaware corporation ("FDC"), Integrated Payment Systems Inc., a
Delaware corporation and a wholly owned subsidiary of FDC ("IPS"), and MoneyGram
Payment Systems, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, IPS is, among other things, engaged in the Business (as defined in
Section 1.1) and historically has operated the Business in the name of American
Express Travel Related Services Company, Inc., a New York corporation ("Travel
Related Services"), in order to comply with State Licensing Requirements (as
defined in Section 1.1);
WHEREAS, prior to, or simultaneous with, the Closing (as defined in Section
1.1), IPS will have obtained all licenses necessary under State Licensing
Requirements and begun operating the Business (as defined in Section 1.1)
substantially in its own name; and
WHEREAS, FDC and IPS desire to contribute to the Company, and the Company
desires to acquire, on a going concern basis, the Contributed Assets (as defined
in Section 2.1), all on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed among FDC, IPS and the Company as
follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1. DEFINITIONS. In this Agreement, the following terms have
the meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person; provided, however, that under no circumstances shall FDC and
its Affiliates be deemed Affiliates of the Company or the Company and its
Affiliates be deemed Affiliates of FDC.
<PAGE>
"AGENT CONTRACT" means an agreement pursuant to which a MoneyGram Agent
provides Consumer Money Wire Transfer Services on behalf of the Business,
together with any license agreement with such MoneyGram Agent related to the PC
MoneyGram Application Software.
"ASSIGNABLE PENDING APPLICATIONS" means the pending trademark applications
set forth in Schedule 1.1A.
"BUSINESS" means the Consumer Money Wire Transfer Services marketed under
the name "MoneyGram/SM/," it being acknowledged and agreed to by the parties
hereto that the Business shall not include the Consumer Money Wire Transfer
Services marketed under the name "Western Union."
"CLOSING" means the closing of the transfer of the Contributed Assets to
the Company in exchange for the Contribution Amount.
"CLOSING DATE" has the meaning specified in Section 4.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY GROUP MEMBER" means the Company and its Affiliates, and their
respective directors, officers, employees, agents, attorneys and consultants and
their respective successors and assigns.
"CONSENT DECREE" means the Consent Decree dated January 19, 1996 (Docket
No. C-3635) between FDC and the FTC, including all appendices and attachments
thereto, as it may be amended or supplemented from time to time.
"CONSUMER MONEY WIRE TRANSFER SERVICES" means the service of transferring
the right to money using computer or telephone lines from one person through the
location of a MoneyGram Agent to a different person physically present at the
location of a different MoneyGram Agent and the services marketed under the
phrase "Express Payment" or "Cash Advance."
"COVENANT NOT TO SUE" means the Covenant Not to Sue in the form of Exhibit
11.
"ENCUMBRANCE" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
title or other restrictions of a similar kind.
"EXPENSES" means any and all reasonable expenses incurred in connection
with investigating, defending or asserting
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any claim, action, suit or proceeding incident to any matter indemnified against
hereunder (including, without limitation, court filing fees, court costs,
arbitration fees or costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, accountants and other
professionals).
"FACILITY" means the Short-Term Working Capital Facility in the form of
Exhibit 1.
"FIDUCIARY ASSETS" means, as of any date, the amount of assets that would
be reflected in respect of the caption "Assets restricted to settlement of
MoneyGram transactions" on a balance sheet of the Company prepared as of such
date in accordance with the policies applied in the preparation of the audited
balance sheet of the Company dated as of December 31, 1995 contained in the
Registration Statement.
"FIDUCIARY LIABILITIES" means, as of any date, the amount of liabilities
that would be reflected in respect of the caption "Liabilities relating to
unsettled MoneyGram transactions" on a balance sheet of the Company prepared as
of such date in accordance with the policies applied in the preparation of the
audited balance sheet of the Company dated as of December 31, 1995 contained in
the Registration Statement.
"FTC" means the Federal Trade Commission of the United States of America.
"FTC APPROVAL" means the approval by the FTC pursuant to the Consent Decree
of the offering contemplated by the Registration Statement, including the
transactions contemplated or described therein.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" means all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a Governmental Body, whether
through a contractual arrangement with a third Person or otherwise, that are
necessary to entitle IPS to carry on and conduct the Business substantially as
currently conducted.
"HUMAN RESOURCES AGREEMENT" means the Human Resources Agreement in the form
of Exhibit 2.
"INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption in the form
of Exhibit 3.
"INSTRUMENT OF CONTRIBUTION" means the Instrument of Contribution in the
form of Exhibit 4.
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"IPS GROUP MEMBER" means IPS, FDC and Affiliates of FDC, and their
respective directors, officers, employees, agents, attorneys and consultants and
their respective successors and assigns.
"LAKEWOOD LEASE" means the real estate lease and leasehold improvements
described in Schedule 1.1B.
"LOSSES" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"MONEYGRAM AGENT" means a Person that has contracted with Travel Related
Services, IPS or the Company, as the case may be, to provide the Consumer Money
Wire Transfer Services provided by the Business.
"MONEYGRAM MARKS" means all of the trademarks in Schedule 2.1D (as such
Schedule may be amended in accordance with Section 4.2) and any common law
rights IPS may have in any such trademarks.
"MONEYGRAM APPLICATION SOFTWARE" means all source and object code versions
of the computer software commonly known as the MoneyGram Application Software
and all enhancements and modifications thereto, including, without limitation,
all components, modules, tools, utilities and related materials, together with
all related documentation, on whatever medium such materials and related
documentation may be maintained, as described in Schedule 1.1C.
"NONASSIGNABLE PENDING APPLICATIONS" means the pending trademark
applications set forth in Schedule 1.1D.
"OPERATIONS AGREEMENT" means the Operations Agreement in the form of
Exhibit 5.
"PC MONEYGRAM APPLICATION SOFTWARE" means all source and object code
versions of the computer software commonly known as the PC MoneyGram Application
Software and all enhancements and modifications thereto, including, without
limitation, all components, modules, tools, utilities and related materials,
together with all related documentation, on whatever medium such materials and
related documentation may be maintained, as described in Schedule 1.1E.
"PERMITTED ENCUMBRANCES" means (a) liens for Taxes and other governmental
charges and assessments that are not yet due and payable, (b) liens of landlords
and liens of carriers, warehousemen, mechanics and materialmen and other like
liens arising in the ordinary course of business for sums not yet due and
payable and (c) other liens or imperfections on property that are not material
in amount or do not materially detract from the
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value of or materially impair the existing use of the property affected by such
lien or imperfection.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of Exhibit 6.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-1
of the Company (Reg. No. 333-228) filed on January 10, 1996 with the United
States Securities and Exchange Commission under the Securities Act of 1933, as
amended, including all exhibits and amendments thereto.
"REQUIREMENTS OF LAW" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body.
"SERVICE MARK LICENSE AGREEMENT" means the Service Mark License
Agreement in the form of Exhibit 7.
"SOFTWARE LICENSE AGREEMENT" means the Software License Agreement in
the form of Exhibit 8.
"STATE LICENSING REQUIREMENTS" means Requirements of Law related to
the licensing of a Person offering money transfer services.
"STRADDLE PERIOD" means any taxable year or period beginning before
and ending after the Closing Date.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE") means any
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem,
value added, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Body.
"TAX AUTHORITY" means the Internal Revenue Service or any other
comparable state, local or foreign government authority.
"TAXABLE PERIOD" means any Taxable year or period (or portion thereof)
for federal, state or local income or franchise Tax purposes, in each case
ending after the Closing.
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"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
"TELECOMMUNICATIONS SERVICES SHARING AGREEMENT" means the
Telecommunications Services Sharing Agreement in the form of Exhibit 9.
ARTICLE II
CONTRIBUTION
------------
SECTION 2.1. CONTRIBUTED ASSETS. Subject to Section 2.5, upon the
terms and subject to the conditions of this Agreement, on the Closing Date, IPS
shall pay to the Company $12 million in cash, and FDC shall cause IPS or its
Affiliates to contribute, transfer, assign, convey and deliver to the Company,
and the Company shall acquire from IPS or its Affiliates, free and clear of all
Encumbrances (except for Permitted Encumbrances), all right, title and interest
of IPS or its Affiliate, as the case may be, in, to and under:
(a) the Lakewood Lease;
(b) the items contained in Schedule 2.1B (as such Schedule may be
amended in accordance with Section 4.2), which includes (A) all items of
machinery, equipment, vehicles, furniture and other personal property owned
or leased by IPS or its Affiliate and which are used or have been used in
connection with providing the voice center functions for the Business at
the facilities that are the subject of the Lakewood Lease and (B) all
contracts between IPS or its Affiliates and a third Person pursuant to
which such third Person provides services in respect of such personal
property or the facilities that are the subject of the Lakewood Lease
(collectively, the "Lakewood Assets");
(c) the items contained in Schedule 2.1C (as such Schedule may be
amended in accordance with Section 4.2), which includes (A) all items of
machinery, equipment, signage and other personal property, including,
without limitation, computers and computer printers, that are owned or
leased by IPS or its Affiliates and provided to MoneyGram Agents for the
use by MoneyGram Agents in providing the Consumer Money Wire Transfer
Services on behalf of IPS and (B) all contracts between IPS or its
Affiliates and a third Person pursuant to which such third Person provides
services in respect of such personal property (collectively the "MoneyGram
Agent Assets");
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(d) the MoneyGram Marks described or set forth in Schedule 2.1D (as
such Schedule may be amended in accordance with Section 4.2);
(e) the economic benefits under the Agent Contracts listed or
described in Schedule 2.1E (as such Schedule may be amended in accordance
with Section 4.2);
(f) the items contained in Schedule 2.1F (as such Schedule may be
amended in accordance with Section 4.2), which constitute certain items of
machinery, equipment, furniture and other personal property owned or leased
by IPS or its Affiliates and which are used or have been used in connection
with providing the help desk functions for the Business and (B) all
contracts between IPS or its Affiliates and a third Person pursuant to
which such third Person provides services in respect of such personal
property (collectively, the "Help Desk Assets");
(g) the items contained in Schedule 2.1G (as such Schedule may be
amended in accordance with Section 4.2), which includes (A) all items of
machinery, equipment, furniture and other personal property owned or leased
by IPS or its Affiliates and which are used or have been used in connection
with providing the "Express Payment" service offered by the Business and
(B) all contracts between IPS or its Affiliates and a third Person relating
to the "Express Payment" service offered by the Business (collectively, the
"Express Payment Assets");
(h) the items contained in Schedule 2.1H (as such Schedule may be
amended in accordance with Section 4.2), which includes (A) all items of
machinery, equipment, furniture and other personal property owned or leased
by IPS or its Affiliates and which are used or have been used in connection
with providing the "Cash Advance" service offered by the Business and (B)
all contracts between IPS or its Affiliates and a third Person relating to
the "Cash Advance" service offered by the Business (collectively, the "Cash
Advance Assets");
(i) the trademarks and service marks that are the subject of the
Nonassignable Pending Applications, upon assignment thereof as contemplated
by Section 5.8; and
(j) the MoneyGram Application Software and the PC MoneyGram
Application Software, and, in each case, (x) all copyright interests owned
or claimed by IPS or its Affiliates pertaining to such Software, including,
without limitation, all copyright interests accruing by reason of the
Copyright Act of 1976, as amended, 17 U.S.C. (S) 101 et. seq., and
international copyright conventions; and (y) all
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inventions, discoveries, improvements, ideas, trade secrets, know-how,
confidential information, and all other intellectual property owned or
claimed by IPS or its Affiliates relating to such software.
All of the foregoing assets to be acquired by the Company hereunder
(excluding any Excluded Assets (as defined in Section 2.2) but supplemented from
time to time pursuant to Section 2.5) are referred to herein as the "Contributed
Assets."
SECTION 2.2. EXCLUDED ASSETS. Notwithstanding the provisions of
Section 2.1, the Contributed Assets shall not include any assets, properties,
business or goodwill, tangible or intangible, of IPS or any of its Affiliates
that are not expressly contributed, assigned, transferred, conveyed and
delivered to the Company pursuant to the Instrument of Contribution (the
"Excluded Assets"), including, without limitation, the following:
(a) all Fiduciary Assets as of the Closing Date;
(b) the rights, claims or causes of action of IPS or its Affiliates
against third parties that may arise in connection with the discharge by
IPS or its Affiliates of the Excluded Liabilities;
(c) all Governmental Permits of IPS in respect of the Business; and
(d) the Licensed Marks (as defined in the Service Mark License
Agreement).
SECTION 2.3. ASSUMED LIABILITIES. Subject to Section 2.5, on the
Closing Date, the Company shall deliver to IPS the Instrument of Assumption
pursuant to which the Company shall assume and agree to discharge the following
obligations and liabilities in accordance with their respective terms and
subject to the respective conditions thereof: all liabilities and obligations
of IPS or its Affiliates to be paid or performed on and after the Closing Date
in respect of the Contributed Assets, including, without limitation, under (i)
the Lakewood Lease; (ii) the contracts included in the Lakewood Assets; (iii)
the economic liabilities under the Agent Contracts listed or described in
Schedule 2.1E (as such Schedule may be amended in accordance with Section 4.2);
(iv) the contracts included in the MoneyGram Agent Assets; (v) the contracts
included in the Help Desk Assets; (vi) the contracts included in the Express
Payment Assets; (vii) the contracts included in the Cash Advance Assets; (viii)
Assignable Pending Applications; and (ix) all aspects of the conduct of the
Business on and after the Closing Date not delegated to Affiliates of FDC under
the Operations Agreement, including the performance of all activities
contemplated by Section 5.1 of the Operations Agreement; except, in each case,
to
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the extent such liabilities and obligations, but for a breach or default by IPS
or its Affiliates, would have been paid, performed or otherwise discharged prior
to the Closing Date or to the extent any such liabilities and obligations arise
out of any such breach or default.
All of the foregoing liabilities and obligations to be assumed by the
Company hereunder (excluding any Excluded Liabilities but supplemented from time
to time pursuant to Section 2.5) are referred to herein as the "Assumed
Liabilities."
SECTION 2.4. EXCLUDED LIABILITIES. The Company shall not assume or
be obligated to pay, perform or otherwise discharge any liability or obligation
of IPS or its Affiliates, direct or indirect, known or unknown, absolute or
contingent, not expressly assumed by the Company pursuant to the Instrument of
Assumption, including, without limitation, (i) any of the Fiduciary Liabilities
as of the Closing Date and (ii) any liabilities existing as of the Closing Date
related to personal computers that, prior to the Closing Date, the Company has
requested IPS purchase on its behalf, the costs of which (not to exceed
$1,350,000) the parties hereto have agreed will be paid by IPS (all such
liabilities and obligations not being assumed being herein called the "Excluded
Liabilities").
SECTION 2.5. TRANSFER OF TITLE TO AGENT CONTRACTS. (a)
Notwithstanding anything in this Agreement to the contrary, in order to comply
with State Licensing Requirements, this Agreement shall not constitute an
agreement to assign to the Company any Agent Contract or an assumption by the
Company of any Agent Contract. In furtherance of the foregoing sentence, at the
Closing the Company shall receive assignment of all economic benefits under
Agent Contracts included in the Contributed Assets pursuant to the Instrument of
Contribution and assume all economic liabilities under the Agent Contracts
included in the Contributed Assets pursuant to the Instrument of Assumption.
Upon satisfaction of the conditions to the Company's offering of Consumer Money
Wire Transfer Services and operation of the Business in its own name as
contemplated by the Operations Agreement, including compliance by the Company
with all State Licensing Requirements, IPS shall assign such Agent Contracts to
the Company and the Company shall assume all liabilities and obligations related
thereto pursuant to instruments reasonably acceptable to the Company and IPS and
in accordance with the terms of the Operations Agreement. Upon the assignment
and assumption of the Agent Contracts as contemplated in this Section 2.5(a),
such Agent Contracts shall constitute Contributed Assets and all liabilities
associated therewith shall constitute Assumed Liabilities for purposes of this
Agreement.
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(b) If after the Closing Date and prior to the two-year anniversary of
the date hereof any Agent Contract the economic benefits of which are included
in the Contributed Assets is terminated by a MoneyGram Agent in accordance with
the terms of such Agent Contract, then FDC and IPS each agrees not to, and to
cause their Affiliates not to, for a period of 60 days after the date of such
termination, enter into any agreement with such MoneyGram Agent to provide
consumer money wire transfer services on behalf of IPS or any of its Affiliates.
(c) If any Agent Contract, which on the day of Closing is not
assignable in accordance with its terms to IPS or the Company, is terminated in
connection with the transactions contemplated hereby, then FDC and IPS each
agrees not to, and to cause their Affiliates not to, enter into any agreement
with such terminated MoneyGram Agent to provide consumer money wire transfer
services on behalf of IPS or any of its Affiliates for a period of 60 days after
the time such Agent Contract would have expired in accordance with its terms,
determined without regard to any automatic extension or renewal provisions.
SECTION 2.6. REPRESENTATION AND WARRANTY REGARDING CONTRIBUTED
ASSETS. Except for those assets that IPS must retain in order for the Business
to be operated in compliance with State Licensing Requirements, the Contributed
Assets, together with the services provided by IPS and its Affiliates to the
Company under the Operations Agreement, the services made available to the
Company under the Telecommunications Services Sharing Agreement, the rights of
the Company under the Covenant Not to Sue and the licenses to the Software (as
defined in the Software License Agreement) and the Licensed Marks (as defined in
the Service Mark License Agreement), constitute all services and assets
necessary to conduct the Business as currently conducted by IPS. THE
CONTRIBUTED ASSETS ARE BEING TRANSFERRED ON AN "AS IS, WHERE IS" BASIS AND IPS,
FDC AND THEIR AFFILIATES DISCLAIM ALL WARRANTIES, REPRESENTATIONS AND GUARANTIES
WHETHER EXPRESS OR IMPLIED (EXCEPT AS SET FORTH IN THIS SECTION 2.6). NEITHER
IPS, FDC NOR ANY OF THEIR AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY AS TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES
WHATSOEVER.
ARTICLE III
ISSUANCE OF SHARES
------------------
SECTION 3.1. ISSUANCE OF SHARES AND OTHER CONSIDERATION. In
consideration for the Contributed Assets, on the Closing Date the Company shall
assume the Assumed Liabilities and issue to IPS such number of validly issued,
fully paid and nonassessable shares (the "Contribution Amount") of the Company's
Common Stock, par value $.01 per share (the "Common Stock") as
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the parties shall agree (but in no event more than that number of shares of
Common Stock registered under the Registration Statement). IPS and the Company
agree that the assumption of the Assumed Liabilities and the issuance of the
Contribution Amount of Common Stock shall be allocated among the Contributed
Assets as set forth in the Allocation Schedule (as defined in Section 5.4).
ARTICLE IV
CLOSING
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SECTION 4.1. CLOSING DATE. The Closing shall be consummated as soon
as practicable after the fulfillment or (if permissible) waiver of the
conditions set forth in Article VI on a date agreed upon by the Company and IPS,
at such place and at such time as shall be agreed upon by the Company and IPS.
The time and date on which the Closing is actually held is referred to herein as
the "Closing Date."
SECTION 4.2. AMENDMENT OF SCHEDULES. IPS may, from time to time on
or prior to the Closing, by notice in accordance with the terms of this
Agreement, supplement, amend or create any Schedule to reflect the status of the
Business as of such time.
SECTION 4.3. THE COMPANY'S CLOSING DATE DELIVERIES. At the Closing
the Company shall deliver to IPS all of the following:
(a) The Instrument of Assumption, the Operations Agreement, the
Facility, the Software License Agreement, the Service Mark License
Agreement, the Human Resources Agreement, the Telecommunications Services
Sharing Agreement, the Covenant Not to Sue and the Registration Rights
Agreement, each duly executed by the Company; and
(b) The Contribution Amount of Common Stock.
SECTION 4.4. IPS' CLOSING DATE DELIVERIES. Subject to fulfillment or
(if permissible) waiver of the conditions set forth in Article VI, at the
Closing IPS shall deliver, or cause to be delivered, to the Company all of the
following:
(a) The Instrument of Contribution duly executed by IPS and each
Affiliate of IPS contributing any Contributed Assets;
(b) The Operations Agreement, the Facility, the Software License
Agreement, the Service Mark License Agreement, the Human Resources
Agreement, the Telecommunications Services Sharing Agreement, the Covenant
Not to Sue and the Registration Rights
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Agreement, each duly executed by FDC, IPS or an Affiliate of FDC, as the
case may be; and
(c) An instrument of assignment in the form of Exhibit 10
transferring certain rights Western Union Financial Services, Inc., an
indirect, wholly owned subsidiary of FDC, may own in the MoneyGram Marks.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
SECTION 5.1. USE OF NAMES. IPS is not granting the Company a license to
use any of the trade names or trademarks of IPS or any Affiliate of IPS (other
than those granted pursuant to Sections 2.1 or 5.8 or the Service Mark License
Agreement), including, without limitation, those listed on Schedule 5.1, or of
American Express Company or any Affiliate of American Express Company and, after
the Closing, except as provided in Sections 2.1 or 5.8, the Operations Agreement
or the Service Mark License Agreement, the Company shall not use in any manner
the names or marks of IPS or any Affiliate of IPS or of American Express Company
or any Affiliate of American Express Company or any word that is similar in
sound or appearance that infringes on such names or marks. In the event the
Company or any Affiliate of the Company violates any of its obligations under
this Section 5.1, IPS and its Affiliates may proceed against it in law or in
equity for such damages or other relief as a court may deem appropriate. The
Company acknowledges that a violation of this Section 5.1 may cause IPS and its
Affiliates irreparable harm which may not be adequately compensated for by money
damages. The Company therefore agrees that in the event of any actual or
threatened violation of this Section 5.1, IPS and any of its Affiliates shall be
entitled, in addition to other remedies that they may have, to a temporary
restraining order and to preliminary and final injunctive relief against the
Company or an Affiliate of the Company to prevent any violations of this Section
5.1, without the necessity of posting a bond.
SECTION 5.2. COLLECTION OF ACCOUNTS. (a) If, after the Closing Date, the
Company shall receive any remittance from any MoneyGram Agent with respect to
any Fiduciary Asset as of the Closing Date, the Company shall, immediately upon
receipt thereof, credit a bank account specified by IPS through an automated
clearing house or wire transfer.
(b) After the Closing Date, IPS and its Affiliates shall handle any
remittance from any MoneyGram Agent with respect to any Contributed Asset in
accordance with the terms of the Operations Agreement.
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SECTION 5.3. TAXES. (a) IPS shall be liable for and shall pay all Taxes
(whether assessed or unassessed) applicable to the Business or the Contributed
Assets, in each case attributable to taxable years or periods ending at the time
of or prior to the Closing and, with respect to any Straddle Period, the portion
of such Straddle Period ending at the time of the Closing. The Company shall be
liable for and shall pay all Taxes (whether assessed or unassessed) applicable
to the Business or the Contributed Assets, in each case attributable to taxable
years or periods beginning after the Closing and, with respect to any Straddle
Period, the portion of such Straddle Period beginning immediately after the
Closing. IPS and the Company shall each be entitled to any refunds of Taxes for
which it is liable under this Section 5.3(a). For purposes of this Section 5.3,
any Straddle Period shall be treated on a "closing of the books" basis as two
partial periods, one ending at the time of the Closing and the other beginning
immediately after the Closing, provided, however, that Taxes (such as property
Taxes) imposed on a periodic basis shall be allocated on a daily basis.
Notwithstanding the preceding sentence, if the transactions contemplated by this
Agreement result in the reassessment of the value of any of the Contributed
Assets or any of the assets of the Business for property Tax purposes, or the
imposition of any property Taxes on such Contributed Assets or assets of the
Business at a rate which is different than the rate that would have been imposed
if such transactions had not occurred, then (y) the portion of such property
Taxes for the portion of the Straddle Period ending at the time of the Closing
shall be determined on a daily basis, using the assessed value and Tax rate that
would have applied had such transactions not occurred, and (z) the portion of
such property Taxes for the portion of such Straddle Period beginning
immediately after the Closing shall be the total property Taxes for the Straddle
Period minus the amount described in clause (y) of this sentence.
(b) Notwithstanding paragraph (a), any sales Tax, use Tax, real property
transfer or gains Tax, documentary stamp Tax or similar Tax attributable to the
sale or transfer of the Business or the Contributed Assets shall be paid by 50
percent by the Company and 50 percent by IPS. The Company and IPS agree to
timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns with respect to, such Taxes.
(c) IPS or the Company, as the case may be, shall promptly provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this Section
5.3. Within a reasonable time prior to the payment of any said Tax, the party
paying such Tax shall give notice to the other party of the Tax payable and the
portion which is the liability of each party,
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although failure to do so will not relieve the other party from its liability
hereunder.
(d) After the Closing, each of IPS and the Company shall (and cause their
respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which such
other party or its Affiliates is responsible for preparing and filing;
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns relating to the Business or
the Contributed Assets;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes relating to the Business or the Contributed Assets;
(iv) provide timely notice to the other in writing of any pending or
threatened Tax audits or assessments relating to the Business or the
Contributed Assets for taxable periods for which the other may have a
liability under Section 7.1(b)(ii) as it relates to this Section 5.3; and
(v) furnish the other with copies of all correspondence received from
any taxing authority in connection with any Tax audit or information
request with respect to any such taxable period.
(e) Any indemnity payments made pursuant to Section 7.1(a)(i) as it
relates to this Section 5.3 shall be treated by the Company and IPS as an
adjustment to the amount of Contributed Assets (except to the extent the payment
is the liability under controlling law of the party making such indemnity
payment).
SECTION 5.4. ALLOCATION OF CONSIDERATION.
---------------------------
Within 90 days following the Closing Date, IPS shall deliver to the Company
a schedule (the "Allocation Schedule") allocating the consideration described in
Section 3.1 among each category of assets included in the Contributed Assets.
The Allocation Schedule shall be reasonable and shall be prepared in accordance
with Section 1060 of the Code and the regulations thereunder. The Company and
IPS each agrees that promptly after receiving said Allocation Schedule it shall
return an executed copy thereof to IPS. The Company and IPS each agrees to file
(or cause to be filed) Internal Revenue Service Form 8594, and all federal,
state, local and foreign Tax Returns, in accordance with the Allocation
Schedule. The Company and IPS each agrees to provide the other promptly with any
other information required to complete Form 8594.
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SECTION 5.5 TAX CONTESTS.
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(a) The Company shall promptly notify IPS in writing upon receipt by the
Company or any Affiliate thereof of notice of any pending or threatened federal,
state, local or foreign Tax audits, examinations or assessments that will or
might affect the Tax liabilities for which IPS would be required to indemnify
the Company pursuant Section 7.1(a)(i) as it relates to Section 5.3. Such notice
shall include a summary of all action taken or proposed to be taken by the
Internal Revenue Service or a state or local Tax Authority in respect of such
matter. The Company shall forbear (and shall cause each Affiliate to forbear),
for at least 30 days after the giving of such notice, payment of any amounts
related to such matter (if such forbearance is permitted by law).
(b) In the case of any pending or threatened federal, state, local or
foreign Tax audits examinations or assessments that will or might affect the Tax
liabilities for which IPS would be required to indemnify the Company pursuant to
Section 7.2(a)(i) as it relates to Section 5.3(a), the Company shall contest, or
cause to be contested, such matter on audit, through Internal Revenue Service or
state, local or foreign administrative proceedings and through judicial
proceedings, unless notified to the contrary in writing by IPS or unless, and to
the extent, IPS does not exercise its right to participate in and control such
contest pursuant to this paragraph (b). IPS shall have the sole right to
participate in and control, at the expense of IPS, any such Tax audit or
administrative or judicial proceeding, and such participation and control shall
be reflected by the grant of appropriate powers of attorney or other appropriate
or necessary authorizations. Decisions regarding the conduct of any such audit
or administrative or judicial proceeding shall be made by IPS, FDC or their
representatives after consultation with the Company and its representatives,
provided, however, that ultimate control over any such audit or administrative
or judicial proceedings, including procedural matters that necessarily relate to
all issues being contested in connection therewith (including, without
limitation, choice of forum) shall be exercised in good faith solely by IPS, FDC
and their representatives. The Company shall take any action as is necessary to
effectuate the decisions of IPS and FDC made in conformity with the requirements
of the preceding sentence. Decisions regarding the settlement of proceedings or
litigation related in whole or in part to such matter shall be made solely by
IPS, FDC and their representatives. Fees and expenses paid to third-party
service providers (including, without limitation, legal and accounting expenses)
relating to the resolution of any such matter shall be borne by IPS.
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SECTION 5.6. RIGHT TO USE MONEYGRAM AGENT ASSETS.
(a) The Company hereby acknowledges that certain computers included in the
MoneyGram Agent Assets are used by MoneyGram Agents to provide products and
services marketed by IPS, including, without limitation, the money order and
utility bill remittance services marketed by IPS (the "IPS Products"). The
Company hereby grants IPS and its Affiliates a license for such MoneyGram Agents
to use such computers and related equipment included in the MoneyGram Agent
Assets, and any upgraded or new computers and related equipment provided to such
MoneyGram Agents by the Company for use in the Business, to process transactions
for any IPS Products. So long as the MoneyGram Agents offer any IPS Products,
the Company shall not remove, or terminate the right to use, such computers and
related equipment used by a MoneyGram Agent to process transactions for any IPS
Product without having given IPS or such assignee 30 days' prior written notice
thereof.
(b) IPS agrees to pay to the Company on or prior to the 30th day after
Closing the amount of $52,000, which amount equals the estimated maintenance
fees that will be incurred by the Company for the two-year period following
Closing with respect to the computers currently used by "Big B" and certain
other MoneyGram Agents to be agreed to by IPS and the Company prior to Closing.
In consideration for such payment, the Company agrees, notwithstanding the
provisions of paragraph (a) above, not to remove, or terminate the right to use,
such computers and related equipment used by such MoneyGram Agents to process
transactions for any IPS Product for a period of two years after Closing and
thereafter only upon 30 days' prior written notice thereof.
SECTION 5.7. EMPLOYEES. Schedule 5.7A sets forth a list of each
individual employed by FDC or any of its Affiliates who the parties hereto agree
will be employed by the Company on and after the Closing Date (each, a
"MoneyGram Business Employee"). FDC agrees, and agrees to cause its Affiliates,
effective at the Closing Date, to terminate the employment of each of the
MoneyGram Business Employees, and the Company agrees, effective upon such
termination, to offer employment to each of the MoneyGram Business Employees at
total compensation levels agreed to between FDC and the Company.
SECTION 5.8. PENDING SERVICE AND TRADEMARKS. On behalf of IPS and
its Affiliates, the Company shall prosecute, in the name of IPS or any such
Affiliate, the Nonassignable Pending Applications. IPS agrees, and agrees to
cause its Affiliates, to execute all papers reasonably requested by the Company
to prosecute such applications. IPS hereby grants to the Company an assignable,
exclusive, royalty-free license to use each of the marks that are the subject of
the Nonassignable Pending Applications in the territories and languages
applicable to such
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applications during the period of time during which the Company prosecutes the
related application until such time as the application or certificate of
registration can be assigned to the Company in accordance with applicable
Requirements of Law. IPS hereby agrees that at such time as the application or
certificate of registration can be assigned to the Company in accordance with
applicable Requirements of Law for any of the marks that are the subject of the
Nonassignable Pending Applications, IPS shall, and shall cause its Affiliates
to, assign to the Company all right, title and interest in such mark, together
with the goodwill of the business symbolized thereby. The parties hereto hereby
agree that upon the occurrence of any such assignment such mark shall constitute
Contributed Assets for purposes of this Agreement.
SECTION 5.9. LAKEWOOD LEASE. (a) On or before Closing, IPS and the
Company agree to negotiate in good faith the terms and conditions upon which the
Company shall sublease to IPS a portion of the premises located on the first
floor of the facilities that are the subject of the Lakewood Lease, including,
without limitation, the space subject to such sublease, the term of such
sublease and other provisions thereof (including rentals, which shall be no
greater than current market rates).
(b) Within 30 days after the Closing, IPS and the Company agree to
negotiate in good faith the terms and conditions upon which IPS shall, or shall
cause, the fourth floor of the facilities that are the subject of the Lakewood
Lease to be built-out to the specifications agreed to by IPS and the Company.
IPS shall pay all costs and expenses with respect to such build-out.
SECTION 5.10. FINANCIAL SYSTEMS. IPS shall provide, or cause to be
provided, to the Company at IPS's expense either the "Platinum" software or the
"Lawson" software. IPS shall give the Company notice of the software IPS has
selected to provide (the "Offered Software") and IPS's cost and expense of
providing such software (the "Software Expense"). The Company may, at its
option, elect not to accept the Offered Software and instead acquire its own
software for general ledger and related accounting functions (which may be the
"Lawson" software if the "Lawson" software is not the Offered Software). In
such event, IPS shall reimburse the Company for the cost of such software in an
amount not to exceed the Software Expense.
SECTION 5.11. ADDITIONAL SERVICES. At the request of the Company,
First Data shall cause Call Interactive, an affiliate of First Data, to enter
into an agreement with the Company to provide to the Company any service then
offered by Call Interactive upon such terms and conditions to be agreed to by
First Data and the Company and at prices equal to (i) during the period
commencing on the Closing Date and ending on the fifth anniversary of the
Closing Date, Call Interactive's costs of
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providing such service plus 15 percent and (ii) thereafter, Call Interactive's
costs of providing such service plus 20 percent.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF IPS
------------------------------------------
The obligations of IPS and FDC under this Agreement shall, at the
option of IPS (to the extent permissible under applicable law), be subject to
the satisfaction, on or prior to the Closing Date, of the following conditions:
SECTION 6.1. FTC APPROVAL. FDC shall have obtained the FTC
Approval.
SECTION 6.2. NO RESTRAINT. No legal action, suit, investigation or
proceeding shall have been instituted to restrain or prohibit or otherwise
challenge the legality or validity of the transactions contemplated hereby.
SECTION 6.3. UNDERWRITING AGREEMENT. IPS shall have entered into a
legally enforceable and binding agreement with the representatives of the
underwriters named in the Registration Statement to sell, on a firm commitment
basis, more than 80% of the shares of Common Stock of the Company outstanding
following the issuance of the Common Stock pursuant to Section 3.1, pursuant to
the offering contemplated by such Registration Statement.
ARTICLE VII
INDEMNIFICATION
---------------
SECTION 7.1. INDEMNIFICATION BY IPS. (a) IPS agrees to indemnify and
hold harmless each Company Group Member from and against any and all Losses and
Expenses incurred by such Company Group Member in connection with or arising
from:
(i) any breach or failure to perform by IPS or any Affiliate of IPS of
any of their respective covenants or obligations in this Agreement;
(ii) any Excluded Liability; or
(iii) any claim that the MoneyGram Application Software or the PC
MoneyGram Application Software infringes or violates the Intellectual
Property of any third Person;
provided, however, that IPS's maximum aggregate obligation to indemnify and hold
harmless pursuant to this Section 7.1(a) shall be limited to the payment by IPS
of cash in an aggregate amount not to exceed $200 million (except to the extent
related to the
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obligations of IPS and its Affiliates pursuant to Section 5.3, 5.4 or 5.5, as to
which no limitation shall apply); and provided, further, that IPS shall have no
obligation to indemnify and hold harmless under Section 7.1(a)(iii) if any
infringement is based upon the Company's use of the MoneyGram Application
Software or the PC MoneyGram Application Software, as the case may be, in
combination with any other software or the MoneyGram Application Software or the
PC MoneyGram Application Software, as the case may be, is used in a manner for
which it is not designed or the infringement is based upon modifications of the
MoneyGram Application Software or the PC MoneyGram Application Software, as the
case may be, made by or for the Company.
(b) The indemnification provided for in Section 7.1(a)(i) and (ii)
shall terminate two years after the Closing Date and the indemnification
provided for in Section 7.1(a)(iii) shall terminate ten years after the Closing
Date (and no claims shall be made by any Company Group Member under this Section
7.1 thereafter), except that the indemnification by IPS shall con tinue as to:
(i) the covenants of IPS and FDC set forth in Section 9.4, which shall
survive for the period of time set forth therein;
(ii) the covenants of IPS set forth in Sections 5.3, 5.4 and 5.5
which shall survive until the expiration of the relevant statutory period
of limitations applicable to the underlying claim, giving effect to any
waiver, mitigation or extension thereof;
(iii) the covenants of IPS set forth in Section 5.8, as to which no
time limitation shall apply; and
(iv) any Loss or Expense of which any Company Group Member has
notified IPS in accordance with the requirements of Section 7.3 on or prior
to the date such indemnification would otherwise terminate in accordance
with this Section 7.1, as to which the obligation of IPS shall continue
until the liability of IPS shall have been determined pursuant to this
Article VII, and IPS shall have reimbursed all Company Group Members for
the full amount of such Loss and Expense in accordance with this Article
VII.
SECTION 7.2. INDEMNIFICATION BY THE COMPANY. (a) The Company agrees
to indemnify and hold harmless each IPS Group Member from and against any and
all Loss and Expense incurred by such IPS Group Member in connection with or
arising from:
(i) any breach or failure to perform by the Company or any Affiliate
of the Company of any of their respective covenants or obligations in this
Agreement;
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(ii) any Assumed Liability; or
(iii) any Agent Contract included in the Contributed Assets or the
economic benefits of which are assigned to the Company, except to the
extent such Loss and Expense directly resulted from any IPS Group Member's
gross negligence or willful misconduct or the failure of any IPS Group
Member to perform its material obligations under the Operations Agreement;
provided, however, that the Company's maximum aggregate obligation to indemnify
and hold harmless pursuant to this Section 7.2(a) shall be limited to the
payment by the Company of cash in an aggregate amount not to exceed $200 million
(except to the extent related to the obligations of the Company pursuant to
Section 5.3, 5.4 or 5.5, as to which no limitation shall apply).
(b) The indemnification provided for in Section 7.2(a) shall
terminate two years after the Closing Date (and no claims shall be made by any
IPS Group Member under this Section 7.2 thereafter), except that the
indemnification by the Company shall continue as to:
(i) the covenants of the Company set forth in Section 9.4, which shall
survive for the period of time set forth therein;
(ii) covenants of the Company set forth in Sections 5.3, 5.4 and 5.5,
which shall survive until the expiration of the relevant statutory period
of limitations applicable to the underlying claim, giving effect to any
waiver, mitigation or extension thereof;
(iii) the covenants of the Company set forth in Sections 5.6 and 5.8,
as to which no time limitation shall apply; and
(iv) any Loss or Expense of which IPS has notified the Company in
accordance with the requirements of Section 7.3 on or prior to the date
such indemnification would otherwise terminate in accordance with this
Section 7.2, as to which the obligation of the Company shall continue until
the liability of the Company shall have been determined pursuant to this
Article VII, and the Company shall have reimbursed all IPS Group Members
for the full amount of such Loss and Expense in accordance with this
Article VII.
SECTION 7.3. NOTICE OF CLAIMS. (a) Any Company Group Member or IPS
Group Member (the "Indemnified Party") seeking indemnification hereunder shall
give promptly to the party obligated to provide indemnification to such
Indemnified Party (the "Indemnitor") a notice (a "Claim Notice") describing in
reasonable detail the facts giving rise to the claim for
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indemnification hereunder and shall include in such Claim Notice (if then known)
the amount or the method of computation of the amount of such claim and a
reference to the provision of this Agreement or any other agreement, document or
instrument executed hereunder or in connection herewith upon which such claim is
based; provided, however, that a Claim Notice in respect of any action at law or
suit in equity by or against a third Person as to which indemnification will be
sought shall be given promptly after the action or suit is commenced and in
accordance with Section 7.4.
(b) In calculating any Loss or Expense there shall be deducted (i)
any insurance recovery in respect thereof (and no right of subrogation shall
accrue hereunder to any insurer) and (ii) the amount of any Tax benefit to the
Indemnified Party (or any of its Affiliates) with respect to such Loss or
Expense (and increased to take into account any Taxes payable by the recipient
of any indemnity payment hereunder as a result of the receipt of such payment).
(c) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article VII shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party shall have the burden of proof in
establishing the amount of Losses and Expenses suffered by it.
SECTION 7.4. THIRD PERSON CLAIMS. (a) In order for an Indemnified
Party to be entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a claim or demand made by any third
Person against the Indemnified Party (a "Third Person Claim"), such Indemnified
Party must notify the Indemnitor in writing of the Third Person Claim within 10
days after receipt by such Indemnified Party of written notice thereof. Any
notice of a Third Person Claim shall contain a reference to the provision of
this Agreement or any other agreement, document or instrument executed hereunder
or in connection herewith upon which such claim is based, the facts giving rise
to an alleged basis for the claim and (if then known) the amount of the
liability asserted against the Indemnitor by reason of the claim. Following
such notice of a Third Person Claim, the Indemnified Party shall deliver to the
Indemnitor, within five business days after the Indemnified Party's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Party relating thereto. Notwithstanding the foregoing, should
a party be physically served with a complaint with regard to a Third Person
Claim, the
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Indemnified Party must notify the Indemnitor with a copy of the complaint within
five business days after receipt thereof and shall deliver to the Indemnitor
within seven business days after the receipt of such complaint copies of notices
and documents (including court papers) received by the Indemnified Party
relating to the Third Person Claim.
(b) In the event any legal proceeding shall be threatened or
instituted or any claim or demand shall be asserted in respect of a Third Party
Claim, the Indemnitor shall have the sole and absolute right after the receipt
of the notice required by Section 7.4(a), at its option and at its own expense,
to be represented by counsel of its choice and to control, defend against,
negotiate, settle or otherwise deal with any such proceeding, claim or demand;
provided, however, that the Indemnified Party may participate in any such
proceeding with counsel of its choice and at its expense. The parties hereto
agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such legal proceeding, claim or demand. To the
extent the Indemnitor elects not to defend such proceeding, claim or demand, and
the Indemnified Party defends against or otherwise deals with any such
proceeding, claim or demand, the Indemnified Party may retain counsel, at the
expense of the Indemnitor, and control the defense of such proceeding. Neither
the Indemnitor nor the Indemnified Party may settle any such proceeding which
settlement obligates the other party to pay money, to perform obligations or to
admit liability without the consent of the other party, which consent shall not
be unreasonably withheld. After any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency of competent
jurisdiction and the time in which to appeal therefrom has expired, or a
settlement shall have been consummated, or the Indemnified Party and the
Indemnitor shall arrive at an agreement with respect to each separate matter
alleged to be indemnified by the Indemnitor hereunder, the Indemnified Party
shall forward to the Indemnitor notice of any sums due and owing by it with
respect to such matter and the Indemnitor shall pay all of the sums so owing to
the Indemnified Party by wire transfer, certified or bank cashier's check within
30 days after the date of such notice.
SECTION 7.5. LIMITATIONS. (a) In any case in which an Indemnified
Party recovers from third Persons any amount in respect of a matter with respect
to which an Indemnitor has indemnified it pursuant to this Article VII, such
Indemnified Party shall promptly pay over to the Indemnitor the amount so
recovered (after deducting therefrom the full amount of the expenses reasonably
incurred by it in procuring such recovery), but not in excess of the sum of (i)
any amount previously so paid by the Indemnitor to or on behalf of the
Indemnified Party in respect of such matter and (ii) any amount expended by the
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Indemnitor in pursuing or defending any claim arising out of such matter.
(b) Except for remedies that cannot be waived as a matter of law,
injunctive and provisional relief and as otherwise expressly set forth herein,
if the Closing occurs, this Article VII shall be the exclusive remedy for breach
of this Agreement (including any covenant, obligation, representation or
warranty contained in this Agreement or any certificate delivered pursuant to
this Agreement) or otherwise in respect of the contribution of the Contributed
Assets contemplated hereby.
(c) Any payment by the Company or IPS under this Article VII shall be
treated by the Company and IPS as an adjustment to the Contributed Assets.
(d) To the extent of any inconsistency between this Article 7 and
Sections 5.3, 5.4 or 5.5, the provisions of Sections 5.3, 5.4 or 5.5, as the
case may be, shall control.
ARTICLE VIII
TERMINATION
SECTION 8.1. TERMINATION. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement may be terminated at any time prior
to the Closing Date by the mutual consent of the Company and IPS. In the event
this Agreement shall be terminated, no party shall have any liability to any
other party hereunder.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. SURVIVAL OF OBLIGATIONS. All covenants and obligations
contained in this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.
SECTION 9.2. NOTICES. All notices or other communications required
or permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or when sent by registered or certified mail
or by private courier addressed as follows:
If to the Company, to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 68164
Attention: Chief Executive Officer
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with a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 68164
Attention: General Counsel
If to FDC or to IPS to:
First Data Corporation
2121 North 117th Avenue
Omaha, Nebraska 68164
Attention: General Counsel
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
SECTION 9.3. SUCCESSORS AND ASSIGNS. (a) The rights of either party
under this Agreement shall not be assignable by such party hereto without the
written consent of the other party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, (i) FDC and IPS may assign all their
respective rights and delegate their respective duties and obligations hereunder
to any of their Affiliates, provided such Affiliate remains an Affiliate of FDC
and IPS after such an assignment and that notwithstanding such assignment FDC
and IPS, respectively, shall remain primarily liable for all of their respective
obligations hereunder; and (ii) subsequent to the consummation of the offering
in accordance with the Registration Statement, the Company may assign all its
rights and delegate its duties and obligations hereunder to any of its
Affiliates or to any Person who purchases substantially all of the Business,
provided the assignee agrees to be bound in writing to the terms and conditions
set forth in this Agreement, and, notwithstanding such assignment, the Company
shall remain primarily liable for all of its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. Except as to any
Company Group Member or IPS Group Member entitled to indemnity under Article
VII, nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and successors and
assigns permitted by this Section 9.3 any right, remedy or claim under or by
reason of this Agreement.
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SECTION 9.4. ACCESS TO RECORDS AFTER CLOSING. (a) For a period of
six years after the Closing Date or, in the case of books and records relating
to Taxes, until the expiration of all applicable statutes of limitation and
carryback and carryforward periods, IPS, FDC and their Affiliates and their
respective representatives shall have reasonable access to all of the books and
records of the Business to the extent that such access may reasonably be
required by IPS or its Affiliates in connection with matters relating to or
affected by (i) the operations of the Business prior to the Closing Date and
(ii) Sections 5.3, 5.4, 5.5 or 5.6. Such access shall be afforded by the Company
upon receipt of reasonable advance written notice and during normal business
hours. IPS shall be solely responsible for any costs or expenses incurred by it
pursuant to this Section 9.4(a). If the Company shall desire to dispose of any
of such books and records prior to the expiration of such six-year period or
applicable statutes of limitation and carryback and carryforward periods, as the
case may be, the Company shall, prior to such disposition, give IPS a reasonable
opportunity, at IPS' expense, to segregate and remove such books and records as
IPS may select.
(b) For a period of six years after the Closing Date, or, in the case
of books and records relating to Taxes, until the expiration of all applicable
statutes of limitation, the Company and its representatives shall have
reasonable access to all of the books and records relating to the Business which
IPS or any of its Affiliates may retain after the Closing Date. Such access
shall be afforded by IPS and its Affiliates upon receipt of reasonable advance
written notice and during normal business hours. The Company shall be solely
responsible for any costs and expenses incurred by it pursuant to this Section
9.4(b). If IPS or any of its Affiliates shall desire to dispose of any of such
books and records prior to the expiration of such six-year period or applicable
statutes of limitation, as the case may be, IPS shall, prior to such
disposition, give the Company a reasonable opportunity, at the Company's
expense, to segregate and remove such books and records as the Company may
select.
SECTION 9.5. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the
Exhibits and Schedules referred to herein and the agreements and documents
delivered pursuant hereto contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and supersede all
other prior agreements, understandings or letters of intent between or among any
of the parties hereto. Except as provided in Section 4.2, this Agreement shall
not be amended, modified or supplemented except by a written instrument signed
by an authorized representative of each of the parties hereto.
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SECTION 9.6. PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 9.7. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to each of IPS and the
Company.
SECTION 9.8. FURTHER ASSURANCES. On and after the Closing Date each
party hereto shall take such other actions and execute such other documents and
instruments of conveyance and transfer as may be reasonably requested by the
other party hereto from time to time to effectuate or confirm the transfer of
the Contributed Assets to the Company and the issuance of shares of Common Stock
to IPS in accordance with the terms of this Agreement.
SECTION 9.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflict of
laws provisions) of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
FIRST DATA CORPORATION
By _____________________________
Name:
Title:
INTEGRATED PAYMENT SYSTEMS INC.
By _____________________________
Name:
Title:
MONEYGRAM PAYMENT SYSTEMS, INC.
By _____________________________
Name:
Title:
-27-
<PAGE>
State of Delaware PAGE 1
Office of the Secretary of State Exhibit 3.1
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "MONEYGRAM PAYMENT SYSTEMS, INC.", FILED IN THIS OFFICE ON THE
FOURTH DAY OF JANUARY, A.D. 1996, AT 9 O'CLOCK A.M.
[LOGO OF THE GREAT SEAL OF THE STATE OF DELAWARE APPEARS HERE]
[LOGO OF DELAWARE SECRETARY'S OFFICE APPEARS HERE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8052783
DATE: 08-02-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
MONEYGRAM PAYMENT SYSTEMS, INC.
FIRST: The name of the Corporation is MoneyGram Payment Systems, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 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.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware (the "DGCL").
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 100,000,000 shares of
Common Stock, each with a par value of $.01 per share.
FIFTH: The name and mailing address of the incorporator is John S. Zieser,
2121 North 117th Avenue, Omaha, Nebraska 68164.
SIXTH: A. The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors consisting of not less than one
nor more than fifteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. Class I directors shall be elected initially for
a one-year term, Class II directors initially for a two-year term and Class III
directors initially for a three-year term. At each succeeding annual meeting of
stockholders beginning in 1997, successors to the class of directors whose term
expires at that annual meeting
<PAGE>
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors may be filled only by a majority of the
directors then in office, even if less than a quorum, or a sole remaining
director.
Any director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same remaining term as that of his
predecessor.
B. A director may be removed only by the holders of a majority of shares
of Common Stock then entitled to vote at an election of directors and only for
cause.
SEVENTH: 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, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. Any repeal or modification of this Article SEVENTH by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
-2-
<PAGE>
EIGHTH: A. The Corporation shall indemnify to the fullest extent
permitted under and in accordance with the laws of the State of Delaware any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, trustee,
employee or agent of or in any other capacity with another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
B. Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent of the Corporation) be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH.
C. The indemnification and other rights set forth in this Article EIGHTH
shall not be exclusive of any provisions with respect thereto in the By-laws or
any other contract or agreement between the Corporation and any officer,
director, employee or agent of the Corporation.
D. Neither the amendment nor repeal of Section A, B or C of this Article
EIGHTH nor the adoption of any provision of this Certificate of Incorporation
inconsistent with Section A, B or C of this Article EIGHTH shall eliminate or
reduce the effect of Sections A, B or C of this Article EIGHTH in respect of any
matter occurring prior to such amendment, repeal or adoption of an inconsistent
provision or in respect of any cause of action,
-3-
<PAGE>
suit or claim relating to any such matter which would have given rise to a right
of indemnification or right to receive expenses pursuant to Section A, B or C of
this Article EIGHTH if such provision had not been so amended or repealed or if
a provision inconsistent therewith had not been so adopted.
NINTH: Any action required or permitted to be taken by the stockholders of
the Corporation may be effected only at a duly called annual or special meeting
of such holders an may not be effected by a consent in writing by such holders
in lieu of such a meeting.
TENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-laws of the Corporation. Elections of directors need not be by written
ballot unless the By-laws of the Corporation so provide.
ELEVENTH: In accordance with Section 203 (b) (1) of the DGCL, the
Corporation expressly elects not to be governed by Section 203 of the DGCL.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
-4-
<PAGE>
THE UNDERSIGNED, being the incorporator named above, has executed this
Certificate on January 3, 1996.
/s/ John S. Zieser
-----------------------------------------
John S. Zieser
-5-
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "MONEYGRAM PAYMENT SYSTEMS, INC." FILED IN THIS OFFICE ON THE NINTH DAY OF
JULY, A.D. 1996, AT 4 O'CLOCK P.M.
[LOGO OF THE GREAT SEAL OF THE STATE OF DELAWARE]
[LOGO OF DELAWARE SECRETARY'S OFFICE] /s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8052784
DATE: 08-02-96
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
MONEYGRAM PAYMENT SYSTEMS, INC.
MoneyGram Payment Systems, Inc., a Delaware corporation (the
"Corporation"), organized and existing under and by virtue of the General
Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
1. That Article NINTH of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
NINTH: Any action required or permitted to be taken by the
stockholders of the Corporation may be effected only at a duly called annual or
special meeting of such holders and may not be effected by a consent in writing
by such holders in lieu of such a meeting; provided, however, that during any
time when there is only one stockholder of the Corporation, such sole
stockholder may take any action by written consent in lieu of such a meeting.
2. That, in accordance with the applicable provisions of Section 242
of the General Corporation Law of the State of Delaware, the aforesaid Amendment
was duly adopted by the Board of Directors and the sole stockholder of the
Corporation.
IN WITNESS WHEREOF, MoneyGram Payment Systems, Inc. has caused this
Certificate to be signed by Paul A. Seader, its President, this 8th day of July,
1996.
MONEYGRAM PAYMENT SYSTEMS, INC.
By: /s/ Paul A. Seader
-------------------------------
[Name]
President
<PAGE>
Exhibit 5.1
[LETTERHEAD OF SIDLEY & AUSTIN]
October, 1996
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 80235
Gentlemen:
We have acted as special counsel to MoneyGram Payment Systems, Inc., a
Delaware corporation (the "Company"), in connection with the registration of up
to __________ shares of Common Stock, par value $.01 per share, of the Company
(the "Shares"), to be sold by Integrated Payment Systems Inc. (the "Selling
Stockholder") pursuant to a Registration Statement on Form S-1 (Registration No.
333-228), as amended, filed with the Securities and Exchange Commission (the
"Commission") and to which this opinion appears as Exhibit 5 (the "Registration
Statement").
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination,
we have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares to be sold by the Selling Stockholder were, when issued by
the Company to the Selling Stockholder, duly authorized, validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Legal
Matters" in the Prospectus constituting part of the Registration Statement. In
giving such consent, we do not thereby admit that we are within the category of
persons where consent is required by Section 7 of the
<PAGE>
MoneyGram Payment Systems, Inc.
September 30, 1996
Page 2
Securities Act of 1933, as amended, or the related rules promulgated by the
Commission.
Very truly yours,
<PAGE>
Exhibit 9.1
IRREVOCABLE VOTING TRUST AGREEMENT
THIS IRREVOCABLE VOTING TRUST AGREEMENT (this "Trust Agreement"), is
entered into on ____ __, 1996, by and between First Data Corporation, a Delaware
corporation ("FDC"), Integrated Payment Systems Inc., a Delaware corporation and
a wholly-owned subsidiary of FDC ("IPS"), and Wachovia Bank of North Carolina,
N.A., a National Banking Association (the "Trustee"). FDC, IPS and each
affiliate of FDC are referred to herein collectively as the "FDC Group" and each
individually as a "FDC Group Member."
WITNESSETH:
WHEREAS, FDC, through IPS, engages in, among other things, the business of
transferring the right to money using computer or telephone lines from one
person through the location of an agent to a different person physically present
at the location of a different agent, which is marketed under the name
MoneyGram, (the "Consumer Money Wire Transfer Services" or the "Business");
WHEREAS, pursuant to a consent decree dated January 19, 1996 (the "Consent
Decree") between FDC and the Federal Trade Commission (the "FTC"), FDC is
obligated to divest certain assets relating to either the Business or the
Consumer Money Wire Transfer Services owned and operated by Western Union
Financial Services, Inc., a subsidiary of FDC, by January 23, 1997;
WHEREAS, FDC has decided to comply with the Consent Decree by divesting
itself of the Business (the "Divestiture");
WHEREAS, FDC and IPS have entered into a contribution agreement with
MoneyGram Payment Systems, Inc., a Delaware corporation and a wholly-owned
subsidiary of IPS ("MG"),
<PAGE>
dated as of _______, 1996 (the "Contribution Agreement"), whereby IPS will
contribute to MG the Contributed Assets (as defined in the Contribution
Agreement) in exchange for shares (the "IPS Shares") of common stock, par value
$.01 per share, of MG ("MG Common Stock");
WHEREAS, FDC and IPS will accomplish the Divestiture through the sale of
the IPS Shares via an initial public offering (the "IPO") pursuant to an
underwriting agreement dated __________, 1996 (the "Underwriting Agreement")
among IPS, MG and the underwriters named therein (collectively, the
"Underwriters"), whereby the Underwriters will (i) make a firm commitment to
purchase approximately 87% of the IPS Shares to be sold in the IPO and (ii) have
an option (the "Overallotment Option") exercisable within 30 days of the date of
the Underwriting Agreement to purchase any or all of the remaining IPS Shares;
WHEREAS, the proposed Divestiture is subject to the prior approval of the
FTC, which has reviewed this Trust Agreement;
WHEREAS, in order to comply with the Consent Decree and obtain the approval
of the FTC to the Divestiture pursuant to the IPO, FDC and IPS have agreed that,
in the event that the Overallotment Option is not exercised in full during the
30-day option period, IPS shall deposit any and all IPS Shares then owned by IPS
into an irrevocable voting trust (the "Trust") with the Trustee pursuant to this
Trust Agreement for disposition in accordance with the terms and conditions
hereof; and
WHEREAS, FDC and IPS desire to enter into this Trust Agreement to (i)
facilitate the above described transactions and (ii) to obtain FTC approval of
the Divestiture through the IPO, including the subsequent disposition or
dispositions of any IPS Shares by the Trustee under this Trust Agreement.
-2-
<PAGE>
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises, covenants and agreement hereinafter set forth, the parties hereto
agree as follows:
1. APPOINTMENT OF TRUSTEE. FDC and IPS hereby jointly and irrevocably
appoint Wachovia Bank of North Carolina, N.A. as Trustee hereunder, and Wachovia
Bank of North Carolina, N.A. hereby accepts said appointment and agrees to act
as Trustee under this Trust Agreement as provided herein.
2. CREATION AND PURPOSE OF IRREVOCABLE VOTING TRUST. Subject to the terms
and conditions hereof, as of the date 31 days after the execution of the
Underwriting Agreement (the "Effective Date") a voting trust in respect of all
the MG Common Stock held by IPS as of the Effective Date (the "Remaining Stock")
will be created and established in accordance with Section 218 of the Delaware
General Corporation Law for the purpose of causing all of the Remaining Stock to
be held pending sale thereof at the earliest practicable date, as provided for
herein. A copy of this Trust Agreement and any amendment hereto shall be filed
at the registered office of MG in the State of Delaware and shall be made
available for examination by any stockholder of MG or any beneficiary of the
Trust at any reasonable time for any reasonable purpose.
3. IRREVOCABILITY. After the deposit of the Remaining Stock with the
Trustee as provided herein, this Trust Agreement, the Trust and the nomination
of the Trustee shall be irrevocable by FDC and IPS and shall terminate only in
accordance with the provisions of Section 11.
4. DEPOSIT AND TRANSFER OF REMAINING STOCK; VOTING TRUST CERTIFICATES. (a)
On the Effective Date, IPS shall deliver a certificate or certificates
representing all of the outstanding Remaining Stock to the Trustee, duly
endorsed for transfer or accompanied by duly executed instruments of transfer.
Each certificate delivered to the Trustee pursuant to this Section 4(a)
-3-
<PAGE>
shall be canceled and new certificates evidencing the Remaining Stock shall be
issued and registered in the name of the Trustee. Upon the issuance and
registration of such certificates, the Trustee shall deliver Voting Trust
certificates substantially in the form attached hereto as Exhibit A with blanks
therein appropriately completed (the "Certificates") to IPS (IPS's status upon
its delivery of the Remaining Stock to the Trustee and the Trustee's delivery of
the Certificates to IPS shall be referred to herein as "Beneficiary").
(b) All shares of Remaining Stock, while deposited with the Trustee
pursuant to this Trust Agreement, are herein called the "Deposited Stock."
(c) Each Certificate representing Deposited Stock shall bear a legend to
the effect that it is subject to this Trust Agreement, and that fact also shall
be noted in the stock transfer records of MG.
5. RETENTION OF DEPOSITED STOCK BY TRUSTEE. The Trustee shall retain
possession of the Deposited Stock only in accordance with, and subject to the
terms and conditions set forth in, this Trust Agreement.
6. MAINTENANCE OF RECORDS; REPLACEMENT OF VOTING TRUST CERTIFICATES. (a)
The Trustee shall keep a record relating to the Certificates, indicating the
name and address of the Beneficiary, the number of shares of Deposited Stock
represented thereby, and the date the Beneficiary originally acquired the
Remaining Stock, and the Trustee shall deposit a copy of such record with MG at
its registered office in the State of Delaware. The copy of such record may be
examined by any stockholder of MG or any beneficiary of the Trust, either in
person or by agent or attorney, at any reasonable time for any reasonable
purpose. The Trustee also shall maintain such other records and books as are
necessary or appropriate to carry out the terms and provisions of this Trust
Agreement.
-4-
<PAGE>
(b) In case any Certificate shall become mutilated, lost, stolen or
destroyed, the Trustee, under such conditions with respect to indemnity and
otherwise as in the Trustee's discretion may be prescribed, may provide for the
issuance of a new Certificate in lieu of such lost, stolen or destroyed
Certificate or in exchange for such mutilated Certificate.
7. RESTRICTION ON TRANSFER. During the term of this Trust Agreement, the
Trustee shall not, sell, transfer, assign, pledge, or otherwise encumber or
create any lien on any Deposited Stock, except in accordance with Sections 8 or
9.
8. VOTING AND OTHER ACTIONS BY TRUSTEE. (a) During the term, and subject
to the provisions, of this Trust Agreement and for so long as the Trustee shall
hold the Deposited Stock pursuant to this Trust Agreement, the Trustee shall
possess and shall be entitled to exercise all rights and powers of absolute
ownership of the Deposited Stock, including, but not limited to, the right to
take part in and consent to any corporate or stockholders' action of any kind
whatsoever; the right to receive dividends and distributions on all Deposited
Stock for the account of the Beneficiary; the right to receive and waive any
notices to stockholders as required by law or the certificate of incorporation
or by-laws of MG; the right to dispose of the Deposited Stock in accordance with
Section 9 and Section 11; and the right to vote the Deposited Stock on all
matters upon which holders of Deposited Stock are entitled to vote, provided,
however, that the Trustee shall vote all shares of Deposited Stock with respect
to all matters, including, without limitation, the election or removal of
directors, voted on by the stockholders of MG (whether at a regular or special
meeting or pursuant to a unanimous written consent) in the same proportion as
all shares of MG Common Stock (other than Deposited Stock) are voted with
respect to such matters. In exercising its voting rights in accordance with this
Section 8(a), the Trustee shall take such actions at all annual, special or
other meetings of stockholders of MG or in connection with any action by consent
in lieu of a meeting.
-5-
<PAGE>
(b) No other person shall have any voting right in respect of any
Deposited Stock so long as this Trust Agreement is in effect. The Trustee shall
have no beneficial interest in the Deposited Stock.
(c) During the term of this Trust Agreement, neither the Beneficiary nor
any other FDC Group Member shall attempt to exercise any control over the
decisions or actions of the Trustee; provided, however, nothing herein shall
prevent the Trustee from otherwise utilizing Beneficiary or any other FDC Group
Member, or any of their respective officers or employees, as consultants with
regard to the disposition of the Deposited Stock, the Trustee having no
obligation to accept or follow any recommendations from such consultants; and
provided further, however, nothing herein shall prevent the Trustee from
providing to the Beneficiary such reports, financial data or other information
heretofore customarily provided by MG to its stockholders.
9. DISPOSITION OF THE DEPOSITED STOCK. (a) Immediately upon receipt of
the Deposited Stock, the Trustee shall retain Morgan Stanley & Co. Incorporated
("Morgan Stanley") or, if Morgan Stanley declines such representation, an
investment banking firm of national reputation (the "Investment Banker") to
advise Trustee as to the appropriate method by which to dispose of the Deposited
Stock in accordance with the terms of this Trust Agreement.
(b) The Investment Banker shall recommend a disposition whereby the
Trustee will sell all of the Deposited Stock at the earliest practicable date
(but in no event sooner than ______________, 1996 without the prior written
approval of Morgan Stanley in accordance with the Underwriting Agreement) to one
or more purchasers (other than any FDC Group Member) in a manner and for such
price as the Investment Banker shall deem reasonable and consistent with
maximizing the price to be received by IPS in consideration therefor. The
Trustee shall sell the Deposited Stock only when recommended and in the manner
recommended by the Investment
-6-
<PAGE>
Banker. The Trustee shall have no discretion with respect to the disposition in
respect of the Deposited Stock.
(c) The Trustee shall have all right, power and authority to dispose of
all of the Deposited Stock in accordance with the Investment Banker's
recommendation and shall cause all reasonably necessary actions to be taken to
effect the sale of all Deposited Stock (in one or more transactions) in a manner
consistent with such recommendation.
(d) The Investment Banker may recommend a sale of, and the Trustee may
sell, the Deposited Stock by any method, including, but not limited to, a
secondary public offering of all or some of the Deposited Stock (i) in one or
more publicly registered transactions and/or (ii) in one or more privately
negotiated transactions for the sale of either publicly registered or
unregistered Deposited Stock.
(e) If either the Beneficiary or the Trustee determines, or if the
Investment Banker recommends, that in connection with the disposition of the
Deposited Stock it may be beneficial or advisable to register or qualify any or
all of the Deposited Stock under the Securities Act of 1933, as amended, or any
state securities or Blue Sky laws, then each of the Beneficiary and the Trustee
shall take any and all action necessary or advisable, including any and all
actions pursuant to the Registration Rights Agreement dated ______, 1996 between
IPS and MG, to register and qualify or cause MG to register and qualify such
Deposited Stock.
(f) The Trustee shall comply with all applicable laws, including, without
limitation, all federal and state securities laws, in connection with any sale
of the Deposited Stock.
(g) Beneficiary shall cooperate with the Trustee, take such other actions
and execute such documents or instruments as may be reasonably requested by the
Trustee from time to time, and provide any information and such representations
and warranties regarding the Deposited
-7-
<PAGE>
Stock in order to facilitate and effectuate the disposition of the Deposited
Stock in accordance with the terms of this Trust Agreement.
(h) The Trustee promptly shall inform the Beneficiary and the FTC of any
disposition of Deposited Stock in accordance with this Section 9.
10. TRANSFERABILITY OF TRUST CERTIFICATES. All Certificates shall be
transferable on the books of the Trustee upon the surrender by the registered
holder thereof, properly assigned, in accordance with rules from time to time
established for this purpose by the Trustee. Use of the transfer form included
in Exhibit A hereto shall be deemed acceptable for such purpose by the Trustee.
Until a Certificate is so transferred, the Trustee may treat the registered
holder as owner for all purposes. Each transferee of a Certificate issued
hereunder shall, by transferee's acceptance thereof, assent to and become a
party to this Trust Agreement and shall assume all attendant rights and
obligations hereunder. Notwithstanding the foregoing, only a FDC Group Member
shall be permitted to be a transferee or a registered holder of Certificates in
accordance herewith.
11. TERMINATION OF VOTING TRUST AGREEMENT. (a) This Trust Agreement
shall terminate upon the earlier of (i) the disposition of all of the Deposited
Stock in accordance with Section 9 or (ii) January 23, 1997, without notice by
or to, or action on the part of, the Trustee or the Beneficiary. Notwithstanding
the preceding sentence, the Beneficiary may amend the date in clause (ii) of the
preceding sentence by providing written notice to the Trustee providing (x) the
new, amended date (which shall not exceed three months from the expiration date
then in effect) and (y) a representation that the FTC has approved such amended
date. In the event of such extension, prior to the expiration as hereinabove
provided, as originally fixed, or as theretofore extended, as the case may be,
the Trustee shall file in the registered offices of MG in the State of Delaware
a copy of an agreement extending the expiration date of this Trust
-8-
<PAGE>
Agreement and thereupon the duration of this Trust Agreement shall be extended
for the period fixed by such extension agreement.
(b) In the event that any Deposited Stock remains in the Trust on the
termination of this Trust Agreement, as it may be extended, then the Trustee
shall deliver certificates representing all of such remaining Deposited Stock,
duly endorsed for transfer or accompanied by duly executed instruments of
transfer, to or among one or more of the charitable organizations listed on
Schedule A, as designated by IPS in writing on or before the termination of this
Trust Agreement. The Beneficiary shall promptly notify the FTC of any
disposition of Deposited Stock in accordance with this Section 11(b).
12. DIVIDENDS; DISTRIBUTIONS ON SALE OF DEPOSITED STOCK AND
DISSOLUTION. (a) The Beneficiary shall be entitled to receive from time to
time payments equal to the amount of cash dividends, if any, collected or
received by the Trustee with respect to the shares of Deposited Stock
represented by such Certificate. Such payments shall be made by the Trustee as
soon as practicable after the receipt of the dividends. In lieu of receiving
cash dividends and paying them to the Beneficiary, the Trustee may instruct MG
in writing to pay the cash dividends directly to the Beneficiary. In the event
any such instruction is given to MG, all liability of the Trustee with regard to
the payment of such dividends shall cease, unless and until such instruction is
revoked. The Trustee may at any time revoke such instruction by written notice
to MG and direct it to make subsequent payments to the Trustee.
(b) In the event that the Trustee receives any additional shares of
capital stock of MG through a dividend or other distribution with respect to any
Deposited Stock, the Trustee shall hold such shares subject to this Trust
Agreement for the benefit of the Beneficiary, and the shares shall become
subject to all of the terms and conditions of this Trust Agreement to the same
extent as if they were originally deposited as shares of Deposited Stock
hereunder. The Trustee shall issue Certificates in respect of such shares to the
Beneficiary.
-9-
<PAGE>
(c) In the event of the sale of any or all of the Deposited Stock
pursuant to this Trust Agreement, the Trustee shall receive the cash,
securities, property or other consideration paid in exchange for such shares of
Deposited Stock (the "Proceeds"), and promptly shall distribute such Proceeds to
the Beneficiary. The Trustee, in its reasonable discretion, may require the
surrender to it of Certificates before paying to the holder such Proceeds and,
if any Deposited Stock remains subject to the Trust, reissue to such holder a
new Certificate reflecting such remaining Deposited Stock.
(d) In the event of the termination of this Trust Agreement pursuant
to Section 11, the Trustee shall receive any Proceeds which are distributed or
distributable in respect of the Deposited Stock, and, upon the receipt of all
Certificates by the holders thereof, promptly shall distribute the Proceeds to
the Beneficiary.
13. TRUSTEE TO MAINTAIN INDEPENDENCE. During the effective period of
this Trust, neither the Trustee nor any affiliate of the Trustee may have (i)
any officers or directors in common with any FDC Group Member, or (ii) any
material business arrangements or dealings, financial or otherwise, outside of
the customary or ordinary course of business, with any FDC Group Member.
Investment by the Trustee in the stock or securities of any FDC Group Member,
short of obtaining a controlling interest, will not be considered a proscribed
business arrangement or dealing; provided, however, that in no event shall any
such investment by the Trustee in voting securities of any FDC Group Member
exceed five percent of the outstanding voting securities of such entity and in
no event shall the Trustee hold a proportion of such voting securities so
substantial as to permit the Trustee in any way to control or direct the affairs
of any FDC Group Member.
14. COMPENSATION OF TRUSTEE. The Trustee shall be entitled to
receive from IPS, as compensation for all services rendered hereunder as
Trustee, an amount equal to $500.00 per
-10-
<PAGE>
month for each and every month or part thereof during the term that this Trust
Agreement is in effect.
15. PAYMENT OF TRUSTEE'S EXPENSES. The Trustee is expressly
authorized to incur and pay all reasonable charges and other expenses, including
all reasonable fees and expenses of counsel and the Investment Banker, deemed
necessary and proper in the performance of the Trustee's duties under this Trust
Agreement, and the Beneficiary agrees to reimburse the Trustee for such charges
and expenses.
16. DELEGATION OF TRUSTEE'S DUTIES. The Trustee may appoint an agent
or agents at any time or from time to time and may delegate to such agent or
agents the performance of any administrative duty of the Trustee hereunder.
17. STANDARD OF CARE; INDEMNITY. The duties and responsibilities of
the Trustee shall be limited to those expressly set forth in this Trust
Agreement. The Trustee shall not be answerable for the default or misconduct of
the Investment Banker or any agent or attorney appointed by the Trustee in
pursuance hereof; provided, however, that, in the case of such expert or
attorney, Trustee selected such agent or attorney in good faith exercising
reasonable care. The Trustee shall be free from liability in action on any
paper, document or signature reasonably believed by the Trustee to be genuine
and to have been signed by the proper party. The Trustee shall not be liable for
any error of judgment nor for any act done or omitted, nor any mistake of fact,
nor for anything which the Trustee may do or refrain from doing in good faith,
except that (i) the Trustee shall be liable for the Trustee's own intentional
wrongful actions or gross negligence and (ii) the Trustee's obligations under
Section 9(e). The Trustee may consult with counsel reasonably acceptable to IPS
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, omitted or suffered by the Trustee in
good faith and in accordance with such opinion. Each of FDC and IPS, jointly and
severally agree to at all times protect, indemnify and save harmless the Trustee
from any liability, loss or
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<PAGE>
expense of any kind or character whatsoever incurred by the Trustee in
connection with this Trust or the performance of the Trustee's duties and
obligations under this Trust Agreement, except those resulting from or arising
out of the gross negligence or willful misconduct of the Trustee, and will
assume full responsibility for, and pay all reasonable cost and expense of, any
suit or litigation of any character, including any proceedings before the FTC,
with respect to the Deposited Stock, this Trust Agreement or the performance of
the Trustee's duties and obligations under this Trust Agreement, and if the
Trustee shall be made a party thereto, IPS and FDC shall pay all reasonable
costs and expenses, including reasonable counsel fees, to which the Trustee may
be subject by reason thereof. The indemnification provided by this Section 17
shall survive termination of this agreement.
18. QUALIFICATION OF TRUSTEE. Upon receipt of the Deposited Stock
pursuant to this Trust Agreement, neither the initial Trustee, nor any successor
trustee designated pursuant to Section 19 may be an officer, director, employee
or attributable stockholder of IPS or any other FDC Group Member, or have any
business or familial relationships with FDC; provided, however, that any such
Trustee may thereafter become an officer, director or employee of MG.
19. TERMINATION, RESIGNATION AND REPLACEMENT OF TRUSTEE. (a) The
Trustee shall serve for the duration of this Trust Agreement, or until the
Trustee's earlier resignation, incapacity to act or death. No interest in any of
the Deposited Stock held by any deceased or former Trustee nor any of the rights
or duties of any deceased or former Trustee may be transferred by will, devise,
succession or in any manner except as provided in this Trust Agreement. The
heirs, administrators and executors of such deceased Trustee, however, shall
have the right and duty to convey any Deposited Stock held by such Trustee to
one or more successor trustees.
(b) The Trustee, or any trustee hereafter appointed, may resign at
any time by giving 60 days' written notice of resignation to IPS and the FTC,
provided, however, the Trustee agrees
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to continue the Trustee's duties until such time as the Deposited Stock has been
transferred to a successor trustee appointed pursuant to Section 19.
(c) Upon receiving such notice of resignation or upon being notified
of the death or incapacity of the Trustee: (i) IPS shall select a successor
trustee, subject to the consent of the FTC, which consent shall not be
unreasonably withheld; (ii) the successor trustee shall have experience and
expertise in acquisitions and divestitures and (iii) if the FTC has not opposed,
in writing, including the reasons for opposing, the selection of any proposed
successor trustee, within 10 days after notice by the Trustee or IPS to the FTC
of the identity of any proposed successor trustee, the FTC shall be deemed to
have consented to the selection of the proposed successor trustee.
(d) If no successor trustee shall have been appointed and shall have
accepted appointment within 45 days after a notice of resignation pursuant to
Section 19(b), the resigning Trustee may petition any authority or court of
competent jurisdiction for the appointment of a successor trustee.
(e) Upon written assumption by the successor trustee of the Trustee's
powers and duties hereunder, the Trustee shall deliver a copy of the assumption
to IPS and shall notify the FTC and all registered holders of Certificates of
such assumption, whereupon the Trustee shall be discharged of its powers and
duties hereunder and the successor trustee shall become vested therewith.
(f) Any corporation into which any trustee hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which any trustee hereunder may be a party, shall be the
successor trustee under this Trust Agreement, without the execution or filing of
any paper or any further act on the part of the parties hereto,
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anything to the contrary notwithstanding, provided that such successor trustee
meets the qualifications specified in Section 18.
20. DISCLOSURE OF INFORMATION. To the extent requested to do so by
IPS or by any registered holder of a Certificate, the Trustee promptly shall
furnish to the party making such request full information with respect to (a)
all property theretofore delivered to it as Trustee under this Trust Agreement,
(b) all property then held by it as Trustee under this Trust Agreement, and (c)
all action theretofore taken by it as Trustee under this Trust Agreement.
21. AMENDMENTS. From time to time this Trust Agreement may be
modified or amended by agreement executed by the Trustee and FDC and IPS (with
the approval of the FTC) and all registered holders of Certificates. Each
amendment to the Trust Agreement shall be filed at the registered office of MG
in the State of Delaware.
22. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, or sent by cable, telegram, telex or
telefax, or by first-class mail (postage prepaid) to the respective parties as
follows:
If to FDC: First Data Corporation
2121 North 117th Avenue
Omaha, Nebraska 68164
Attention: General Counsel
If to IPS: Integrated Payment Systems Inc.
6200 S. Quebec
Englewood, Colorado 80111
Attention: General Counsel
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<PAGE>
If to Trustee: Wachovia Bank of North Carolina, N.A.
101 N. Main Street
Winston Salem, N.C. 27102
Attention: Sandra Turner
If to FTC: Bureau of Competition-Compliance
Federal Trade Commission
601 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Attention: Daniel P. Ducore
or to such other address as any of them by written notice to the other parties
may designate from time to time. Each notice or other communication which shall
be personally delivered, mailed, telecopied or telexed in the manner described
above, or which shall be delivered to a telegraph company, shall be deemed
sufficiently received for all purposes at such time as it is delivered to the
addressee (with any return receipt, delivery receipt or, with respect to a
telecopy or telex, answer back being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
23. ASSIGNABILITY. Except as expressly provided for herein, this
Trust Agreement shall not be assignable by any of the parties hereto, except in
the event of the resignation, incapacity to act or death of any Trustee and the
appointment of a successor trustee in accordance with Section 19.
24. PARTIAL INVALIDITY. If any part of any provision of this Trust
Agreement or any other agreement, document or writing given pursuant to or in
connection with this Trust Agreement shall be invalid or unenforceable under
applicable law, said part shall be ineffective to the extent of such invalidity
only, without in any way affecting the remaining parts of said provisions or the
remaining provisions of said agreement.
25. SUCCESSORS AND ASSIGNS. This Trust Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their successors and
assigns as provided herein.
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<PAGE>
26. HEADINGS. Section headings contained in this Trust Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Trust Agreement for any purpose, and shall not in any way define or affect
the meaning, construction or scope of any of the provisions hereof.
27. GOVERNING LAW. This Trust Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof.
28. EXECUTION IN COUNTERPARTS. This Trust Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together shall be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, First Data Corporation has caused this Irrevocable
Voting Trust Agreement to be executed by its __________________________, and its
corporate seal to be affixed, attested by its _______________, and Integrated
Payment Systems Inc. has caused this Irrevocable Voting Trust Agreement to be
executed by its __________, and its corporate seal to be affixed by its
__________, and Wachovia Bank of North Carolina, N.A. has caused this
Irrevocable Voting Trust Agreement to be executed by its _________ and its
corporate seal to be affixed, attested to by its Trust Officer, the day and
year first above written.
Attest: FIRST DATA CORPORATION
By:
- -------------------------- --------------------------------
Attest: INTEGRATED PAYMENT SYSTEMS INC.
By:
- -------------------------- --------------------------------
Attest: WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By:
- -------------------------- --------------------------------
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<PAGE>
Exhibit 10.1
OPERATIONS AGREEMENT
DATED AS OF ________, 1996
AMONG
MONEYGRAM PAYMENT SYSTEMS, INC.,
FIRST DATA TECHNOLOGIES, INC.
AND
INTEGRATED PAYMENT SYSTEMS INC.
CONFIDENTIAL
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE 1
DEFINITIONS....................................................................1
ARTICLE 2
SERVICES......................................................................10
Section 2.1. Support Services...........................................10
Section 2.2. Additional Services........................................10
ARTICLE 3
TRANSACTION SETTLEMENT; PORTFOLIO AND REGULATORY COMPLIANCE...................10
Section 3.1. Transaction Settlement.....................................10
Section 3.2. Portfolio..................................................12
Section 3.3. MoneyGram Agents...........................................12
Section 3.4. Compliance with Laws.......................................14
Section 3.5. Transition of Business.....................................15
ARTICLE 4
SECURITY......................................................................16
ARTICLE 5
GENERAL AGREEMENTS OF THE PARTIES.............................................17
Section 5.1. Company Obligations........................................17
Section 5.2. First Data Obligations.....................................18
Section 5.3. Extension of Term; Money Order Processing..................18
Section 5.4. License to Certain Software................................19
ARTICLE 6
PAYMENTS TO FIRST DATA........................................................20
Section 6.1. Fees and Charges...........................................20
Section 6.2. IPS Reports and Payments...................................20
Section 6.3. Taxes......................................................21
Section 6.4. Certification of Charges...................................22
ARTICLE 7
CONFIDENTIALITY...............................................................22
Section 7.1. General....................................................22
Section 7.2. Confidential Information Defined...........................23
</TABLE>
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<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
Section 7.3. Permitted Disclosure; Public and Generic Information;
Legally Required Disclosure...............................24
Section 7.4. Notices....................................................25
Section 7.5. Company Disclosure of Confidential Information
to First Data.............................................25
Section 7.6. Remedy.....................................................25
ARTICLE 8
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES..................................26
ARTICLE 9
TERM AND TERMINATION..........................................................26
Section 9.1. Term.......................................................26
Section 9.2. Termination by Company.....................................27
Section 9.3. Termination by First Data..................................29
Section 9.4. Orderly Transition.........................................30
Section 9.5. Effect of Termination......................................30
ARTICLE 10
INDEMNITIES, LIABILITY AND
LIMITS OF LIABILITY.......................................................31
Section 10.1. First Data's Indemnification..............................31
Section 10.2. Company's Indemnification.................................32
Section 10.3. Notification..............................................35
Section 10.4. Claims Period.............................................37
Section 10.5. Subrogation...............................................37
Section 10.6. Exclusive Remedy..........................................37
Section 10.7. No Special Damages........................................37
ARTICLE 11
DISPUTE RESOLUTION............................................................38
Section 11.1. Dispute Resolution........................................38
Section 11.2. Recourse to Courts and Other Remedies.....................41
Section 11.3. Affiliates................................................41
Section 11.4. Exception to Article 11...................................42
ARTICLE 12
MISCELLANEOUS.................................................................42
Section 12.1. Expenses..................................................42
Section 12.2. Relationship of Parties...................................42
Section 12.3. Force Majeure.............................................43
Section 12.4. Entire Agreement..........................................43
Section 12.5. Assignment................................................43
Section 12.6. Notices...................................................44
</TABLE>
-ii- CONFIDENTIAL
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
Section 12.7. Counterparts.............................................45
Section 12.8. Governing Law............................................45
Section 12.9. Media Releases...........................................46
Section 12.10. Waiver...................................................46
Section 12.11. Severability.............................................46
Section 12.12. Construction Rules.......................................46
</TABLE>
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<PAGE>
EXHIBITS
A. Support Services
A-1. Agent Services
A-2. Corporate Support Services
A-3. Data Center Services
A-4. Voice Center Disaster Recovery Services
A-5. Regulatory Compliance Services
B. Inspection, Review and Timing
C. Software
C-1. IPS Application Software
C-2. MoneyGram Application Software
C-3. PC MoneyGram Application Software
D. Pricing and Reimbursable Expenses
E. Terminable Groups of Data Center Services
F. Form of Agent Contract
-iv- CONFIDENTIAL
<PAGE>
1
OPERATIONS AGREEMENT
THIS OPERATIONS AGREEMENT (this "Agreement") dated as of __________,
1996 is among MoneyGram Payment Systems, Inc., a Delaware corporation
("Company"), First Data Technologies, Inc., a Delaware corporation ("FDT"), and
Integrated Payment Systems Inc., a Delaware corporation ("IPS" and, together
with FDT, "First Data").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Company, IPS and First Data Corporation, a Delaware
corporation and the parent company of FDT and IPS ("FDC"), have entered into a
Contribution Agreement dated as of __________, 1996 (the "Contribution
Agreement") pursuant to which IPS and certain of its Affiliates (as defined
below) contributed to Company certain assets of the Business (as defined below);
and
WHEREAS, Company and First Data desire to enter into this Agreement to
establish, among other things, (i) the terms and conditions pursuant to which
First Data shall perform for the benefit of Company certain services relating to
the Business and (ii) the duties, rights and obligations of each of First Data
and Company to the other;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, Company and First Data agree as follows:
ARTICLE 1
DEFINITIONS
-----------
In this Agreement, unless the context shall otherwise require, the
capitalized terms used herein shall have the respective meanings specified or
referred to in this Article 1. Each agreement referred to in this Agreement
shall mean such agreement as amended, supplemented and modified from time to
time to the extent permitted by the applicable provisions thereof and hereof.
Each definition in this Agreement includes the singular and the plural, and
reference to the neuter gender includes the masculine and feminine where
appropriate. References to any statute or regulations means such statute or
regulations as amended at the time and include any successor legislation or
regulations. The headings to the Articles and Sections hereof and the table of
contents herein are for convenience of reference and shall not affect the
meaning or interpretation of this
CONFIDENTIAL
<PAGE>
Agreement. Except as otherwise stated, reference to Articles, Sections,
Exhibits mean the Articles, Sections and Exhibits of this Agreement. The
Exhibits are hereby incorporated by reference into and shall be deemed a part of
this Agreement. Unless the context clearly indicates otherwise, the word
"including" means "including but not limited to".
"AAA" means the American Arbitration Association.
"AAA Rules" means the AAA's Commercial Arbitration Rules.
"Additional Services" means services performed for Company by First
Data or its Affiliates pursuant to this Agreement, other than (i) the Support
Services and (ii) any service or other obligation to be performed by First Data
pursuant to Article 3.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person; provided, however, that FDC and its Affiliates shall not be deemed
Affiliates of Company and Company and its Affiliates shall not be deemed
Affiliates of FDC and its Affiliates.
"Agent Contract" means an agreement pursuant to which a MoneyGram
Agent provides Consumer Money Wire Transfer Services on behalf of the Business,
together with any license agreement with such MoneyGram Agent related to the PC
MoneyGram Application Software described in Exhibit C-3.
"Agent Services" means the services specified in Exhibit A1.
"Amount Due" has the meaning specified in Section 6.2.
"Arbitrators" has the meaning specified in Section 11.1(b)(ii).
"Bankruptcy" means, with respect to any Party, the happening of any
one or more of the following events: (a) a Party: (i) makes an assignment for
the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii)
is adjudged a bankrupt or insolvent, or there has been entered against such
Party an order for relief, in any bankruptcy or insolvency proceeding; (iv)
files a petition or answer seeking in respect of such Party any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against such Party in any proceeding of a
CONFIDENTIAL
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<PAGE>
nature described above; (vi) seeks, consents or acquiesces in the appointment of
a trustee, receiver, conservator or liquidator of such Party or of all or any
substantial part of such Party's properties; or (vii) in respect of clauses (i),
(ii), (iv), (v) or (vi) above, such Party takes any corporate action to
authorize any action contemplated by any of such clauses; or (b) 90 days after
the commencement of any proceeding against any Party seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, if such proceeding has not been
dismissed, or within 60 days after the appointment without such Party's consent
or acquiescence of a trustee, receiver or liquidator of the Party or of all or
any substantial part of such Party's properties, if such appointment is not
vacated or stayed, or within 60 days after the expiration of any such stay, if
such appointment is not vacated.
"Basic Qualifications" has the meaning specified in Section
11.1(b)(ii).
"Business" means the Consumer Money Wire Transfer Services marketed
under the name "MoneyGram/sm/."
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in
Denver, Colorado.
"Claim Notice" has the meaning specified in Section 10.3(a).
"Company Data" means, at any time, data files, databases and related
data and information (in any form or medium) relating to the Business or
comprising the input or output of First Data's obligations specified in Article
3, the Support Services or any Additional Services.
"Company Indemnitee" has the meaning specified in Section 10.1(a).
"Confidential Information" has the meaning specified in Section 7.2.
"Consequential Damages" means any liability, Loss, Expense or damage,
whether in an action arising out of breach of warranty, breach of contract,
delay, negligence, theory of tort, strict liability or other legal or equitable
theory, for indi rect, special, reliance, incidental, punitive or consequential
damages or commercial loss, injury or damage, including loss of revenues,
profits or use of capital or production.
CONFIDENTIAL
-3-
<PAGE>
"Consumer Money Wire Transfer Services" means the service of
transferring the right to money using computer or telephone lines from one
person through the location of a MoneyGram Agent to a different person
physically present at the location of a different MoneyGram Agent and the
services marketed under the phrase "Express Payment" or "Cash Advance".
"Corporate Support Services" means the services specified in Exhibit
A-2.
"Costs" means all direct costs, expenses and charges plus all indirect
costs, expenses and charges, including reasonable allocations of overhead,
incurred by a Party in performing its obligations under this Agreement.
"Data Center Services" means the services specified in Exhibit A-3.
"days" means calendar days.
"Designated Representative" means the employee of First Data
designated in writing from time to time by First Data who shall be the only
individual to whom Company shall provide certain specified information under
this Agreement, including Confidential Information of Company. The Designated
Representative on the date hereof is Michael H. Jeronimus.
"Dispute" has the meaning specified in Section 11.1(a).
"Expenses" means any and all reasonable expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including court
filing fees, court costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, accountants and other
professionals).
"Fees" means, with respect to each of the Support Services and the
services provided by IPS under Article 3, the fees and charges set forth or
referenced in Exhibit D and, with respect to any Additional Service, the fees
and charges agreed to in writing by First Data and Company, in each case as the
same may be modified from time to time during the Term.
"Fiduciary Funds" means, (i) in respect of any IPS Funds Transfer
Service transaction that will be paid to the recipient thereof in U.S. dollars,
the amount of money being transmitted to the recipient thereof and (ii) in
respect of any IPS Funds Transfer Service transaction that will be paid to the
recipient thereof in a currency other than U.S. dollars, the
CONFIDENTIAL
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<PAGE>
amount of U.S. dollars necessary to purchase the amount of such other currency
being transmitted to the recipient thereof.
"First Data" has the meaning specified in the first paragraph of this
Agreement.
"First Data Equipment" means the equipment owned by or leased to First
Data or its Affiliates required to perform First Data's obligations hereunder.
"First Data Indemnitee" has the meaning specified in Section 10.2(a).
"Force Majeure Event" has the meaning specified in Section 12.3.
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"Indemnified Party" has the meaning specified in Section 10.3(a).
"Indemnifying Party" has the meaning specified in Section 10.3(a).
"IPS Application Software" means the application Software owned by IPS
or its Affiliates that is used to provide the Data Center Services, together
with the documentation (if any) relating thereto, as described on Exhibit C-1,
and any modifications thereto.
"IPS Funds Transfer Service" means the Consumer Money Wire Transfer
Services offered by and in the name of IPS or Travel Related Services.
"IPS Report" has the meaning set forth in Section 6.2.
"Losses" means any and all losses, Costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, deficiencies
or other charges.
"modification" means any modification, enhancement, translation,
conversion, compilation, upgrade or other derivative version of, or change or
addition to, any item, and "modify" and "modified" shall have corollary
meanings.
-5- CONFIDENTIAL
<PAGE>
"MoneyGram Agent" means a Person that has contracted with Travel
Related Services, IPS or the Company, as the case may be, to provide the
Consumer Money Wire Transfer Services provided by the Business.
"MoneyGram Application Software" means the application Software owned
by Company that is used in the Business, together with the documentation (if
any) relating thereto, as described on Exhibit C-2.
"New MoneyGram Application Software" means all developments,
improvements, modifications, additions, expansions, new versions, new releases,
rewrites or enhancements to the MoneyGram Application Software that are
developed by or on behalf of Company after the Closing Date.
"Panel" has the meaning specified in Section 11.1(b)(ii).
"Party" means First Data or Company as the context requires.
"PC MoneyGram Application Software" means the application Software
owned by Company that is used in the Business, together with the documentation
(if any) relating thereto, as described on Exhibit C-3.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Portfolio" has the meaning specified in Section 3.2(a).
"Proprietary Rights" means all trade secret, copyright, patent,
trademark, service mark, trade name, certification mark, trade dress or other
proprietary rights in all countries related to such item or any part thereof,
any extensions or renewals of the foregoing, and any registrations, patents or
applications with respect to the foregoing.
"Regulatory Compliance Services" means the services specified in
Exhibit A-5.
"Reimbursable Expenses" means, in respect of the Support Services and
the services provided by IPS under Article 3, the items of expense so designated
or described in Exhibit D and, with respect to any Additional Service, the items
of expense so designated or described by written agreement of the Parties,
-6- CONFIDENTIAL
<PAGE>
in each case subject to such additions and deletions as may be made by written
agreement of the Parties from time to time during the Term.
"Requirements of Law" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body.
"Service Mark License Agreement" means the Service Mark License
Agreement dated as of the date hereof among Company, IPS and Western Union
Financial Services, Inc.
"Software" means computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form; provided,
however, that Software shall not include computer software that is available in
consumer retail stores and subject to "shrink-wrap" license agreements.
"Software License Agreement" means the Software License Agreement
dated as of the date hereof between IPS and Company.
"Solvent", when used with respect to any Person, means that at the
time of determination: (i) the fair market value of its assets is in excess of
the total amount of its liabilities (including contingent liabilities determined
in accordance with generally accepted accounting principles); (ii) the present
fair saleable value of its assets is greater than its probable liability on its
existing debts (including contingent liabilities) as such debts become absolute
and matured; (iii) it is then able, and is reasonably expected to be able, to
pay its debts (including contingent debts and other commitments) as they mature;
and (iv) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.
"State Licenses" means the licenses or permits issued by Governmental
Bodies in respect of State Licensing Requirements.
"State Licensing Requirements" means Requirements of Law related to
the licensing of a Person offering money transfer services.
"Support Services" means the services as described in Exhibits A-1
through A-5.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property,
-7- CONFIDENTIAL
<PAGE>
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, govern mental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed by
any Governmental Body.
"Term" means, subject to the provisions of Section 5.3, the period
commencing on the date hereof and ending on the earlier of: (i) the second
anniversary of the date hereof and (ii) the end of any transition period in
accordance with Section 9.4, except that the obligations of the Parties under
Article 3 (including the Regulatory Compliance Services) shall terminate in
accordance with the provisions of Section 9.1(b).
"Third Party Software" means any Software that is proprietary to a
Person other than any Party or its Affiliates and that is to be obtained and
used by First Data or its Affiliates to perform their obligations hereunder, and
any modifications thereto.
"Third Party Vendor" means, with respect to any item of First Data
Equipment or Third Party Software, the owner, licensor, manufacturer,
distributor or other supplier of such item.
"Travel Related Services" means American Express Travel Related
Services Company, Inc., a New York corporation.
"Voice Center Disaster Recovery Services" means the services specified
in Exhibit A-4.
ARTICLE 2
SERVICES
--------
SECTION 2.1. SUPPORT SERVICES. During the Term, First Data shall
perform for Company, either directly, through its Affiliates or through
agreements with Third Party Vendors, each of the Support Services described in
Exhibit A.
SECTION 2.2. ADDITIONAL SERVICES. During the Term, First Data shall
perform for Company, either directly, through its Affiliates or through
agreements with Third Party Vendors, such Additional Services agreed to by the
Parties. Such Additional Services and the Fees, Reimbursable Expenses and other
terms with respect thereto shall be set forth in an additional Exhibit to this
Agreement or otherwise evidenced by a written amendment hereto.
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ARTICLE 3
TRANSACTION SETTLEMENT; PORTFOLIO AND REGULATORY COMPLIANCE
-----------------------------------------------------------
SECTION 3.1. TRANSACTION SETTLEMENT. (a) During the period commencing
on the date hereof and until the earlier of (i) the termination of the
obligations of IPS and Company in respect of any IPS Funds Transfer Service
transaction as specified in Section 9.1(b) and (ii) the date 30 days after the
date Company has obtained all State Licenses necessary to offer the Consumer
Money Wire Transfer Services and conduct the Business in its own name, IPS
shall, subject to Section 3.1(g), be responsible for the administrative function
of collecting all sums due from MoneyGram Agents under Agent Contracts and the
payment of all Fiduciary Funds in respect of completed IPS Funds Transfer
Service transactions in accordance with the terms of the Agent Contracts.
(b) Each Business Day, IPS shall notify Company of the following items
related to IPS Funds Transfer Service transactions effected during the
immediately preceding Business Day (and, if applicable, any intervening non-
Business Day or Days): (i) the aggregate amount received by MoneyGram Agents
from customers in respect of all IPS Funds Transfer Service transactions, (ii)
the aggregate amount of all Fiduciary Funds related to such transactions and
(iii) the aggregate amount of fees paid by customers related to such
transactions.
(c) Each Business Day, IPS shall deliver to Company, in U.S. dollars
by automated clearing house or wire transfer to an account specified by Company,
an amount equal to the amount set forth in respect of clause (iii) of Section
3.1(b).
(d) Company shall pay all fees and any foreign exchange revenues due
to MoneyGram Agents under the Agent Contracts on a timely basis in accordance
with the terms of such Agent Contracts.
(e) The Parties shall agree from time to time on operational
procedures to implement the payment obligations under Section 3.1(c) in a
timely, efficient and prudent manner.
(f) Company acknowledges that all amounts representing Fiduciary Funds
are funds of IPS to be held on behalf of IPS until such time as they are
disbursed by a MoneyGram Agent to the recipient thereof. Company and MoneyGram
Agents shall have a fiduciary duty to IPS with respect to such Fiduciary Funds.
Company shall take appropriate steps on its own initiative and as reasonably
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requested by IPS to ensure that MoneyGram Agents are clearly aware of their
responsibilities with respect to such Fiduciary Funds and properly handle such
Fiduciary Funds.
(g) Any amounts paid by IPS to MoneyGram Agents or customers with
respect to any IPS Funds Transfer Service transaction for which a corresponding
settlement of sales proceeds is not received by IPS shall be the sole
responsibility of Company. If IPS makes any payment with respect to any such
transaction, IPS shall be entitled to full reimbursement therefor from Company.
SECTION 3.2. PORTFOLIO. (a) The Parties agree that IPS shall maintain
in accordance with Requirements of Law a portfolio or portfolios of investments
(the "Portfolio") at least equal to the amount of Fiduciary Funds associated
with IPS Funds Transfer Service transactions conducted in the name of IPS that,
from time to time, have been initiated but not yet paid to the recipient.
(b) The Parties agree to transfer the Portfolio to Company for
management by Company in accordance with the transition contemplated by Section
3.5.
SECTION 3.3. MONEYGRAM AGENTS. (a) Company shall be responsible for
negotiating and enforcing the terms of all Agent Contracts, including in respect
of the sums to be paid to IPS, the timing of remittance fees and consumer funds
to be transferred (subject to compliance with applicable Requirements of Law)
and the payment of any incentive fees to MoneyGram Agents.
(b) The Parties agree that contracts entered into after the date
hereof with respect to the IPS Funds Transfer Service shall be executed (i) in
the name of IPS by Company as IPS's authorized agent for such purpose,(ii)
assignable to Company and (iii) shall be binding upon IPS, it being agreed by
the Parties that no such contract shall, without the prior written consent of
IPS, which consent shall not be unreasonably withheld, contain terms relating to
the liabilities and obligations of IPS that are materially more onerous to IPS
than those set forth in the form or forms of contract set forth in Exhibit F.
Promptly after entering into any Agent Contract or amending or modifying any
Agent Contract, Company shall inform the Designated Representative, in writing,
of the material terms thereof, including the timing of payment of Fiduciary
Funds. If required in order to comply with Requirements of Law or State
Licensing Requirements, the Company shall deliver to the Designated
Representative a copy of any Agent Contract requested by IPS to be used solely
for such purposes.
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(c) Company shall have sole discretion in selecting the entities that
shall serve as MoneyGram Agents; provided, however, that, if First Data
reasonably determines that providing the IPS Funds Transfer Service through a
MoneyGram Agent could reasonably be expected to subject First Data to potential
liability under, or cause First Data to violate or not be in full compliance
with, applicable Requirements of Law, including State Licensing Requirements,
federal and state currency reporting and anti-money laundering statutes or
similar laws, then First Data may give Company written notice of its desire not
to provide the services contemplated by this Article 3 in respect of such
MoneyGram Agent. If Company does not object to such written notice within five
Business Days of receipt thereof, First Data shall be excused from its
obligations to perform under this Article 3 in respect of such MoneyGram Agent.
If Company does so object by written notice to First Data within such five
Business Day period, then First Data shall continue to perform its obligations
under this Article 3 in respect of such MoneyGram Agent, and First Data and
Company shall resolve their dispute in accordance with the following procedures:
(i) Any disputes or controversies under this Section 3.3(c) shall be
settled by arbitration before a single arbitrator in Denver, Colorado under
the Expedited Procedures of the AAA Rules. The AAA shall provide the
Parties with a list of proposed arbitrators within five Business Days of
the filing of a demand for arbitration. Each Party shall have three
Business Days to return the list containing its peremptory strikes of
arbitrators. The AAA shall then appoint a single arbitrator within five
Business Days of receiving the return of the Parties' lists, and any
objections by the Parties to the qualifications of the arbitrator shall be
made within two Business Days thereafter. Within five Business Days of the
date for Parties' objections to the qualifications of the arbitrator, the
arbitration hearing shall begin and it shall be continued from day to day
until completed. The arbitrator's award shall be rendered within five
Business Days of the completion of the hearing;
(ii) To the extent that the award rendered by the arbitrator is relief
or a remedy on which a court could enter judgment, a judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. Otherwise the award shall be binding on the Parties in
connection with their continuing performance of this Agreement and in any
subsequent arbitral or judicial proceeding between the Parties; and
(iii) To the extent that there is a dispute or controversy as to
whether providing the IPS Funds Transfer
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Service through a MoneyGram Agent could reasonably be expected to cause
First Data to violate or not be in full compliance with applicable
Requirements of Law under this Section 3.3(c), either Party may, but is not
required to, obtain an opinion or ruling from the applicable Governmental
Body regarding such issue. Any such opinion or ruling shall be conclusive
between the Parties. If such opinion or ruling is obtained prior to or
during an arbitration proceeding, it shall be conclusively binding upon the
arbitrator in rendering the award, and the arbitrator's authority shall be
limited to rendering an award that is consistent with the opinion or
ruling. If such opinion or ruling is obtained after an award has been
rendered, the Parties agree to vacate any award inconsistent with the
opinion or ruling, and any judgment rendered on such an award. Vacating of
such an award and/or judgment, however, shall not affect the Parties'
rights to have relied upon the award and/or judgment while it was in
effect.
(d) Company shall have the authority, in its sole discretion, to
terminate any MoneyGram Agent in accordance with the terms of the applicable
Agent Contract. Company shall have the authority to determine where the Business
is conducted, subject to compliance with applicable Requirements of Law.
SECTION 3.4. COMPLIANCE WITH LAWS. (a) Company and IPS each agrees
that it will perform its obligations under this Article 3 and, in the case of
IPS, the Regulatory Compliance Services so as not to cause the other Party or
the Business to be in violation of any applicable Requirements of Law, including
State Licensing Requirements, permissible investment rules, prompt remittance
rules and federal and state currency reporting and anti-money laundering
requirements.
(b) IPS shall, with the cooperation and assistance of Company and at
Company's expense, provide Regulatory Compliance Services, including making all
required filings with any Governmental Body, that are required in connection
with the Business solely as it relates to the sale of the IPS Funds Transfer
Service and shall comply with State Licensing Requirements and licensing,
escheat and sales Tax laws with respect to the Business. The Parties acknowledge
that IPS shall have no obligation under this Section 3.4(b) with respect to any
Consumer Money Wire Transfer Services conducted by Company in its own name,
including in connection with the transition contemplated by Section 3.5.
(c) IPS shall prepare and provide Company (i) the operating,
financial, investments, sales and outstanding, and abandoned property reports
that IPS generated in respect of the
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Business prior to the date hereof in the ordinary course of its business and
(ii) such other reports and information (in such form and frequency as Company
may reasonably request) sufficient to enable Company to monitor the Business.
(d) Company may (with prior written approval of IPS, which shall not
be unreasonably withheld) initiate, prosecute and resolve collection actions
against MoneyGram Agents or other actions in the name of IPS to enforce and
defend IPS's rights under the Agent Contracts. Company shall keep the Designated
Representative informed on a timely and regular basis of any material
developments in any such action.
SECTION 3.5. TRANSITION OF BUSINESS. (a) As soon as practicable after
the execution of this Agreement, Company shall apply for and use its best
efforts to obtain State Licenses to offer Consumer Money Wire Transfer Services
and conduct the Business in its own name. No later than three months after the
date hereof, Company shall inform the Designated Representative, in writing, of
the material terms of Company's strategy and anticipated schedule for obtaining
such licenses and shall keep IPS informed, in writing, on a timely and regular
basis of any changes to such strategy and schedule.
(b) Company shall notify the Designated Representative in writing
before filing any license application contemplated by Section 3.5(a). IPS may
elect to participate in any such application process if it deems such
participation appropriate to protect licenses IPS will continue to maintain in
connection with its businesses.
(c) Company shall begin converting MoneyGram Agents from sellers of
the IPS Funds Transfer Services to become sellers of Consumer Money Wire
Transfer Services offered in Company's name as soon as possible after obtaining
the appropriate State Licenses to allow for such conversion.
(d) Company shall keep the Designated Representative informed on a
regular and timely basis (with such frequency and in such format as IPS
reasonably requests) of all of its plans and activities relating to the
transition process contemplated hereunder, including as to the schedule and
status of State License applications and the conversion of MoneyGram Agents and
the Portfolio.
(e) Subject to its other rights under this Agreement, IPS shall
cooperate in good faith with Company in support of Company's transition plan and
take such actions as are reasonable and necessary to support such transition,
including assignment of Agent Contracts.
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ARTICLE 4
SECURITY
--------
The IPS Application Software is and shall remain First Data's
property, and Company shall have no rights to, or interest in, the IPS
Application Software, except as contemplated in the Software License Agreement.
Except as contemplated by the Software License Agreement, as between First Data
and Company, First Data shall exercise exclusive control over the First Data
Equipment, IPS Application Software, First Data personnel and physical premises
and facilities used by First Data and its Affiliates to perform its obligations
hereunder. Except as contemplated by the Software License Agreement, any use of
or access to such First Data Equipment, IPS Application Software, First Data
personnel, physical premises or facilities by Company personnel shall be subject
to First Data's express prior consent in each specific instance. The personnel
of each Party shall comply with the security and other rules, policies and
procedures applicable to the other Party's employees and invitees for access to
such other Party's premises or facilities.
ARTICLE 5
GENERAL AGREEMENTS OF THE PARTIES
---------------------------------
SECTION 5.1. COMPANY OBLIGATIONS. (a) Except as set forth in this
Agreement, Company hereby agrees to perform and be responsible for all aspects
of the Business, including all sales and marketing activities and credit review
and analysis related to selecting and maintaining MoneyGram Agents and all voice
center services.
(b) Company agrees to perform on a timely basis its obligations set
forth in this Agreement. Without limiting the generality of the foregoing,
Company agrees to:
(i) inspect and review all reports, displays and other output prepared
by First Data in connection with performing its obligations hereunder and
reject all such incorrect reports, displays or output within the period
necessary to permit timely correction of such report, display or output, as
specified in Exhibit B;
(ii) comply with the operating procedures established from time to
time by First Data in connection with the provision of its Data Center
Services hereunder, it being
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understood that First Data has provided to Company a copy of such procedures as
in effect on the date hereof; and
(iii) provide to the Designated Representative such timely management
decisions, access to personnel, information (including financial statements
necessary for IPS to perform its obligations under Article 3 (including
Regulatory Compliance Services) in respect of, or to comply with, State
Licensing Requirements), approvals and acceptances as First Data or its
Affiliates may reasonably request in order to perform their obligations
hereunder, including (A) furnishing to the Designated Representative on a
monthly basis by the first of each month, for First Data's planning
purposes, reports of Company's anticipated need for Support Services (and
Additional Services, if any) during the next six-month period (but not
beyond the later of (i) the end of the Term and (ii) the expiration of
First Data's obligations under Section 9.4), and (B) promptly informing the
Designated Representative of any proposed business changes that would
require First Data to alter its performance of its obligations hereunder.
(c) The failure of Company to reject any report, display or output
within the applicable time period as contemplated by Section 5.1(b)(i) shall
constitute acceptance thereof. If Company rejects any such report, display or
output within the applicable time period, then upon request of Company, First
Data shall use reasonable efforts to correct the report, display or output. The
correction of any such incorrect report, display or output, at First Data's
expense (to the extent that First Data is responsible primarily therefor and has
received timely notice thereof), shall be Company's sole and exclusive remedy
for any such incorrect report, display or output.
SECTION 5.2. FIRST DATA OBLIGATIONS. Except as may otherwise be agreed
during the Term, First Data shall perform the Support Services, any Additional
Services and the services under Article 3 in all material respects in a
professional and workmanlike manner.
SECTION 5.3. EXTENSION OF TERM; MONEY ORDER PROCESSING. (a) Upon the
written request of Company, in its sole discretion, at any time during the Term,
First Data will negotiate in good faith (i) an extension of the Term or (ii) the
terms of a new agreement covering the provision by First Data to Company of any
or all of the Support Services, any Additional Services or the services
contemplated by Article 3, in each case upon such terms and conditions,
including prices, to be agreed upon by First Data and Company.
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(b) Upon the written request of Company, in its sole discretion at any
time during the Term, First Data will negotiate in good faith the terms of
Additional Services to be provided to Company in respect of (i) a money order
product offered by Company in the names of IPS, as the entity licensed to offer
such a product under State Licensing Requirements, and Company and (ii) at such
time as Company has obtained State Licenses necessary under State Licensing
Requirements to offer such product in its own name, a money order product
offered by Company in the name of Company. Any agreement among the Parties in
respect of such Additional Services shall be entered into in accordance with
Section 2.2; provided, however, that the Fees and Reimbursable Expenses in
respect of such Additional Services shall not be greater than then-current
market rates.
SECTION 5.4. LICENSE TO CERTAIN SOFTWARE. (a) Company hereby grants
First Data a non-exclusive, royalty-free license for the Term to execute the
MoneyGram Application Software and any New MoneyGram Application Software in
connection with First Data's performance of the Data Center Services. As between
First Data and Company, the MoneyGram Application Software and any New MoneyGram
Application Software will remain Company's property. First Data will have no
ownership interest or other right in the MoneyGram Application Software or any
New MoneyGram Application Software. Company represents and warrants to First
Data that the New MoneyGram Application Software, if any, will not violate or
infringe, directly or indirectly, any Proprietary Rights of any other Person or
contribute to any such violation or infringement.
(b) If any injunction is issued as to the MoneyGram Application
Software or any New MoneyGram Application Software because of the violation or
infringement, or alleged violation or infringement, of a third Person's
Proprietary Rights, Company shall use reasonable efforts to modify or replace
such Software in order to avoid such violation or infringement. If Company is
unable to so modify or replace such Software with reasonable efforts, at
reasonable prices or within a reasonable period of time, then First Data shall
not be responsible for providing to Company the affected portion of the Data
Center Services.
ARTICLE 6
PAYMENTS TO FIRST DATA
----------------------
SECTION 6.1. FEES AND CHARGES. The initial Fees for the Support
Services and the services performed by First Data under Article 3 are set forth
in Exhibit D. Exhibit D also sets forth or describes the applicable Reimbursable
Expenses, including reimbursements, assessments and pass through fees of
CONFIDENTIAL
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Third Party Vendors. If First Data commences to perform any Additional Services
for Company after the execution of this Agreement, then Company shall pay Fees
and Reimbursable Expenses for any such Additional Services as agreed upon by the
Parties and set forth in writing.
SECTION 6.2. IPS REPORTS AND PAYMENTS. In respect of each calender
month, First Data shall deliver to Company a report (the "IPS Report") setting
forth in reasonable detail the following information in respect of such month,
such IPS Report to delivered to Company as soon as reasonably practicable after
the information needed to compile the report is available to First Data and in
no event later than the 15th day after the end of such month: (i) the aggregate
amount of foreign exchange revenues realized in respect of all IPS Funds
Transfer Service transactions effected and (ii) the aggregate amount of all
Fees, Costs, charges, Reimbursable Expenses, Taxes, interest payments and other
amounts due or payable to First Data under this Agreement. The difference
between the amounts set forth in response to items (i) and (ii) above in the IPS
Report is defined herein as the "Amount Due".
If the Amount Due is a positive number, then IPS shall pay to Company
the absolute value of the Amount Due and, if the Amount Due is a negative
number, then Company shall pay to IPS the absolute value of the Amount Due.
Payments of the Amount Due with respect to any IPS Report shall be made no later
than five Business Days following the delivery of such IPS Report. Such payment
shall be made by wire transfer to the account identified in writing from time to
time by the Party receiving an Amount Due.
To the extent Company disputes in good faith any portion of the IPS
Report or the calculation of the Amount Due, then Company shall so notify First
Data and such dispute shall be resolved pursuant to the procedures set forth in
Article 11. Notwithstanding the existence of any such dispute, each Party agrees
to pay, and continue to pay, any Amount Due on a timely basis in accordance with
the terms hereof, without set-off or taking other action other than pursuant to
the procedures set forth in Article 11.
SECTION 6.3. TAXES. (a) In addition to any and all other payments to
First Data to be made hereunder, Company shall pay, or shall reimburse First
Data for payments made in respect of, all Taxes which are levied or imposed by
any Governmental Body by reason of the performance, sale, license or use of any
services, equipment, software or other goods or products covered by this
Agreement, excluding any income Taxes payable by First Data on amounts earned by
First Data hereunder. Without
CONFIDENTIAL
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limitation on the foregoing, Company shall promptly pay to First Data an amount
equal to any such Taxes actually paid or required to be collected or paid by
First Data.
(b) Company hereby authorizes First Data to calculate the total amount
of escheat and sales Taxes due from Company from the monies due First Data and
remit the amount of escheat and sales Taxes to the appropriate taxing authority
on behalf of Company. First Data's remittance of the escheat and sales Taxes on
behalf of Company shall be computed by First Data based on the information
available to First Data. In the event of under or over calculation, Company
shall be responsible for any additional monies due including any penalties or
interest and for collecting any refunds due to Company from the appropriate
taxing authority, unless such calculation resulted from First Data's negligence
or willful misconduct.
(c) Prior to First Data making the escheat and sales Tax remittance on
behalf of Company provided in paragraph (b) above, Company agrees to supply
First Data with any and all current information necessary for First Data to
compute and remit the escheat and sales Taxes.
SECTION 6.4. CERTIFICATION OF CHARGES. First Data shall provide, upon
reasonable request, the written certificate of First Data's authorized officer,
certifying that any amount calculated by First Data hereunder has been
accurately calculated in accordance with the terms of this Agreement.
ARTICLE 7
CONFIDENTIALITY
---------------
SECTION 7.1. GENERAL. (a) Except as otherwise provided in this Article
7, each Party shall keep confidential and not disclose Confidential Information
of the other Party. The Parties shall take reasonable steps, no less rigorous
than those taken to protect their own comparable confidential and proprietary
information, to prevent any unauthorized or inadvertent disclosure of
Confidential Information of the other Party or the loss of Confidential
Information. Each Party agrees that for purposes of this Article 7, the terms
First Data and Company shall also include their respective Affiliates, who shall
be subject to the provisions of this Article 7.
(b) Each Party shall create and maintain safeguards to limit
disclosure of Confidential Information of the other Party to its Affiliates, and
its or its Affiliate's employees, third party service providers, consultants,
subcontractors and
CONFIDENTIAL
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contractors who have a need to know such information solely in connection with
such Party's obligations under this Agreement or rights under the Software
License Agreement or the Service Mark License Agreement, and provided that any
such Person who is not an employee of the Party or an Affiliate of such Party
making such disclosure shall have first executed a confidentiality agreement
containing terms consistent with the obligations of this Article 7. First Data
acknowledges and agrees to use best efforts to establish and maintain safeguards
so that Confidential Information of Company shall not be used in competition
with, or otherwise to the detriment of, Company.
(c) Subject to Company's rights under the Software License Agreement
and the Service Mark License Agreement, each Party agrees that, upon request by
the other Party, such Party shall return to the other Party any Confidential
Information of the other Party which such Party does not then require to perform
its obligations hereunder. No Party shall obtain any Proprietary Rights under
this Agreement in any of the other Party's Confidential Information that has
been or at any time after the date of this Agreement is disclosed, directly or
indirectly, to such Party exclusively pursuant to this Agreement.
SECTION 7.2. CONFIDENTIAL INFORMATION DEFINED. As used herein the term
"Confidential Information" means (i) with respect to Company, the Company Data,
the MoneyGram Application Software, any New MoneyGram Application Software, the
PC MoneyGram Application Software and any Third Party Software that is licensed
to or used by Company, (ii) with respect to First Data, the IPS Application
Software and any Third Party Software that is licensed to or used by First Data
and (iii) with respect to each Party, the terms of this Agreement and all
information and materials (in any medium), whether communicated to a Party
before or after the date hereof, respecting, comprising, describing, embodying
or incorporating:
(i) information about such Party's business, customers, employees,
finances, operations, products or services,
(ii) other technical data, research, products, business or financial
information, plans or strategies, forecasts or forecast assumptions,
business practices, operations or procedures, services, marketing or
merchandising information respecting such Party or its customers, or
(iii) computer software and documentation, databases, data processing
or communications systems, practices or procedures or other internal
systems or controls (planned or
CONFIDENTIAL
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in any stage of development) used, owned or developed (or in development)
by or at the request of such Party (including (1) object code, source code,
source listings, programming techniques or systems, programming or systems
documentation or specifications, or user, operations or systems manuals,
(2) hardware, firmware or other equipment or appliances, engineering
drawings, schematics or related documentation, specifications or manuals or
(3) other charts, diagrams, graphs, models, sketches, writings or data
related thereto),
including, in each case, any trade secrets and other proprietary ideas,
concepts, know-how, methodologies and information incorporated therein, whether
incorporated in materials produced by a Party pursuant to or in connection with
this Agreement or any other agreement between the Parties; provided, however,
that the Party disclosing such information in tangible form shall mark any
tangible material containing Confidential Information of such Party with an
appropriate legend indicating the confidential nature of such material prior to
providing such material to the other Party; and provided, further, that the
failure of either Party to so legend any material shall not relieve the other
Party of the obligation to maintain the confidentiality of any unlegended
material which such Party knows or should reasonably know contains Confidential
Information of the other Party.
SECTION 7.3. PERMITTED DISCLOSURE; PUBLIC AND GENERIC INFORMATION;
LEGALLY REQUIRED DISCLOSURE. (a) The provisions of this Article 7 shall not
apply to any Confidential Information to the extent included in any assignment
of any of Company's rights under the Software License Agreement or the Service
Mark License Agreement if effected in accordance with the terms of such
agreements; provided, however, that such assignee executes and delivers to IPS
an agreement to be bound by the terms of this Article 7 in respect of such
Confidential Information, in form and substance reasonably satisfactory to IPS.
(b) The provisions of this Article 7 shall not prohibit disclosure by
a Party of any information or materials identical or similar to that contained
in another Party's Confidential Information, but which (i) are or become
generally available to the public other than as a result of any breach of the
provisions of this Agreement or any other applicable agreement between the
Parties; (ii) are in the possession of such Party or any of its Affiliates prior
to receipt thereof (other than through any improper means) and are not subject
to a confidentiality obligation; (iii) are commonly known to Persons engaged in
the funds transfer, payment instrument, message or document delivery,
telecommunications or data processing industries or by individuals employed by
Persons engaged in such industries other than as a result of any breach of the
provisions
CONFIDENTIAL
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of this Agreement or any other applicable agreement between the Parties; or (iv)
are independently developed by such Party without reference to the Confidential
Information of the other Party.
(c) A Party may disclose Confidential Information to the extent
required to be disclosed by such Party under any Requirements of Law applicable
to such Party or the conduct of such Party's business or otherwise (provided
that upon receipt of demand for any such required disclosure such Party shall
provide the disclosing Party prompt notice thereof).
SECTION 7.4. NOTICES. Each Party agrees that it will not remove any
statutory copyright notice or other identification or evidence of Confidential
Information contained on or included in any item of Confidential Information of
the other Party. The Parties shall each reproduce any such notice or
identification on any reproduction, modification or translation of such Confiden
tial Information and shall add any statutory copyright notice or other evidence
of confidential information to the other Party's Confidential Information in its
possession upon reasonable request by the other Party.
SECTION 7.5. COMPANY DISCLOSURE OF CONFIDENTIAL INFORMATION TO FIRST
DATA. Company hereby agrees that it shall, and shall cause its Affiliates and
its or its Affiliates officers, employees, representatives, agents and advisors
to, disclose only to the Designated Representative any and all Confidential
Information of Company that Company desires or intends to, or is required by the
terms of this Agreement to, disclose to First Data or its Affiliates.
SECTION 7.6. REMEDY. In the event of any breach of this Article 7, the
Parties agree that the non-breaching Party will suffer irreparable harm and the
total amount of monetary damages for any injury to the non-breaching Party from
any violation of this Article 7 will be impossible to calculate and will
therefore be an inadequate remedy. Accordingly, the Parties agree that the non-
breaching Party shall be entitled to temporary and permanent injunctive relief
against the breaching Party, its Affiliates, employees, officers, directors,
agents or representatives, and the other rights and remedies to which the non-
breaching Party may be entitled to at law, in equity and under this Agreement
for any violation of this Article 7. The provisions of this Article 7 shall
survive the expiration or termination of this Agreement.
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ARTICLE 8
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
IT IS UNDERSTOOD AND AGREED THAT FIRST DATA DOES NOT REPRESENT,
WARRANT OR GUARANTEE IN ANY WAY THAT THE PERFORMANCE OF THE SUPPORT SERVICES,
ANY ADDITIONAL SERVICES OR THE SERVICES CONTEMPLATED BY ARTICLE 3 WILL BE
UNINTERRUPTED OR ERROR FREE. EXCEPT AS PROVIDED HEREIN, NO PARTY HERETO MAKES
ANY, AND EACH PARTY HERETO HEREBY EXPRESSLY DISCLAIMS ANY, REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING OUT OF OR RELATED TO THIS
AGREEMENT, INCLUDING AS TO ANY SERVICES, HARDWARE, SOFTWARE, EQUIPMENT OR
MATERIALS PROVIDED OR USED BY OR ON BEHALF OF ANY PARTY UNDER THIS AGREEMENT.
EACH PARTY HERETO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE. FIRST DATA AND COMPANY HEREBY AGREE THAT
THIS AGREEMENT INVOLVES THE PROVISIONS OF SERVICES, AND THAT THIS AGREEMENT IS A
SERVICE AGREEMENT FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE AND THEREFORE THAT
THE PROVISIONS OF THE UNIFORM COMMERCIAL CODE SHALL NOT APPLY TO THIS AGREEMENT.
ARTICLE 9
TERM AND TERMINATION
SECTION 9.1. TERM. (a) This Agreement shall commence on the date
hereof and, subject to the earlier termination of (i) the services contemplated
in Article 3 pursuant to Section 3.1(a) (including the Regulatory Compliance
Services) or (ii) the Data Center Services, the Agent Services, the Corporate
Support Services, the Voice Center Disaster Recovery Services or any Additional
Services pursuant to Section 9.2(b), shall continue for the Term, unless
earlier terminated as provided in Section 9.2 or Section 9.3.
(b) Upon the earlier of (i) the expiration of the Term or (ii) the
conditions specified in clause (ii) of Section 3.1(a) have been fulfilled, IPS
shall have no further obligation to allow Company or any MoneyGram Agent to
continue to sell the IPS Funds Transfer Service. On or before the expiration of
the earlier of the Term or the transition period contemplated by Section 9.4,
Company shall terminate on behalf of IPS all Agent Contracts between IPS and
MoneyGram Agents in respect of the IPS Funds Transfer Service or convert such
Agent Contracts into contracts between Company and MoneyGram Agents, destroy at
its expense all IPS blank financial paper (money transfer checks) not shipped to
MoneyGram Agents and perform such other tasks as are reasonably requested by
First Data for the prompt, orderly and proper wind-down of the IPS Funds
Transfer Service relationship
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with such MoneyGram Agents. After the expiration of the earlier of the Term or
the transition period contemplated by Section 9.4, IPS and Company shall
continue to fulfill their respective obligations under Article 3 (including, in
the case of IPS, Regulatory Compliance Services) so long as any IPS Funds
Transfer Service transactions remain uncompleted, and, once all IPS Funds
Transfer Service transactions are completed, then Article 3 shall be null and
void and of no further force or effect.
SECTION 9.2. TERMINATION BY COMPANY. (a) This Agreement shall
terminate upon the occurrence of any of the following events and (i) in the case
of clause (A), (C) or (D) below, at the option of Company by written notice to
First Data and (ii) in the case of clause (B) below, immediately and without
prior written notice or any other action by Company:
(A) If First Data or any Affiliate of First Data shall fail to
perform, or repudiates or seeks to avoid or invalidate, any material
obligation to be performed by it under this Agreement, provided that (i) in
the case of any breach which is capable of being cured, or otherwise
discontinued, First Data has received notice of such breach from Company
demanding such breach be cured and First Data has not cured or discontinued
such breach within 30 days of receipt of such notice; and (ii) the Parties
have exhausted the dispute resolution proceedings described in Article 11;
(B) In the event of Bankruptcy of IPS;
(C) If a Governmental Body enjoins the performance by a Party of any
material obligations under this Agreement; or
(D) If Company reasonably determines that First Data is not Solvent.
(b) Notwithstanding anything to the contrary in this Agreement,
(i) if the conditions specified in clause (ii) of Section 3.1(a)
have been fulfilled, Company may terminate this Agreement in its entirety
by giving First Data 90 days' notice thereof; and
(ii) if Company shall determine that it no longer requires (1) the
Data Center Services, (2) the Agent Services, (3) the Corporate Support
Services, (4) the Voice Center Disaster Recovery Services or (5) any
Additional Services, in the case of clauses (1), (2) or (3), as a whole or
any portion thereof (provided that Company may only terminate groups of
Data Center Services as described in
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Exhibit E) and, in the case of clause (4), as a whole, then Company shall
give First Data prior written notice of such determination as follows:
(A) in the case of all or any portion of the Data Center
Services, 90 days' notice;
(B) in the case of all or any portion of the Agent Services, 30
days' notice;
(C) in the case of all or any portion of the Corporate Support
Services, 30 days' notice;
(D) in the case of the Voice Center Disaster Recovery Services,
30 days' notice; and
(E) in the case of any Additional Services, as agreed to by the
Parties.
Upon any such termination, the provisions of this Agreement that
relate to such Support Services or any Additional Services so terminated
shall be void and of no further force and effect and the Parties shall
effect the provisions of the last paragraph of Section 9.5. If Company
terminates all or any portion of the Data Center Services prior to the time
that First Data's obligations under Article 3 have terminated, then Company
shall provide to First Data such information at such times as First Data
reasonably requests as necessary or desirable to perform its obligations
under Article 3 (including Regulatory Compliance Services). The failure of
Company to so provide such information at the times required shall excuse
First Data from its obligations to perform under Article 3 for any period
affected by, and to the extent of, such failure by Company, and First Data
shall not be liable to Company under this Agreement in connection with
First Data's duties or obligations under Article 3.
SECTION 9.3. TERMINATION BY FIRST DATA. (a) This Agreement shall
terminate upon the occurrence of any of the following events and (i) in the case
of clause (A), (C) or (D) below, at the option of First Data by written notice
to Company and (ii) in the case of clause (B) below, immediately and without
prior written notice or any other action by First Data:
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(A) If Company or any Affiliate of Company shall fail to perform, or
repudiates or seeks to avoid or invalidate, any material obligation to be
performed by it under this Agreement, provided that (i) in the case of any
breach which is capable of being cured, or otherwise discontinued, Company has
received notice of such breach from First Data demanding such breach be cured
and Company has not cured or discontinued such breach within 30 days of receipt
of such notice; and (ii) the Parties have exhausted the dispute resolution
proceedings described in Article 11;
(B) In the event of Bankruptcy of Company;
(C) If a Governmental Body enjoins the performance by a Party of any
material obligations under this Agreement; or
(D) If First Data reasonably determines that Company is not Solvent.
(b) Notwithstanding anything to the contrary in this Agreement,
First Data shall have the right to terminate the Corporate Support Services
described in Exhibit A-2.1 upon 60 days' prior written notice to Company.
SECTION 9.4. ORDERLY TRANSITION. Upon termination of this Agreement
pursuant to Section 9.2(a) or 9.3(a), First Data and Company shall
expeditiously and in good faith, agree upon and document a plan providing for an
orderly transition of any or all of the obligations of First Data hereunder, as
the case may be, to a successor over a period of not less than 180 days from the
date of such termination. Such transition period shall be deemed to be part of
the Term, unless otherwise agreed to by the Parties. During such transition
period, First Data shall provide reasonable transition assistance to Company.
Company shall compensate First Data, on a time and materials basis, for such
assistance, at First Data's then prevailing rates (plus reimbursement of out-of-
pocket expenses) in addition to all other payment obligations of Company
pursuant to and in accordance with this Agreement.
SECTION 9.5. EFFECT OF TERMINATION. Upon the termination of this
Agreement, each Party shall have no further obligation to perform any obligation
hereunder to the other Party and all outstanding unpaid amounts due and owing to
First Data or Company under the terms of this Agreement shall become immediately
due and payable, provided, however, that the termination of this Agreement shall
not affect the following:
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(a) The obligation of Company to pay for any services rendered or any
other obligation or liability owing or which becomes owing under this Agreement
whether the obligations arise prior to or after the date of termination,
including pursuant to Section 9.4;
(b) The provisions of Article 10 or any other indemnification
obligations of any Party;
(c) The provisions of Section 3.5, Section 5.3 and Section 9.4;
(d) The provisions of Article 7 or any other confidentiality
obligations of any Party; and
(e) The provisions of Article 11.
In addition, (i) upon the termination of this Agreement, each Party
shall return to the other Party all copies of such Party's Confidential
Information, and shall erase all versions of the other Party's Confidential
Information from its data files, in each case, other than any Confidential
Information licensed to Company under the Software License Agreement or the
Service Mark License Agreement, and (ii) upon the termination of the provisions
hereof relating to all of the Data Center Services, IPS and Company shall
execute and deliver an amendment to Exhibit A of the Software License Agreement,
in form and substance reasonably acceptable to IPS and Company, which amendment
shall set forth a description of the IPS Application Software as of the date of
such termination.
ARTICLE 10
INDEMNITIES, LIABILITY AND
LIMITS OF LIABILITY
SECTION 10.1. FIRST DATA'S INDEMNIFICATION. (a) Subject to the
provisions of this Article 10, First Data shall indemnify and hold harmless
Company, its Affiliates and their respective directors, officers, employees,
shareholders and permitted assigns (each, a "Company Indemnitee") from and
against any and all Loss and Expense imposed in any manner upon or asserted
against any Company Indemnitee in connection with or arising from this Agreement
to the extent that such Loss or Expense relates to or arises out of:
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(i) the breach by First Data or any Affiliate of First Data of any
material covenant or agreement of First Data or any Affiliate of First Data
contained in this Agreement; or
(ii) any claim, demand or action alleging that the First Data
Equipment infringes any third Person's Proprietary Rights.
(b) Notwithstanding subsection (a) of this Section 10.1, First Data
shall not be required to indemnify, protect or hold harmless any Company
Indemnitee from and against any Loss or Expense to the extent that such Loss or
Expense arises as a result of any Company Indemnitee's gross negligence or
willful misconduct or the breach by Company or any Affiliate of Company any of
its covenants or agreements contained in this Agreement.
(c) Except as provided in Section 10.1(d), notwithstanding anything to
the contrary in this Agreement, the cumulative liability of First Data under
Section 10.1(a) relating to any and all events occurring in any one calendar
year shall not under any circumstances exceed the aggregate amount of fees paid
to First Data for its services provided hereunder performed during the
immediately preceding calendar year; and in the case of events occurring in the
remainder of the calendar year in which this Agreement is executed, such
liability shall not under any circumstances exceed $2 million.
(d) Notwithstanding the limitation of liability provided in Section
10.1(c), if the liability of First Data under Section 10.1(a) arises as a result
of its gross negligence or willful misconduct in the performance of its
obligations hereunder, then the cumulative liability of First Data under Section
10.1(a) relating to any and all events occurring in any one calendar year shall
not under any circumstances exceed an amount equal to two times the aggregate
amount of fees paid to First Data for its services provided hereunder performed
during the immediately preceding calendar year; and in the case of events
occurring in the remainder of the calendar year in which this Agreement is
executed, such liability shall not under any circumstances exceed $4 million.
SECTION 10.2. COMPANY'S INDEMNIFICATION. (a) Subject to the
provisions of this Article 10, Company shall indemnify and hold harmless First
Data and its Affiliates and their respective directors, officers, employees,
shareholders and permitted assigns (each, a "First Data Indemnitee") from and
against any and all Loss and Expense imposed in any manner upon or asserted
against any First Data Indemnitee in connection with or arising
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from this Agreement to the extent that such Loss or Expense relates to or arises
out of:
(i) the breach by Company or any Affiliate of Company of any
material covenant or agreement of Company or any Affiliate of Company
contained in this Agreement;
(ii) any claim, demand or action alleging that any New MoneyGram
Application Software, any modification to the PC MoneyGram Application
Software or any Software (other than the MoneyGram Application Software),
Company Data or Third Party Software provided by Company or any Affiliate
of Company or any portion thereof as furnished to or used by First Data or
its Affiliates under this Agreement infringes any third Person's
Proprietary Rights; provided that Company shall not be required to
indemnify and hold harmless any First Data Indemnitee to the extent an
actual or alleged infringement is caused by any First Data Indemnitee
combining any New MoneyGram Application Software or any Software (other
than the MoneyGram Application Software), Company Data or Third Party
Software with any other Software without the express consent of Company;
and provided, further, that Company's obligations hereunder shall also not
apply to the extent that an infringement claim is made with respect to
Software (other than the MoneyGram Application Software, the PC MoneyGram
Application Software or the IPS Application Software) provided by First
Data to Company or enhancements to Software, Company Data or Third Party
Software that are requested by First Data or any Affiliate of First Data
and which are implemented using designs or specifications created by First
Data or any Affiliate of First Data;
(iii) any claim that the Business, Company or any Affiliate of Company
has violated or does not comply with any Requirements of Law, except to the
extent such violation or lack of compliance directly relates to the
services provided by First Data under this Agreement;
(iv) any claim by any third Person (including any MoneyGram Agent)
that Company breached any contractual or other legal obligation (including
any Agent Contract) owed or alleged to be owed to such third Person;
(v) the performance on and after the date hereof of all aspects of
the Business not delegated to First Data under this Agreement, including
all activities contemplated by Section 5.1; or
(vi) any application for any license as contemplated by Section
3.4(b).
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(b) Notwithstanding subsection (a) of this Section 10.2, Company
shall not be required to indemnify or hold harmless any First Data Indemnitee
from and against any Loss or Expense to the extent that such Loss or Expense
arises as a result of any First Data Indemnitee's gross negligence or willful
misconduct or the breach by First Data or any Affiliate of First Data of any of
its covenants or agreements contained in this Agreement.
(c) Except as provided in Section 10.2(d), notwithstanding anything to
the contrary in this Agreement, the cumulative liability of Company under
Sections 10.2(a)(i) and (ii) relating to events occurring in any one calendar
year shall not under any circumstances exceed the aggregate amount of fees paid
to First Data for its services provided hereunder performed during the
immediately preceding calendar year; and in the case of events occurring in the
remainder of the calendar year in which this Agreement is executed, such
liability shall not under any circumstances exceed $2 million.
(d) Notwithstanding the limitation of liability provided in Section
10.2(c), if the liability of Company under Section 10.2(a)(i) or (ii) arises as
a result of its gross negligence or willful misconduct in the performance of its
obligations hereunder, then the cumulative liability of Company under Sections
10.2(a)(i) and (ii) relating to events occurring in any one calendar year shall
not under any circumstances exceed an amount equal to two times the aggregate
amount of fees paid to First Data for its services provided hereunder performed
during the immediately preceding calendar year; and in the case of events
occurring in the remainder of the calendar year in which this Agreement is
executed, such liability shall not under any circumstances exceed $4 million.
SECTION 10.3. NOTIFICATION. (a) Any Person (the "Indemnified Party")
seeking indemnification hereunder shall give promptly to the Party obligated to
provide indemnification to such Indemnified Party (the "Indemnifying Party") a
notice (a "Claim Notice") describing in reasonable detail the facts giving rise
to any claim for indemnification hereunder and shall include in such Claim
Notice (if then known) the amount or the method of computation of the amount of
such claim, and a reference to the provision of this Agreement or any other
agreement, document or instrument executed hereunder or in connection herewith
upon which such claim is based; provided, however, that a Claim Notice in
respect of any action at law or suit in equity by or against a third Person as
to which indemnification will be sought shall be given promptly after the action
or suit is commenced.
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(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article 10 shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnifying Party; (ii) by a final judgment, decree
or decision pursuant to the dispute resolution procedures referred to in Article
11 and/or of any court of competent jurisdiction; or (iii) by any other means to
which the Indemnified Party and the Indemnifying Party shall agree. The judgment
or decree of a court shall be deemed final when the time for appeal, if any,
shall have expired and no appeal shall have been taken or when all appeals taken
shall have been finally determined. The Indemnified Party shall have the burden
of proof in establishing the amount of Loss and Expense suffered by it.
(c) If a claim, suit or proceeding by a third Person for which
indemnification may be available under this Agreement is made or filed against
an Indemnified Party, the Indemnified Party shall promptly notify the
Indemnifying Party in writing of such claim, suit or proceeding. The
Indemnifying Party, within thirty (30) days, or such shorter period as is
required to avoid any prejudice in the claim, suit or proceeding, after the
notice, may elect to defend, compromise or settle the third Person claim, suit
or proceeding at its expense. Thereafter, the Indemnified Party shall deliver to
the Indemnifying Party, within ten (10) Business Days after the Indemnified
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the third Person claim. In
any third Person claim, suit or proceeding which the Indemnifying Party has
elected to defend, compromise or settle, the Indemnifying Party shall not after
such election be responsible for the expenses of legal counsel for the
Indemnified Party, but the Indemnified Party may participate therein and retain
counsel at its own expense. In any third Person claim, suit or proceeding the
defense of which the Indemnifying Party shall have assumed, the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the matter without the consent of the Indemnifying Party and the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement affecting the Indemnified Party without the written consent of
the Indemnified Party to the extent that the judgment or settlement involves
more than the payment of money. The Indemnified Party shall provide to the
Indemnifying Party all information, assistance and authority reasonably
requested in order to evaluate any third Person claim, suit or proceeding and
effect any defense, compromise or settlement. To the extent the Indemnifying
Party elects not to defend such proceeding, claim or demand, and the Indemnified
Party defends against or otherwise deals with any such proceeding, claim or
demand, the Indemnified Party may retain counsel, at the expense of the
Indemnifying Party, and control
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the defense of such proceeding. After any final judgment or award shall have
been rendered by a court, arbitration board or administrative agency of
competent jurisdiction and the time in which to appeal therefrom has expired, or
a settlement shall have been consummated, or the Indemnified Party and the
Indemnifying Party shall arrive at a binding agreement with respect to each
separate matter alleged to be indemnified by the Indemnifying Party hereunder,
the Indemnified Party shall forward to the Indemnifying Party notice of any sums
due and owing by it with respect to such matter and the Indemnifying Party shall
pay all of the sums owed to the Indemnified Party by wire transfer, certified or
bank cashier's check within thirty (30) days after the date of such notice.
SECTION 10.4. CLAIMS PERIOD. No cause of action, dispute or claim for
indemnification under this Agreement may be asserted or made against any Party
or submitted to arbitration on a date later than: (a) one year after the date in
which facts giving rise to such cause of action, dispute or claim are discovered
or, with the exercise of due diligence, should reasonably have been discovered,
or if such event for which indemnification is claimed is an action or proceeding
brought against the Indemnified Party, the end of the related notification
period provided in Section 10.3; or (b) one year after the earlier of the
termination of this Agreement or the expiration of the Term.
SECTION 10.5. SUBROGATION. If an Indemnifying Party shall be
obligated to indemnify an Indemnified Party pursuant to Sections 10.1 or 10.2,
the Indemnifying Party shall, upon payment of such indemnity in full, be
subrogated to all rights of the Indemnified Party with respect to the claims and
defenses to which such indemnification relates.
SECTION 10.6. EXCLUSIVE REMEDY. Except for (i) remedies that cannot
be waived as a matter of law and injunctive and provisional relief, (ii) the
provisions of Sections 5.1(c), 7.6, 9.2 and 9.3 and (iii) any Party's
obligation to make any payments or reimbursements hereunder (including the
payment of Fees, Reimbursable Expenses and Taxes and reimbursements pursuant to
Article 3), this Article 10 shall be the sole and exclusive remedy for breach of
this Agreement, including with respect to any claim, demand, cause of action,
debt, Cost, Loss, Expense or liability subject thereto.
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SECTION 10.7. NO SPECIAL DAMAGES. IN NO EVENT SHALL FIRST DATA,
COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES BE LIABLE FOR ANY CONSEQUENTIAL
DAMAGES UNDER THIS AGREEMENT, WHICH ARE HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER FIRST DATA, COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES HAS BEEN ADVISED, OR COULD HAVE FORESEEN, OF THE POSSIBILITY SUCH
DAMAGES; PROVIDED THE FOREGOING EXCLUSION SHALL NOT APPLY TO CONSEQUENTIAL
DAMAGES INCURRED BY ANY PARTY AS A RESULT OF THE MISAPPROPRIATION OR MISUSE OF
SUCH PARTY'S CONFIDENTIAL INFORMATION. THE FOREGOING REPRESENTS AN EXPRESS
ALLOCATION OF RISK BETWEEN THE PARTIES.
ARTICLE 11
DISPUTE RESOLUTION
SECTION 11.1. DISPUTE RESOLUTION.
(a) Informal Dispute Resolution. Subject to Section 11.2, any
dispute, controversy or claim between Company and First Data arising from or in
connection with this Agreement, the Software License Agreement or the Service
Mark License Agreement whether based on contract, tort, common law, equity,
statute, regulation, order or otherwise ("Dispute") shall be resolved in
accordance with this Section 11.1:
(i) Upon written request of Company or First Data, each Party will
appoint a designated representative whose task it will be to meet for the
purpose of endeavoring to resolve such Dispute ("Level 1 Review"). The
designated representatives shall meet as often as the Parties reasonably
deem necessary to discuss the Dispute and negotiate in good faith in an
effort to resolve the Dispute without the necessity of any formal
proceeding;
(ii) If resolution of the Dispute cannot be resolved within fifteen
(15) days of the first Level 1 Review meeting, then the issue shall be
brought before a committee (the "Senior Level Policy Team") comprised of
Charles T. Fote and David P. Bailis, representing First Data, and James F.
Calvano and Andrea Kenyon, representing Company (or comparable level
successors to these individuals, as appropriate) ("Level 2 Review"). The
Senior Level Policy Team shall meet as often as necessary to discuss the
Dispute and negotiate in good faith to resolve the Dispute. The members of
the Senior Level Policy Team may be substituted at the discretion of First
Data or Company, as the case may be, upon ten (10) days' written notice.
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(iii) Arbitration for the resolution of a Dispute may not be
commenced until the earlier of:
(A) the date on which the Senior Level Policy Team concludes in
good faith that amicable resolution through continued negotiation of
the matter does not appear likely; or
(B) 30 days after the date the Dispute became subject to the
review of the Senior Level Policy Team.
(b) Arbitration. Any Dispute that remains unresolved after compliance
with the provisions of Section 11.1(a), regardless of the magnitude thereof or
the amount in controversy or whether such Dispute would otherwise be considered
justiciable or ripe for resolution by a court or arbitral tribunal, shall be
submitted to, and finally determined by, arbitration in accordance with the
following provisions of this Section 11.1(b):
(i) Any such arbitration shall be conducted by the AAA in
accordance with the AAA Rules, except as the AAA Rules conflict with the
provisions of this Article 11, in which event the provisions of this
Article 11 shall control.
(ii) The arbitral panel (the "Panel") shall consist of three
arbitrators independent of the Parties (the "Arbitrators"). The Arbitrators
shall be appointed pursuant to AAA's procedure for selecting arbitrators as
described in its pamphlet entitled Resolving Computer Disputes: A Guide to
Arbitration or any other publication of the AAA relevant to the nature of
the Dispute. Each Arbitrator shall have at least ten years' experience as a
senior manager in a data processing company or a consumer payment services
company (the "Basic Qualifications").
(iii) Should an Arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Section 11.1(b), the
Arbitrator shall be replaced by the AAA. Each such replacement Arbitrator
shall satisfy the Basic Qualifications. If an Arbitrator is replaced after
the arbitration hearing has commenced, then a rehearing shall take place in
accordance with the provisions of this Section 11.1(b) and the AAA Rules.
(iv) The arbitration shall be conducted in Denver, Colorado or in
such other location as the Parties may designate by mutual written consent;
provided, however, that the Panel may from time to time convene, carry on
hearings, inspect property or documents, and take evidence at any location
which the Panel deems appropriate.
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(v) The Panel may in its discretion order a pre-hearing exchange of
information including production of documents, exchange of summaries of
testimony or exchange of statements of position, and shall schedule promptly all
discovery and other procedural steps and otherwise assume case management
initiative and control to effect an efficient and expeditious resolution of the
Dispute.
(vi) At any oral hearing of evidence in connection with an arbitration
pursuant to this Section 11.1(b), each Party and its legal counsel shall have
the right to examine its witnesses and to cross-examine the witnesses of the
other Party. No testimony of any witness shall be presented in written form
unless the opposing Party or Parties shall have the opportunity to cross-examine
such witness, except as the Parties otherwise agree in writing or except under
extraordinary circumstances where, in the opinion of the Panel, the interests of
justice require a different procedure.
(vii) Within 15 days after the closing of the arbitration hearing, the
Panel shall prepare and distribute to the Parties a writing setting forth the
Panel's findings of facts and conclusions of law relating to the Dispute,
including the reasons for the giving or denial of any award.
(viii) Except as necessary in court proceedings to enforce this
arbitration provision or an award rendered hereunder, or to obtain interim
relief, neither a Party nor an arbitrator may disclose the existence, content or
results of any arbitration hereunder without the prior written consent of both
Parties.
(ix) A judgment upon the award rendered by the Panel may be entered in
any court having jurisdiction thereof.
(x) First Data and Company agree to share equally the cost of any
administrative fee, any compensation of the Arbitrators and any expenses of any
witnesses or proof produced at the direct request of the Panel.
(xi) The Parties shall each bear all their own Costs of arbitration,
including legal fees.
(xii) The Panel shall not have the power to award Consequential Damages.
(xiii) The Federal Arbitration Act, 9 U.S.C. Sections 1 through 14, except
as modified hereby, shall govern the interpretation and enforcement of this
Section 11.1(b).
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Notwithstanding the foregoing, the Parties agree to continue
performing their respective obligations under this Agreement, the Software
License Agreement and the Service Mark License Agreement while the Dispute is
being resolved unless and until such obligations are terminated or expire in
accordance with the provisions hereof.
SECTION 11.2. RECOURSE TO COURTS AND OTHER REMEDIES. Notwithstanding
the Dispute resolution procedures contained in Section 11.1, either Party may
apply to any court having jurisdiction (i) to enforce this agreement to
arbitrate, (ii) to seek provisional injunctive relief so as to enforce any
agreements in this Agreement, the Software License Agreement or the Service Mark
License Agreement until the arbitration award is rendered or the Dispute is
otherwise resolved, (iii) to avoid the expiration of any applicable limitation
period, (iv) to preserve a superior position with respect to other creditors or
(v) to challenge or vacate any final judgment, award or decision of the Panel
that does not comport with the express provisions of Section 11.1.
SECTION 11.3. AFFILIATES. Each Party agrees that for purposes of this
Article 11, the terms First Data and Company shall also include their respective
Affiliates, who shall be subject to the Dispute resolution procedures of this
Article 11.
SECTION 11.4. EXCEPTION TO ARTICLE 11. This Article 11 shall not
apply to any dispute or controversy arising out of Section 3.3(c). Such
disputes and controversies shall be settled in accordance with the dispute
resolution procedures of Section 3.3(c).
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. EXPENSES. Except as otherwise provided herein, each of
the Parties shall pay all Costs incurred by it or on its behalf in connection
with the negotiation and preparation of this Agreement and its performance and
compliance with all its obligations hereunder, including fees and expenses of
its own financial consultants, accountants and counsel.
SECTION 12.2. RELATIONSHIP OF PARTIES. (a) First Data, in furnishing
services to Company under this Agreement, is acting only as an independent
contractor. Except as set forth in this Agreement, First Data does not and shall
not undertake by this Agreement or otherwise to perform any obligation of
Company, whether regulatory or contractual, or assume any responsibility
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for Company's business or operations. First Data has the sole and exclusive
right and obligation to supervise, manage, contract, direct, procure, perform
or cause to be performed, all work to be performed by First Data under this
Agreement, unless otherwise provided herein.
(b) Nothing in this Agreement shall be deemed by the Parties, or by
any third Person, to create a partnership, joint venture or similar relationship
between or among any of the Parties and, except as otherwise expressly provided
herein, no Party shall be deemed to be the agent of any other Party, it being
understood and agreed that neither the method of computing compensation nor any
other provision contained herein shall be deemed to create any relationship
between the Parties hereto other than the relationship of independent parties
contracting for services. No Party has, and shall not hold itself out as having,
any authority to enter into any contract or create any obligation or liability
on behalf of, in the name of, or binding upon any other Party except as
specifically provided herein.
SECTION 12.3. FORCE MAJEURE. Each Party shall be excused from the
performance of obligations (other than payment obligations) under this
Agreement, for any period and to the extent that it is prevented, restricted or
delayed from or interfered with in performing any of its obligations under this
Agreement, in whole or in part, as a result of labor disputes, strikes, work
stoppages or delays, acts of God, severe weather, failures or fluctuations in
utilities or telecommunications equipment or service, shortages of materials or
rationing, civil disturbance, acts of public enemies, blockade, embargo or any
law, order, proclamation, regulation, ordinance or court order or requirement
having legal effect of any judicial authority or Governmental Body, or any other
act or omission whatsoever, whether similar or dissimilar to the foregoing,
which are beyond the reasonable control of such Party (each, a "Force Majeure
Event"), and such nonperformance shall not be a breach or default under this
Agreement, or a ground for termination of this Agreement. Each Party shall give
the other Party immediate notice of any Force Majeure Event affecting the
notifying Party's ability to perform under this Agreement and shall promptly
update the other Party regarding the notifying Party's efforts to mitigate and
resolve such Force Majeure Event.
SECTION 12.4. ENTIRE AGREEMENT. This Agreement, the Software License
Agreement and the Service Mark License Agreement, including the Exhibits hereto
and thereto, constitute the entire agreement among the Parties with regard to
the subject matter hereof and thereof, and supersede all other prior agreements,
understandings or discussions among the Parties concerning such subject matter.
This Agreement may not be
CONFIDENTIAL
-36-
<PAGE>
amended or modified except in writing signed by an authorized representative of
each Party to this Agreement.
SECTION 12.5. ASSIGNMENT. Except as otherwise provided herein, the
rights and obligations of both First Data and Company under this Agreement are
personal and not assignable, either voluntarily or by operation of law, without
the prior written consent of the other Party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, (i) First Data may assign
its rights and delegate its duties and obligations hereunder to any of its
Affiliates, provided such Affiliate remains an Affiliate of First Data after
such an assignment and that notwithstanding such assignment IPS and FDC shall
remain primarily liable for all of their respective obligations hereunder; and
(ii) if the conditions specified in clause (ii) of Section 3.1(a) have been
fulfilled, the Company may assign all its rights and delegate its duties and
obligations hereunder to any of its Affiliates or to any Person who purchases
substantially all of the Business, provided the assignee agrees to be bound in
writing to the terms and conditions set forth in this Agreement, and,
notwithstanding such assignment, the Company shall remain primarily liable for
all of its obligations hereunder. Except in respect of a Company Indemnitee or a
First Data Indemnitee entitled to indemnification under Article 10, nothing in
this Agreement is intended to or shall be construed to confer upon any Person
other than the Parties and their respective successors and permitted assigns,
any right, remedy or claim under or by reason of this Agreement.
SECTION 12.6. NOTICES. All notices which any Party may be required
or desire to give to any other Party shall be in writing and shall be given by
personal service, telecopy, registered mail or certified mail (or its
equivalent) or overnight courier to the other Party at its respective address or
telecopy telephone number set forth below. Mailed notices and notices by
overnight courier shall be deemed to be given upon actual receipt by the Party
to be notified. Notice delivered by telecopy shall be confirmed in writing by
overnight courier and shall be deemed to be given upon actual receipt by the
Party to be notified.
In the case of First Data:
First Data Technologies, Inc.
6200 So. Quebec St., Suite 320AK
Englewood, Colorado 80111
Attention: Brent Willing
Telephone Number: 303-488-8190
Telecopy Number: 303-488-8631
Confidenital
-37-
<PAGE>
With a copy to:
First Data Corporation
2121 N. 117th Ave. NP 30
Omaha, Nebraska 68164
Attention: General Counsel
Telephone Number: 402-498-4085
Telecopy Number: 402-498-4123
In the case of Company:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: Chief Executive Officer
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
With a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: General Counsel
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
A Party may from time to time change its address for notification purposes by
giving the other Party prior written notice of the new address and the date upon
which it shall become effective.
SECTION 12.7. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION 12.8. GOVERNING LAW. Except as otherwise specified in
Article 11, this Agreement shall be governed by and construed in accordance with
the internal laws (as opposed to the conflict of laws provisions) of the State
of New York.
SECTION 12.9. MEDIA RELEASES. All media releases, public
announcements and public disclosures by the Parties or their respective
employees, representatives or agents relating to this Agreement or its subject
matter, including promotional or marketing material and annual account reports,
but not including any announcement intended solely for internal distribution by
any of the Parties, or any disclosure required by Requirements of Law
-38- CONFIDENTIAL
<PAGE>
or accounting or regulatory requirements beyond the reasonable control of any of
the Parties, shall be coordinated with and approved in writing by the other
Parties prior to the release thereof.
SECTION 12.10. WAIVER. Any term or provision of this Agreement may
be waived, or the time for its performance may be extended, by the Party
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any Party,
it is authorized in writing by an authorized representative of such Party. The
failure of any Party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any Party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach. Except as specifically provided otherwise, all remedies
provided for in this Agreement shall be cumulative and in addition to and not in
lieu of any other remedies available to any Party at law, in equity or
otherwise.
SECTION 12.11. SEVERABILITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 12.12. CONSTRUCTION RULES. The Parties hereto represent that
in the negotiation and drafting of this Agreement they have been represented by
and relied upon the advice of counsel of their choice. The Parties affirm that
their counsel have had a substantial role in the drafting and negotiation of
this Agreement and, therefore, the rule of construction to the effect that any
ambiguities are to be resolved against the drafting Person shall not be employed
in the interpretation of this Agreement, including any Exhibit.
-39- CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be
signed and delivered by its duly authorized officer as of the date first written
above.
MONEYGRAM PAYMENT SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
FIRST DATA TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INTEGRATED PAYMENT SYSTEMS INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
-40- CONFIDENTIAL
<PAGE>
Exhibit 10.2
SOFTWARE LICENSE AGREEMENT
--------------------------
THIS SOFTWARE LICENSE AGREEMENT (this "Agreement") is entered into as
-----------
of ___________, 1996, between Integrated Payment Systems Inc., a Delaware
corporation ("IPS"), and MoneyGram Payment Systems, Inc., a Delaware corporation
-----
(the "Company").
---------
WHEREAS, IPS, First Data Technologies, Inc., a Delaware corporation
("FDT"), and the Company are parties to the Operations Agreement dated as of the
date hereof (the "Operations Agreement"), pursuant to which IPS and FDT provide,
----------------------
inter alia, certain data processing services to the Company; and
- ----- ----
WHEREAS, IPS wishes to grant to the Company a license to use certain
IPS Application Software (as hereafter defined) on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
representations, conditions and agreements hereafter expressed, the Parties (as
hereafter defined) agree as follows:
1. Definitions. In this Agreement, unless the context shall otherwise
require, the capitalized terms used herein shall have the respective meanings
specified or referred to in this Section 1. Each agreement referred to in this
----------
Agreement shall mean such agreement as amended, supplemented and modified from
time to time to the extent permitted by the applicable provisions thereof and
hereof. Each definition in this Agreement includes the singular and the plural,
and reference to the neuter gender includes the masculine and feminine where
appropriate. References to any statute or regulations means such statute or
regulations as amended at the time and include any successor legislation or
regulations. The headings to the sections hereof are for convenience of
reference and shall not affect the meaning or interpretation of this Agreement.
Except as otherwise stated, reference to Sections and Exhibits means the
Sections and Exhibits of this Agreement. The Exhibits are hereby incorporated by
reference into and shall be deemed a part of this Agreement. Unless the context
clearly indicates otherwise, the word "including" means "including but not
limited to".
"Affiliate" means, with respect to any Person, any other Person which,
-----------
directly or indirectly, controls, is
CONFIDENTIAL
1
<PAGE>
controlled by or is under common control with such Person; provided, however,
-------- -------
that IPS and its Affiliates shall not be deemed Affiliates of the Company and
the Company and its Affiliates shall not be deemed Affiliates of IPS.
"Agreement" shall have the meaning set forth in the first paragraph
-----------
hereof.
"Business" means the Consumer Money Wire Transfer Services marketed
----------
under the name "MoneyGram."
"Company" shall have the meaning set forth in the first paragraph of
---------
this Agreement.
"Consequential Damages" means any liability, Loss, Expense or damage,
-----------------------
whether in an action arising out of breach of warranty, breach of contract,
delay, negligence, theory of tort, strict liability or other legal or equitable
theory, for indirect, special, reliance, incidental, punitive or consequential
damages or commercial loss, injury or damage, including loss of revenues,
profits or use of capital or production.
"Consumer Money Wire Transfer Services" means the service of
---------------------------------------
transferring the right to money using computer or telephone lines, or any
technology now existing or later developed, from one person through the location
of a MoneyGram Agent to a different person physically present at the location of
a different MoneyGram Agent and the services marketed under the phrases "Express
Payment" and "Cash Advance".
"Costs" means all direct costs, expenses and charges plus all indirect
-------
costs, expenses and charges, excluding allocations of overhead.
"Dispute" means any and all disputes, controversies or claims between
---------
the Parties arising from or in connection with this Agreement or the
relationship of the Parties whether based on contract, tort, common law, equity,
statute, regulation, order or otherwise.
"Expenses" means any and all reasonable expenses incurred in
----------
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including court
filing fees, court costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, accountants and other
professionals).
"FDT" shall have the meaning set forth in the first recital to this
-----
Agreement.
CONFIDENTIAL
2
<PAGE>
"Force Majeure Event" shall have the meaning specified in Section
---------------------
11(c).
"Governmental Body" means any foreign, federal, state, local or
-------------------
other governmental authority or regulatory body.
"Intellectual Property" means any United States patent, trademark,
-----------------------
service mark, trade dress, logo, trade name, copy right, mask work, trade
secret, confidential information, publicity and privacy rights or other similar
or related property right.
"IPS" shall have the meaning set forth in the first paragraph of this
-----
Agreement.
"IPS Application Software" means the application software owned by or
--------------------------
licensed to IPS or its Affiliates used in the Business, together with the
documentation (if any) relating thereto as described on Exhibit A.
---------
"Losses" means any and all losses, Costs, obligations, liabilities,
--------
settlement payments, awards, judgments, fines, penalties, damages, deficiencies
or other charges.
"MoneyGram Agent" means a Person that has contracted with Travel
-----------------
Related Services, IPS or the Company, as the case may be, to provide the
Consumer Money Wire Transfer Services provided by the Business.
"Operations Agreement" shall have the meaning set forth in the first
----------------------
recital to this Agreement.
"Party" means a party to this Agreement and its permitted successors
-------
and assigns.
"Person" means any individual, corporation, partnership, limited
--------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Requirements of Law" means any foreign, federal, state and local
---------------------
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body.
CONFIDENTIAL
3
<PAGE>
"Services" shall have the meaning set forth in Section 5.
---------- ---------
"Travel Related Services" means American Express Travel Related
-------------------------
Services Company, Inc., a New York corporation.
2. License Grant.
-------------
(a) IPS Application Software. IPS hereby grants to the Company a
------------------------
perpetual, assignable, nonexclusive, royalty-free license to use the IPS
Application Software only for the data processing requirements of the
Company relating to the Business, including the data processing services
provided by IPS and its Affiliates to the Company under the Operations
Agreement (the "Data Processing Services"); provided, however, that the
-------------------------- --------- --------
Company shall be permitted to reproduce and modify the IPS Application
Software upon (i) the termination of all of the Data Processing Services,
whether as a result of the termination of the Operations Agreement in whole
or in part, and (ii) the Parties having executed and delivered an amendment
to Exhibit A, in form and substance reasonably acceptable to each Party,
----------
which amendment shall set forth a description of the IPS Application
Software as of the date of such amendment.
(b) Reservation. All right, title and interest in and to the IPS
------------
Application Software, other than those rights expressly granted herein,
shall remain in IPS and its licensors. In no event may the Company use the
IPS Application Software (or any modifications thereto) other than in
connection with the Business.
(c) Expansion of Licenses. Upon the written request of the Company,
---------------------
IPS will negotiate in good faith an amendment to this Agreement that would
effect an expansion of the permitted uses of the license granted under this
Section 2 that would allow the Company to offer, and MoneyGram Agents to
---------
process transactions for, (i) a money order product offered by the Company
in the names of IPS, as the entity licensed to offer such a product under
applicable laws, and the Company and (ii) at such time as the Company has
obtained licenses necessary under applicable laws to offer such product in
its own name, a money order product offered by the Company in the name of
the Company, in each case, so long as IPS or its Affiliates provide the
data processing services to the Company for such products, all upon such
terms and conditions, including royalties, to be agreed upon by IPS and the
Company.
CONFIDENTIAL
4
<PAGE>
(d) Assignment. The Company may assign any of its rights under this
----------
Agreement (whether by operation of law or otherwise), including the license
granted pursuant to this Section 2, in accordance with the provisions of
---------
Section 11(e).
-------------
(e) Company Covenants. The Company hereby agrees that it will use
-----------------
reasonable efforts to cause any licensee, sublicensee or assignee with respect
to the IPS Application Software licensed to the Company pursuant to this
Agreement to comply with the terms and conditions of this Agreement.
3. Delivery of Software. IPS shall deliver to the Company the IPS
--------------------
Application Software in the manner and in accordance with the time frame set
forth on Exhibit B.
---------
4. Ownership (and Distribution) of Software and Modifications Thereto
------------------------------------------------------------------
Developed by the Company. As between the Company and IPS, the Parties
- ------------------------
acknowledge and agree that IPS and its licensors shall own all right, title and
interest in and to the IPS Application Software. Subject to such ownership
rights in the IPS Application Software, as between IPS and its licensors and the
Company, the Company shall own all right, title and interest in and to all
modifications it creates to the IPS Application Software. The Company covenants
and agrees that it shall use such modifications only in connection with the IPS
Application Software and only in connection with the Business or any other
permitted uses in accordance with Section 2(c).
------------
5. Transition Responsibilities.
---------------------------
(a) Services. IPS or its Affiliates shall provide the Company with
--------
up to 80 hours of training relating to the IPS Application Software (the
"Services") during the period beginning on the date of the notice delivered
----------
by the Company to IPS under the Operations Agreement setting forth the
Company's intent to terminate all of the Data Processing Services and
ending 30 days after the date of the amendment contemplated by Section
-------
2(a).
----
(b) No Other Services. Except as contemplated by Section 5(a), IPS
----------------- ------------
shall have no responsibility to update, maintain or support the IPS
Application Software.
6. Representations and Warranties; Disclaimers.
--------------------------------------------
(a) By IPS. IPS represents and warrants to the Company that: (i) IPS
------
has all right, power and authority to enter into and perform its
obligations set forth in this Agreement in accordance with its terms
without the consent
CONFIDENTIAL
5
<PAGE>
of any third Person; (ii) the IPS Application Software as delivered to the
Company will not infringe or violate any Intellectual Property of any third
Person; (iii) all Services provided herein shall be provided in a professional
and workmanlike manner.
(b) By the Company. The Company represents and warrants to IPS that
--------------
the Company has all right, power and authority to enter into and perform
its obligations set forth in this Agreement in accordance with its terms
without the consent of any third Person.
(c) No Other Warranties; Disclaimer. EXCEPT FOR THE EXPRESS
-------------------------------
WARRANTIES SET FORTH HEREIN, THE IPS APPLICATION SOFTWARE AND THE SERVICES
PROVIDED TO THE COMPANY HEREUNDER ARE PROVIDED ON AN "AS-IS" BASIS WITHOUT
ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER. EXCEPT AS SET FORTH
HEREIN OR IN ANY OTHER AGREEMENT TO WHICH IPS AND THE COMPANY ARE PARTIES,
IPS MAKES NO REPRESENTATIONS OR WARRAN TIES, EXPRESS OR IMPLIED, TO THE
COMPANY OR ANY OTHER PERSON, INCLUDING ANY WARRANTIES REGARDING THE
MERCHANTABILITY, SUITABILITY, ORIGINALITY, FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE (IRRESPECTIVE OF ANY PREVIOUS COURSE OF DEALINGS BETWEEN THE
PARTIES OR CUSTOM OR USAGE OF TRADE), OR RESULTS TO BE DERIVED FROM THE USE
OF THE SOFTWARE OR THE SERVICES PROVIDED HEREUNDER.
7. Disclaimer of Liability. NOTWITHSTANDING ANY OTHER PROVISION TO
-----------------------
THE CONTRARY SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL IPS, ANY OF ITS
AFFILIATES, OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
SUBCONTRACTORS BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES UNDER THIS AGREEMENT,
WHICH ARE HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER
EITHER PARTY OR ANY OTHER SUCH PERSON HAS BEEN ADVISED, OR COULD HAVE FORESEEN,
OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING REPRESENTS AN EXPRESS
ALLOCATION OF RISK BETWEEN THE PARTIES.
8. Indemnification.
---------------
(a) Indemnification by IPS. Subject to Section 9, IPS shall
---------------------- ---------
indemnify and hold the Company harmless against any and all Losses and
Expenses arising out of or related to (i) the breach of any warranty or the
inaccuracy of any representation of IPS contained in this Agreement, (ii)
the breach by IPS of any of its covenants in this Agreement or (iii) any
claim that the Company's use or possession of the IPS Application Software
or the license granted hereunder, infringes or violates the Intellectual
Property of any third Person. If a final injunction is obtained against the
CONFIDENTIAL
6
<PAGE>
Company's use of the IPS Application Software by reason of such infringement, or
if in IPS' opinion the IPS Application Software is likely to become the subject
of a claim for such infringement, IPS shall, at its sole option and expense: (i)
procure for the Company the right to continue using the IPS Application
Software, or any portion thereof, in the manner permitted hereunder; or (ii)
replace or modify the IPS Application Software, or any portion thereof, so that
it becomes noninfringing.
(b) Indemnification by the Company. Subject to Section 9, the Company shall
------------------------------ ---------
indemnify and hold IPS and its Affiliates harmless against any and all Losses
and Expenses arising out of or related to the breach by the Company of any of
its covenants in this Agreement.
(c) Limitation of Indemnification Obligations. Notwithstanding anything to
-----------------------------------------
the contrary set forth in this Agreement: (i) the remedies in Section 8(a) shall
------------
be the Company's sole remedies in the event of a successful claim of
Intellectual Property infringement; and (ii) IPS shall have no liability to the
Company under this Section 8 if (1) any infringement is based upon the Company's
---------
use of the IPS Application Software in combination with any software not
furnished by IPS, (2) the IPS Application Software is used in a manner for which
it is not designed or permitted here under or (3) the infringement is based upon
modifications of the IPS Application Software made by or for the Company.
(d) Procedure. IPS or the Company, as the case may be (the "Indemnifying
--------- -------------
Party"), shall indemnify the indemnified party under this Section 8 (the
- ------ ---------
"Indemnified Party") as set forth in this Section 8 provided that: (i) the
- ------------------- ---------
Indemnified Party promptly notifies the Indemnifying Party in writing of the
claim; (ii) the Indemnifying Party has sole control of the defense and all
related settlement negotiations with respect to the claim, provided, however,
--------- --------
that the Indemnified Party has the right, but not the obligation, to participate
in the defense of any such claim or action through counsel of its own choosing
and at it's sole expense; and (iii) the Indemnified Party cooperates fully to
the extent reasonably necessary, and executes all documents reasonably necessary
for the defense of such claim.
9. Dispute Resolution. Any Dispute shall be resolved in accordance with
------------------
Article 11 of the Operations Agreement, the provisions of which are incorporated
herein by reference.
CONFIDENTIAL
7
<PAGE>
10. Term and Termination.
--------------------
(a) Term. Notwithstanding anything to the contrary set forth herein, this
----
Agreement (and the license granted herein) shall continue unless terminated
pursuant to Section 10(b).
-------------
(b) Termination. This Agreement (and the license granted herein) shall
-----------
terminate if it is determined pursuant to the provisions referred in Section 9
that the Company has breached any of its material obligations under this
Agreement which breach is not substantially cured within 45 days after such
determination.
(c) Consequences of Termination. Upon termination of this Agreement for
---------------------------
any reason: (i) the license granted to the Company shall immediately terminate
and the Company shall cease use of the IPS Application Software and all
modifications thereto; (ii) the Company shall promptly comply with the
provisions of Section 7.1(c) of the Operations Agreement, the provisions of
which are incorporated herein by reference, as they relate to Confidential
Information (as defined in the Operations Agreement) of IPS obtained by the
Company in connection with the performance by the Parties of their respective
obligations hereunder, including Confidential Information related to the IPS
Application Software; (iii) IPS shall be relieved of its obligations (if any) to
provide Services to the Company; and (iv) all fees (if any) due IPS hereunder
shall be immediately due and payable.
11. Miscellaneous.
--------------
(a) Expenses. Except as otherwise provided herein, each of the Parties
--------
shall pay all Costs incurred by it or on its behalf in connection with its
performance and compliance with all its obligations under this Agreement,
including fees and expenses of its own financial consultants, accountants and
counsel.
(b) Relationship of Parties. IPS, in furnishing Services to the Company
-----------------------
under this Agreement, is acting only as an independent contractor. Except as set
forth in this Agreement, IPS does not and shall not undertake by this Agreement
or otherwise to perform any obligation of the Company, whether regulatory or
contractual, or assume any responsibility for the Company's business or
operations. IPS has the sole and exclusive right and obligation to supervise,
manage, contract, direct, procure, perform or
CONFIDENTIAL
8
<PAGE>
cause to be performed, all work to be performed by IPS under this Agreement,
unless otherwise provided herein.
(c) Force Majeure. Each Party shall be excused from the performance of
-------------
obligations (other than payment obligations) under this Agreement, for any
period and to the extent that it is prevented, restricted or delayed from or
interfered with in performing any of its obligations under this Agreement, in
whole or in part, as a result of labor disputes, strikes, work stoppages or
delays, acts of God, severe weather, failures or fluctuations in utilities or
telecommunications equipment or service, shortages of materials or rationing,
civil disturbance, acts of public enemies, blockade, embargo or any law, order,
proclamation, regulation, ordinance or court order or requirement having legal
effect of any judicial authority or Governmental Body, or any other act or
omission whatsoever, whether similar or dissimilar to the foregoing, which are
beyond the reasonable control of such Party (each, a "Force Majeure Event"), and
---------------------
such nonperformance shall not be a breach or default under this Agreement, or a
ground for termination of this Agreement. Each Party shall give the other Party
immediate notice of any Force Majeure Event affecting the notifying Party's
ability to perform under this Agreement and shall promptly update the other
Party regarding the notifying Party's efforts to mitigate and resolve such Force
Majeure Event.
(d) Entire Agreement. This Agreement, including the Exhibits hereto, and
----------------
the Operations Agreement constitute the entire agreement among the Parties with
regard to the subject matter hereof and thereof, and supersede all other prior
agreements, understandings or discussions among the Parties concerning the
subject matter hereof and thereof. This Agreement may not be amended or modified
except in writing signed by an authorized representative of each Party.
9 CONFIDENTIAL
<PAGE>
(e) Assignment. Except as otherwise provided herein, the rights and
-----------
obligations of both IPS and the Company under this Agreement are personal and
not assignable, either voluntarily or by operation of law, without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, (i) IPS may assign its rights and
delegate its duties and obligations hereunder to any of its Affiliates, provided
--------
such Affiliate remains an Affiliate of IPS after such an assignment and that
notwithstanding such assignment IPS shall remain primarily liable for all of its
obligations hereunder; and (ii) the Company may assign all its rights and
delegate its duties and obligations hereunder to any of its Affiliates or to any
Person who purchases substantially all of the Business, provided the assignee
--------
agrees to be bound in writing to the terms and conditions set forth in this
Agreement, and, notwithstanding such assignment, the Company shall remain
primarily liable for all of its obligations hereunder. Subject to the foregoing,
this Agreement shall extend to and be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns. Except as
contemplated by Section 8 in respect of an Indemnified Party, nothing in this
---------
Agreement is intended to or shall be construed to confer upon any Person other
than the Parties, and their respective successors and permitted assigns, any
right, remedy or claim under or by reason of this Agreement.
(f) Notices. All notices which any Party may be required or desire to
--------
give to any other Party shall be in writing and shall be given by personal
service, telecopy, registered mail or certified mail (or its equivalent) or
overnight courier to the other Party at its respective address or telecopy
telephone number set forth below. Mailed notices and notices by overnight
courier shall be deemed to be given upon actual receipt by the Party to be
notified. Notice delivered by telecopy shall be confirmed in writing by
overnight courier and shall be deemed to be given upon actual receipt by the
Party to be notified.
In the case of IPS:
Integrated Payment Systems Inc.
6200 So. Quebec St., Suite 320AK
Englewood, CO 80111
Attention: Brent Willing
Telephone Number: 303-488-8190
Telecopy Number: 303-488-8631
10 CONFIDENTIAL
<PAGE>
With a copy to:
First Data Corporation
2121 N. 117th Ave. NP 30
Omaha, Nebraska 68164
Attention: General Counsel
Telephone Number: 402-498-4085
Telecopy Number: 402-498-4123
In the case of the Company:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: Chief Executive Officer
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
With a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: General Counsel
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
A Party may from time to time change its address for notification purposes by
giving the other Party prior written notice of the new address and the date upon
which it shall become effective.
(g) Counterparts. This Agreement may be executed in several counterparts,
-------------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(h) Governing Law. Subject to the provisions referenced in Section 9,
--------------
this Agreement shall be governed by and construed in accordance with the
internal laws (as opposed to the conflict of laws provisions) of the State of
New York.
(i) Waiver. Any term or provision of this Agreement may be waived, or the
-------
time for its performance may be extended, by the Party entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently authorized for the
purposes of this Agreement if, as to any Party, it is authorized in writing by
an authorized representative of such Party. The failure of any Party hereto to
enforce at
11 CONFIDENTIAL
<PAGE>
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any Party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach. Except as specifically
provided otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
any Party at law, in equity or otherwise.
(j) Severability. Wherever possible, each provision hereof shall be
-------------
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
12 CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be signed and delivered by its duly authorized officer as of the date first
written above.
MONEYGRAM PAYMENT SYSTEMS, INC.
By:
-------------------------------
Name:
------------------------------
Title:
-----------------------------
INTEGRATED PAYMENTS SYSTEMS INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
13 CONFIDENTIAL
<PAGE>
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
dated as of ______________, 1996
between
MONEYGRAM PAYMENT SYSTEMS, INC.
and
INTEGRATED PAYMENT SYSTEMS INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
-----------
______________, 1996 between MoneyGram Payment Systems, Inc., a Delaware
corporation (the "Company"), and Integrated Payment Systems Inc., a Delaware
---------
corporation ("IPS").
-----
RECITALS
--------
WHEREAS, pursuant to the Contribution Agreement dated as of _______,
1996 (the "Contribution Agreement") between First Data Corporation, a Delaware
------------------------
corporation and the parent company of IPS ("FDC"), IPS and the Company, FDC, IPS
-----
and certain other affiliates of IPS contributed to the Company certain assets
related to the "MoneyGram/SM/" business;
WHEREAS, as a result of the transactions contemplated by the
Contribution Agreement, IPS is the owner of all of the Company's issued and
outstanding common stock as of the date hereof, and IPS and the Company have
determined to offer to the public (the "Initial Public Offering") shares of the
-------------------------
Company's common stock, such Initial Public Offering to consist of a secondary
offering by and for the benefit of IPS; and
WHEREAS, the parties hereto desire to enter into this Agreement
setting forth the terms of certain registration rights applicable to the
Registrable Securities (as defined below).
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions and Usage.
---------------------
As used in this Agreement:
1.1. Definitions.
-----------
Agent. "Agent" shall mean the principal placement agent on an agented
placement of Registrable Securities.
Commission. "Commission" shall mean the Securities and Exchange
----------
Commission.
Common Stock. "Common Stock" shall mean (i) the common stock, par
value $.01 per share, of the Company, and (ii) shares of capital stock of the
Company issued by the Company in respect of or in exchange for shares of such
common stock in connection with any stock dividend or distribution, stock split-
up, recapitalization, recombination or exchange by the Company generally of
shares of such common stock.
<PAGE>
Continuously Effective. "Continuously Effective", with respect to a
----------------------
specified registration statement, shall mean that it shall not cease to be
effective and available for Transfers of Registrable Securities thereunder for
longer than either (i) any ten (10) consecutive business days, or (ii) an
aggregate of fifteen (15) business days during the period specified in the
relevant provision of this Agreement.
Demand Registration. "Demand Registration" shall have the meaning set
-------------------
forth in Section 2.1(i).
--------------
Demanding Holders. "Demanding Holders" shall have the meaning set
-----------------
forth in Section 2.1(i).
--------------
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
Holders. "Holders" shall mean IPS and Transferees of IPS's
-------
Registrable Securities with respect to the rights that such Transferees shall
have acquired in accordance with Section 8, at such times as such Persons shall
---------
own Registrable Securities. Notwithstanding the foregoing, in the event that IPS
deposits any Registrable Securities into the trust (the "Trust") created and
-------
established pursuant to that Irrevocable Voting Trust Agreement dated the date
hereof between FDC, IPS and ___________, as trustee (the "Trustee"), then each
---------
of IPS and the Trustee, individually and collectively shall be deemed to
constitute a "Holder" for all purposes under this Agreement; provided, however,
-------- -------
that the Trustee shall not under any circumstances be deemed a "Selling Holder"
for purposes of Section 7.2 or an "indemnifying party" for purposes of Section
----------- -------
7.4 or otherwise have any obligation or liability under or pursuant to Section
- --- -------
7.2 or 7.4.
- --- ---
Initiating Substantial Holder. "Initiating Substantial Holder" shall
-----------------------------
have the meaning set forth in Section 2.2.
-----------
Majority Selling Holders. "Majority Selling Holders" shall mean those
------------------------
Selling Holders whose Registrable Securities included in such registration
represent a majority of the Registrable Securities of all Selling Holders
included therein.
Person. "Person" shall mean any individual, corporation, partnership,
------
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
Piggyback Registration. "Piggyback Registration" shall have the
----------------------
meaning set forth in Section 3.1.
-----------
Register, Registered and Registration. "Register", "registered", and
-------------------------------------
"registration" shall refer to a registration effected by preparing and filing a
registration statement or
-2-
<PAGE>
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.
Registrable Securities. "Registrable Securities" shall mean, subject
----------------------
to Section 8 and Section 10.3: (i) the Shares owned by Holders on the date
--------- ------------
hereof, and owned by a Holder on the date of determination, (ii) any shares of
Common Stock or other securities issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange by the Company generally
for, or in replacement by the Company generally of, such Shares; and (iii) any
securities issued in exchange for Shares in any merger or reorganization of the
Company; provided, however, that Registrable Securities shall not include any
-------- -------
securities which have theretofore been registered and sold pursuant to the
Securities Act or which have been sold to the public pursuant to Rule 144 or any
similar rule promulgated by the Commission pursuant to the Securities Act, and,
provided further, the Company shall have no obligation under Sections 2 and 3 to
- -------- ------- ---------- -
register any Registrable Securities of a Holder if the Company shall deliver to
the Holders requesting such registration an opinion of counsel reasonably
satisfactory to such Holders and their counsel to the effect that the proposed
sale or disposition of all of the Registrable Securities for which registration
was requested does not require registration under the Securities Act for a sale
or disposition in a single public sale, and the Company offers to remove any and
all legends restricting transfer from the certificates evidencing such
Registrable Securities. For purposes of this Agreement, a Person will be deemed
to be a Holder of Registrable Securities whenever such Person has the then-
existing right to acquire such Registrable Securities (by conversion, purchase
or otherwise), whether or not such acquisition has actually been effected.
Registrable Securities then outstanding. "Registrable Securities then
---------------------------------------
outstanding" shall mean, with respect to a specified determination date, the
Registrable Securities owned by all Holders on such date.
Registration Expenses. "Registration Expenses" shall have the meaning
---------------------
set forth in Section 6.1.
-----------
Securities Act. "Securities Act" shall mean the Securities Act of
--------------
1933, as amended.
Selling Holders. "Selling Holders" shall mean, with respect to a
---------------
specified registration pursuant to this Agreement, Holders whose Registrable
Securities are included in such registration.
Shares. "Shares" shall mean the shares of Common Stock held initially
------
by IPS following the closing of the Initial Public Offering.
-3-
<PAGE>
Shelf Registration. "Shelf Registration" shall have the meaning set
------------------
forth in Section 2.2.
-----------
Substantial Holder. "Substantial Holder" shall mean any Holder that
------------------
owned on the date of this Agreement 25% or more of the Registrable Securities
then outstanding and such Transferee, if any, to whom such Substantial Holder
Transfers Registrable Securities and assigns such Substantial Holder's rights
as a Substantial Holder as permitted by Section 8.
---------
Transfer. "Transfer" shall mean and include the act of selling,
--------
giving, transferring, creating a trust (voting or otherwise), assigning or
otherwise disposing of (other than pledging, hypothecating or otherwise
transferring as security) (and correlative words shall have correlative
meanings); provided however, that any transfer or other disposition upon
-------- -------
foreclosure or other exercise of remedies of a secured creditor after an event
of default under or with respect to a pledge, hypothecation or other transfer
as security shall constitute a "Transfer".
Underwriters' Representative. "Underwriters' Representative" shall
----------------------------
mean the managing underwriter, or, in the case of a co-managed underwriting, the
managing underwriter designated as the Underwriters' Representative by the co-
managers.
Violation. "Violation" shall have the meaning set forth in Section
--------- -------
7.1.
- ---
1.2. Usage.
-----
(i) References to a Person are also references to its assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to Registrable Securities "owned" by a Holder shall
include Registrable Securities beneficially owned by such Person but which are
held of record in the name of a nominee, trustee, custodian, or other agent, but
shall exclude shares of Common Stock held by a Holder in a fiduciary capacity
for customers of such Person.
(iii) References to a document are to it as amended, waived and
otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to
time (and references to any provision thereof shall include references to
any successor provision).
(iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
-4-
<PAGE>
(v) The definitions set forth herein are equally applicable both to
the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
(vi) The term "including" and correlative terms shall be deemed to
be followed by "without limitation" whether or not followed by such words or
words of like import.
(vii) The term "hereof" and similar terms refer to this Agreement as
a whole.
(viii) The "date of" any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 13.2.
------------
Section 2. Demand Registration.
-------------------
2.1.
(i) At any time on or after the date hereof, if one or more Holders
that own an aggregate of 51% or more of the Registrable Securities then
outstanding shall make a written request to the Company (the "Demanding
---------
Holders"), the Company shall cause to be filed with the Commission a
- -------
registration statement meeting the requirements of the Securities Act (a "Demand
------
Registration"), and each Demanding Holder shall be entitled to have included
- ------------
therein (subject to Section 2.7) all or such number of such Demanding Holder's
-----------
Registrable Securities as the Demanding Holder shall request in writing. Any
request made pursuant to this Section 2.1 shall be addressed to the attention of
-----------
the Secretary of the Company, and shall specify the number of Registrable
Securities to be registered, the intended methods of disposition thereof and
that the request is for a Demand Registration pursuant to this Section 2.1(i).
--------------
(ii) The Company shall be entitled to postpone for up to 30 days the
filing of any Demand Registration Statement otherwise required to be prepared
and filed pursuant to this Section 2.1 if the Board of Directors of the Company
-----------
determines, in its good faith reasonable judgment (with the concurrence of the
Underwriters' Representative, if any), that such registration and the Transfer
of Registrable Securities contemplated thereby would materially interfere with,
or require premature disclosure of, any financing, acquisition or reorganization
involving the Company or any of its wholly owned subsidiaries and the Company
promptly gives the Demanding Holders notice of such determination; provided,
--------
however, that the Company shall not have postponed pursuant to this Section
- ------- -------
2.1(ii) the filing of any other Demand Registration Statement otherwise required
- -------
to be prepared and filed pursuant to this Section 2.1 during the 12 month period
-----------
ended on the date of the relevant request pursuant to Section 2.1(i).
--------------
-5-
<PAGE>
(iii) Whenever the Company shall have received a demand pursuant to
Section 2.1(i) to effect the registration of any Registrable Securities, the
- --------------
Company shall promptly give written notice of such proposed registration to all
Holders. Any such Holder may, within twenty (20) days after receipt of such
notice, request in writing that all of such Holder's Registrable Securities, or
any portion thereof designated by such Holder, be included in the registration.
2.2. On or after the date of this Agreement, each Substantial Holder
that shall make a written request to the Company (the "Initiating Substantial
----------------------
Holder") shall be entitled to have all or any number of such Initiating
- ------
Substantial Holder's Registrable Securities included in a registration with the
Commission in accordance with the Securities Act for an offering on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act (a "Shelf
-----
Registration"). Any request made pursuant to this Section 2.2 shall be addressed
- ------------ -----------
to the attention of the Secretary of the Company, and shall specify the number
of Registrable Securities to be registered, the intended methods of disposition
thereof and that the request is for a Shelf Registration pursuant to this
Section 2.2.
- -----------
2.3. Following receipt of a request for a Demand Registration or a
Shelf Registration, the Company shall:
(i) File the registration statement with the Commission as promptly
as practicable, and shall use the Company's best efforts to have the
registration statement declared effective under the Securities Act as soon as
practicable.
(ii) Use the Company's best efforts to keep the relevant registration
statement Continuously Effective (x) if a Demand Registration, for up to 180
days or until such earlier date as of which all the Registrable Securities under
the Demand Registration Statement shall have been disposed of in the manner
described in the registration statement, and (y) if a Shelf Registration, for
eighteen (18) months. Notwithstanding the foregoing, if for any reason the
effectiveness of a registration pursuant to this Section 2 is suspended or, in
---------
the case of a Demand Registration, postponed as permitted by Section 2.1(ii),
---------------
the foregoing period shall be extended by the aggregate number of days of such
suspension or postponement.
2.4. The Company shall be obligated to effect no more than two Demand
Registrations and such number of Shelf Registrations as may be necessary to
provide each and every Substantial Holder with the right to request one Shelf
Registration. For purposes of the preceding sentence, registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or
-6-
<PAGE>
distribution of Registrable Securities thereunder is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Selling
Holders and such interference is not thereafter eliminated, or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Selling Holders. If the Company
shall have complied with its obligations under this Agreement, a right to demand
a registration pursuant to this Section 2 shall be deemed to have been satisfied
---------
(i) if a Demand Registration, upon the earlier of (x) the date as of which all
of the Registrable Securities included therein shall have been disposed of
pursuant to the registration statement, and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 180 days,
and (ii) if a Shelf Registration, upon the effective date of a Shelf
Registration, provided no stop order or similar order, or proceedings for such
an order, is thereafter entered or initiated.
2.5. A registration pursuant to this Section 2 shall be on such
---------
appropriate registration statement form of the Commission as shall (i) be
selected by the Company and be reasonably acceptable to the Majority Selling
Holders, or by the Initiating Substantial Holder, as the case may be, and (ii)
permit the disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the request pursuant to
Section 2.1(i) or Section 2.2, respectively.
- -------------- -----------
2.6. If any registration pursuant to Section 2 involves an
---------
underwritten offering (whether on a "firm", "best efforts" or "all reasonable
efforts" basis or otherwise), or an agented offering, the Majority Selling
Holders, or the Initiating Substantial Holder, as the case may be, shall have
the right to select the underwriter or underwriters and manager or managers to
administer such underwritten offering or the placement agent or agents for such
agented offering; provided, however, that each Person so selected shall be
-------- -------
reasonably acceptable to the Company.
2.7. Whenever the Company shall effect a registration pursuant to
this Section 2 in connection with an underwritten offering by one or more
---------
Selling Holders of Registrable Securities: (i) if such Selling Holders have
requested the inclusion therein of more than one class of Registrable
Securities, and the Underwriters' Representative or Agent advises each such
Selling Holder in writing that, in its opinion, the inclusion of more than one
class of Registrable Securities would adversely affect such offering, the
Demanding Holders holding at least a majority of the Registrable Securities
proposed to be sold therein by them shall decide which class of Registrable
Securities shall be included therein in such offering and the related
registration, and the other class shall be excluded; and
-7-
<PAGE>
(ii) if the Underwriters' Representative or Agent advises each such Selling
Holder in writing that, in its opinion, the amount of securities requested to be
included in such offering (whether by Selling Holders or others) exceeds the
amount which can be sold in such offering within a price range acceptable to the
Majority Selling Holders, securities shall be included in such offering and the
related registration to the extent of the amount which can be sold within such
price range and on a pro rata basis among all Selling Holders, first for the
account of the Substantial Holders, and second for all other Selling Holders.
Section 3. Piggyback Registration.
-----------------------
3.1. If at any time the Company proposes to register (including for
this purpose a registration effected by the Company for stockholders of the
Company other than the Holders) securities under the Securities Act in
connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company shall promptly give each Holder
of Registrable Securities written notice of such registration (a "Piggyback
---------
Registration"). Upon the written request of each Holder given within 20 days
- ------------
following the date of such notice, the Company shall cause to be included in
such registration statement and use its best efforts to be registered under the
Securities Act all the Registrable Securities that each such Holder shall have
requested to be registered. The Company shall have the absolute right to
withdraw or cease to prepare or file any registration statement for any offering
referred to in this Section 3 without any obligation or liability to any Holder.
---------
3.2. If the Underwriters' Representative or Agent shall advise the
Company in writing (with a copy to each Selling Holder) that, in its opinion,
the amount of Registrable Securities requested to be included in such
registration would materially adversely affect such offering, or the timing
thereof, then the Company will include in such registration, to the extent of
the amount and class which the Company is so advised can be sold without such
material adverse effect in such offering: First, all securities proposed to be
sold by the Company for its own account; second, the Registrable Securities
requested to be included in such registration by Holders pursuant to this
Section 3, and all other securities being registered pursuant to the exercise of
- ---------
contractual rights comparable to the rights granted in this Section 3, pro rata
---------
based on the estimated gross proceeds from the sale thereof; and third, all
other securities requested to be included in such registration.
3.3. Each Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 3.
- ---------
3.4. If the Company has previously filed a registration statement
with respect to Registerable Securities pursuant to Section 2 or pursuant to
---------
this Section 3, and if such
---------
-8-
<PAGE>
previous registration has not been withdrawn or abandoned, the Company will not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for its
equity securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of
such securities, until a period of 180 days has elapsed from the effective date
of such a previous registration.
Section 4. Registration Procedures. Whenever required under Section
----------------------- -------
2 or Section 3 to effect the registration of any Registrable Securities, the
- - ---------
Company shall, as expeditiously as practicable:
4.1. Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use the Company's best efforts
to cause such registration statement to become effective; provided, however,
-------- -------
that before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall furnish to one firm of counsel for the Selling Holders
(selected by Majority Selling Holders or the Initiating Substantial Holder, as
the case may be) copies of all such documents in the form substantially as
proposed to be filed with the Commission at least five (5) business days prior
to filing for review and comment by such counsel, which opportunity to comment
shall include an absolute right to control or contest disclosure if the
applicable Selling Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with respect
thereto.
4.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 5.2.
-----------
Subject to Rule 415 under the Securities Act, if the registration statement is a
Shelf Registration, the Company shall amend the registration statement or
supplement the prospectus so that it will remain current and in compliance with
the requirements of the Securities Act for eighteen (18) months after its
effective date, and if during such period any event or development occurs as a
result of which the registration statement or prospectus contains a misstatement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, the Company
shall promptly notify each Selling
-9-
<PAGE>
Holder, promptly amend the registration statement or supplement the prospectus
so that each will thereafter comply with the Securities Act and promptly furnish
to each Selling Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the Transfer of
Registrable Securities covered by such registration statement. Pending such
amendment or supplement each such Holder shall cease making offers or Transfers
of Registrable Securities pursuant to the prior prospectus. In the event that
any Registrable Securities included in a registration statement subject to, or
required by, this Agreement remain unsold at the end of the period during which
the Company is obligated to use its best efforts to maintain the effectiveness
of such registration statement, the Company may file a post-effective amendment
to the registration statement for the purpose of removing such securities from
registered status.
4.3. Furnish to each Selling Holder of Registrable Securities,
without charge, such numbers of copies of the registration statement, any pre-
effective or post-effective amendment thereto, the prospectus, including each
preliminary prospectus and any amendments or supplements thereto, in each case
in conformity with the requirements of the Securities Act and the rules
thereunder, and such other related documents as any such Selling Holder may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by such Selling Holder.
4.4. Use the Company's best efforts (i) to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by the Underwriters' Representative or Agent (as applicable, or if inapplicable,
the Majority Selling Holders or the Initiating Substantial Holder, as the case
may be), and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of the offer and transfer of
any of the Registrable Securities in any jurisdiction, at the earliest possible
moment; provided, however, that the Company shall not be required in connection
-------- -------
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
4.5. In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Majority Selling Holders or Initiating Substantial Holder, as the case
may be, and the Underwriters' Representative or Agent for such offering in the
marketing of the Registerable
-10-
<PAGE>
Shares, including making available the Company's officers, accountants, counsel,
premises, books and records for such purpose, but the Company shall not be
required to incur any material out-of-pocket expense pursuant to this sentence.
4.6. Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered).
4.7. Make generally available to the Company's security holders copies
of all periodic reports, proxy statements, and other information referred to in
Section 10.1 and an earnings statement satisfying the provisions of Section
- ------------
11(a) of the Securities Act no later than 90 days following the end of the 12-
month period beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of each registration statement filed
pursuant to this Agreement.
4.8. Make available for inspection by any Selling Holder, any
underwriter participating in such offering, any Agent in an agented offering and
the representatives of such Selling Holder, underwriter or Agent (but not more
than one firm of counsel to such Selling Holders), all financial and other
information as shall be reasonably requested by them, and provide the Selling
Holder, any underwriter participating in such offering, any Agent in an agented
offering and the representatives of such Selling Holder, underwriter or Agent
the opportunity to discuss the business affairs of the Company with its
executive officers and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case all as necessary to enable them to exercise their due diligence
responsibility under the Securities Act; provided, however, that information
-------- -------
that the Company determines, in good faith, to be confidential and which the
Company advises such Person in writing is confidential shall not be disclosed
unless such Person signs a confidentiality agreement reasonably satisfactory to
the Company or the related Selling Holder of Registrable Securities agrees to be
responsible for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
4.9. Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of counsel
to the Company addressed to the Selling Holders, any underwriter or any Agent,
in customary form and covering such matters of the type customarily covered by
such letters, and in a form that shall be reasonably satisfactory to the
Majority Selling Holders or the Initiating Substantial Holder, as the case be.
The Company shall furnish to each Selling Holder, underwriter or Agent a signed
counterpart of any such comfort letter or legal opinion. Delivery of any such
opinion or comfort letter shall be subject to the recipient
-11-
<PAGE>
furnishing such written representations or acknowledgments as are customarily
provided by selling stockholders, underwriters or agents who receive such
comfort letters or opinions.
4.10. Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement.
4.11. Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if the Common Stock is then listed on
a securities exchange or included for quotation in a recognized trading market,
to continue to be so listed or included for a reasonable period of time after
the offering, and (ii) to be registered with or approved by such other United
States or state governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the Selling
Holders of Registrable Securities to consummate the disposition of such
Registrable Securities.
4.12. Use the Company's reasonable efforts to provide a CUSIP number
for the Registrable Securities prior to the effective date of the first
registration statement including Registrable Securities.
4.13. Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
Section 5. Holders' Obligations. It shall be a condition precedent to
--------------------
the obligations of the Company to take any action pursuant to this Agreement
with respect to the Registrable Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:
5.1. Furnish to the Company such information regarding such Selling
Holder, the number of the Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and to cooperate
with the Company in preparing such registration; and
5.2. Agree to sell their Registrable Securities to the underwriters at
the same price and on substantially the same terms and conditions as the Company
or the other Persons on whose behalf the registration statement was being filed
have agreed to sell their securities, and to execute the underwriting agreement
agreed to by the Majority Selling Holders (in the case of a registration under
Section 2) or the Company and the Majority Selling Holders (in the case of a
- ---------
registration under Section 3).
---------
-12-
<PAGE>
Section 6. Expenses of Registration. Expenses in connection with
------------------------
registrations pursuant to this Agreement shall be allocated and paid as follows:
6.1. With respect to each Demand Registration and Shelf Registration,
the Selling Holders shall proportionately bear and pay all expenses incurred in
connection with any registration, filing, or qualification of Registrable
Securities with respect to such Demand Registrations or Shelf Registrations
(which right may be assigned to any Person to whom Registrable Securities are
Transferred as permitted by Section 8), including all registration, filing and
---------
National Association of Securities Dealers, Inc. fees, all fees relating to
listing the Registrable Securities on the national securities exchange (or
including the Registrable Securities for quotation on the trading market) on
which the Common Stock is then listed (or quoted), all fees and expenses of
complying with state securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the
reasonable fees and disbursements of counsel for the Company, and of the
Company's independent public accountants, including the expenses of "cold
comfort" letters required by or incident to such performance and compliance, and
the reasonable fees and disbursements of one firm of counsel for the Selling
Holders of Registrable Securities (selected by Demanding Holders owning a
majority of the Registrable Securities owned by Demanding Holders to be included
in a Demand Registration or by the Initiating Substantial Holder, as the case
may be) (the "Registration Expenses").
---------------------
6.2. The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 3 for each
---------
Selling Holder (which right may be Transferred to any Person to whom Registrable
Securities are Transferred as permitted by Section 8), but excluding
---------
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders of Registrable
Securities).
6.3. Any failure of the Company to pay any Registration Expenses as
required by Section 6.2 shall not relieve the Company of its obligations under
-----------
this Agreement.
Section 7. Indemnification; Contribution. If any Registrable
-----------------------------
Securities are included in a registration statement under this Agreement:
7.1. To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and each
officer, director, partner, employee and agent of such Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including attorneys' fees and disbursements and
expenses of investigation, incurred by
-13-
<PAGE>
such party pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become subject under
the Securities Act, the Exchange Act or other federal or state laws, insofar as
such losses, claims, damages, liabilities and expenses arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"):
---------
(i) Any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein, or any amendments or
supplements thereto;
(ii) The omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading; or
(iii) Any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
applicable state securities law;
provided, however, that the indemnification required by this Section 7.1 shall
- -------- ------- -----------
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished to the Company by the indemnified party expressly for use in
connection with such registration. The Company shall also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers, directors,
agents and employees and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Selling Holders; provided, however, that the indemnity agreement contained in
-------- -------
this Section 7.1 shall not apply to any underwriter to the extent that any such
-----------
loss is based on or arises out of an untrue statement or alleged untrue
statement of a material fact, or an omission or alleged omission to state a
material fact, included in or omitted from any preliminary prospectus if the
final prospectus shall correct such untrue statement or alleged untrue
statement, or such omission or alleged omission, and a copy of the final
prospectus has not been sent or given to a purchaser of a Registrable Security
subject to such registration at or prior to the confirmation of sale to such
Person if such underwriter was under an obligation to deliver such final
prospectus and failed to do so.
-14-
<PAGE>
7.2. To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who shall have signed the registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act, any
other Selling Holder, any controlling Person of any such other Selling Holder
and each officer, director, partner, employee and agent of such other Selling
Holder and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant to
any actual or threatened action, suit, proceeding or investigation, or to which
any of the foregoing Persons may otherwise become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Selling Holder expressly for use in connection with such
registration; provided, however, that (x) the indemnification required by this
-------- -------
Section 7.2 shall not apply to amounts paid in settlement of any such loss,
- -----------
claim, damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which consent
shall not be unreasonably withheld, and (y) in no event shall the amount of any
indemnity under this Section 7.2 exceed the gross proceeds from the applicable
-----------
offering received by such Selling Holder.
7.3. Promptly after receipt by an indemnified party under this Section
-------
7 of notice of the commencement of any action, suit, proceeding, investigation
- -
or threat thereof made in writing for which such indemnified party may make a
claim under this Section 7, such indemnified party shall deliver to the
---------
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
materially prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
-------
7 but shall not relieve the indemnifying party of any liability that it may have
- -
to any indemnified party otherwise than pursuant to this Section 7. Any fees and
---------
expenses incurred
-15-
<PAGE>
by the indemnified party (including any fees and expenses incurred in connection
with investigating or preparing to defend such action or proceeding) shall be
paid to the indemnified party, as incurred, within thirty (30) days of written
notice thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to pay
such fees and expenses or (ii) the indemnifying party shall have failed to
promptly assume the defense of such action, claim or proceeding or (iii) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of such
defenses would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or claim without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
7.4. If the indemnification required by this Section 7 from the
---------
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7:
- ---------
(i) The indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses,
-16-
<PAGE>
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any Violation has been
committed by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 7.1 and Section 7.2, any legal or other
----------- -----------
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by pro rata
-----------
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in Section 7.4(i). No Person guilty of
--------------
fraudulent misrepresentation (within the meaning of Section 11(f) of the
-------------
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
7.5. If indemnification is available under this Section 7, the
---------
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
---------
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.
-----------
7.6. The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 7 shall survive the completion of any
---------
offering of Registrable Securities pursuant to a registration statement under
this Agreement, and otherwise.
Section 8. Transfer of Registration Rights. Rights with respect to
-------------------------------
Registrable Securities may be Transferred as follows: (i) the rights of a
Substantial Holder to require a Shelf Registration pursuant to Section 2.2 may
-----------
be Transferred to any Person in connection with the Transfer to such Person by
such Substantial Holder of a number of Registrable Securities equal to 25% or
more of the Registrable Securities outstanding on the date of this Agreement,
(ii) all other rights of a Holder with respect to Registrable Securities
pursuant to this Agreement may be Transferred by such Holder to any Person in
connection with the Transfer of Registrable Securities to such Person, in all
cases, if (x) any such Transferee that is not a party to this Agreement shall
have executed and delivered to the Secretary of the Company
-17-
<PAGE>
a properly completed agreement substantially in the form of Exhibit A, and (y)
---------
the Transferor shall have delivered to the Secretary of the Company, no later
than 15 days following the date of the Transfer, written notification of such
Transfer setting forth the name of the Transferor, name and address of the
Transferee, and the number of Registrable Securities which shall have been so
Transferred and (iii) the Trustee shall have such rights and obligations as a
Holder as set forth in the definition of Holder in Section 1.1.
-----------
Section 9. Holdback. Except in the case of a Shelf Registration, each
--------
Holder entitled pursuant to this Agreement to have Registrable Securities
included in a registration statement prepared pursuant to this Agreement, if so
requested by the Underwriters' Representative or Agent in connection with an
offering of any Registrable Securities, shall not effect any public sale or
distribution of shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten or agented registration), during the five business day period prior
to, and during the 90-day period beginning on, the date such registration
statement is declared effective under the Securities Act by the Commission,
provided that such Holder is timely notified of such effective date in writing
- --------
by the Company or such Underwriters' Representative or Agent.
Section 10. Covenants of the Company. The Company hereby agrees and
------------------------
covenants as follows:
10.1. The Company shall file as and when applicable, on a timely
basis, all reports required to be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to the Exchange Act, upon the
request of any Holder of Registrable Securities, the Company shall make publicly
available the information specified in subparagraph (c)(2) of Rule 144 of the
Securities Act, and take such further action as may be reasonably required from
time to time and as may be within the reasonable control of the Company, to
enable the Holders to Transfer Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act or any similar rule or regulation hereafter adopted by
the Commission.
10.2. (i) The Company shall not, and shall not permit its majority
owned subsidiaries to, effect any public sale or distribution of any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for shares of Common Stock, during the five business days prior to, and during
the 90-day period beginning on, the commencement of a public distribution of the
Registrable Securities pursuant to any registration statement prepared pursuant
to this Agreement (other than by the Company pursuant to such registration if
the
-18-
<PAGE>
registration is pursuant to Section 3). The Company shall not effect any
---------
registration of its securities (other than on Form S-4, Form S-8, or any
successor forms to such forms or pursuant to such other registration rights
agreements as may be approved in writing by the Majority Selling Holders or the
Initiating Substantial Holder, as the case may be), or effect any public or
private sale or distribution of any of its securities, including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or at the
request of any holder or holders of such securities from the date of a request
for a Demand Registration pursuant to Section 2.1 until the earlier of (x) 90
-----------
days following the date as of which all securities covered by such Demand
Registration Statement shall have been Transferred, and (y) 90 days following
the effective date of such Demand Registration statement, unless the Company
shall have previously notified in writing all Selling Holders of the Company's
desire to do so, and either Selling Holders owning a majority of the Registrable
Securities or the Underwriters' Representative, if any, shall have consented
thereto in writing.
(ii) Any agreement entered into after the date of this Agreement
pursuant to which the Company or any of its majority owned subsidiaries issues
or agrees to issue any privately placed securities similar to any issue of the
Registrable Securities (other than (x) shares of Common Stock pursuant to a
stock incentive, stock option, stock bonus, stock purchase or other employee
benefit plan of the Company approved by its Board of Directors, and (y)
securities issued to Persons in exchange for ownership interests in any Person
in connection with a business combination in which the Company or any of its
majority owned subsidiaries is a party) shall contain a provision whereby
holders of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in the first sentence of
Section 10.2(i), in each case including a sale pursuant to Rule 144 under the
- ---------------
Securities Act (unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
10.3. The Company shall not, directly or indirectly, (x) enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation or (y) Transfer or agree to Transfer all or
substantially all the Company's assets, unless prior to such merger,
consolidation, reorganization or asset Transfer, the surviving corporation or
the Transferee, respectively, shall have agreed in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to include the securities
which the Holders of Registrable Securities would be entitled to receive in
exchange for Registrable Securities pursuant to any such merger, consolidation
or reorganization.
10.4. The Company shall not grant to any Person (other than a Holder
of Registrable Securities) any registration rights
-19-
<PAGE>
with respect to securities of the Company, or enter into any agreement, that
would entitle the holder thereof to have securities owned by it included in a
Demand Registration or Shelf Registration.
Section 11. Amendment, Modification and Waivers; Further Assurances.
--------------------------------------------------------
(i) This Agreement may be amended only if the Company shall have
obtained the written consent of Holders owning Registrable Securities possessing
a majority in number of the Registrable Securities then outstanding to such
amendment.
(ii) No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
Section 12. Assignment; Benefit. This Agreement and all of the
-------------------
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however, that except as specifically provided herein with
-------- -------
respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without the prior written consent of Holders owning Registrable Securities
possessing a majority in number of the Registrable Securities outstanding on the
date as of which such delegation or assignment is to become effective. A Holder
may Transfer its rights hereunder to a successor in interest to the Registrable
Securities owned by such assignor only as permitted by Section 8.
---------
Section 13. Miscellaneous.
-------------
13.1. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without giving
regard to the conflict of laws principles thereof.
-20-
<PAGE>
13.2. Notices. All notices and requests given pursuant to this
-------
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery to the following:
If to IPS, to:
First Data Corporation
2121 North 117th Avenue
Omaha, Nebraska 68104
Attention: General Counsel
Telephone: 402-498-4085
Facsimile: 402-498-4123
If to the Company, to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 80235
Attention: General Counsel
Telephone: 303-716-6800
Facsimile: 303-716-6997
or in the case of Transferees, to the address contained in the agreement in the
form of Exhibit A whereby such party became bound by the provisions of this
---------
Agreement. Except as otherwise provided in this Agreement, the date of each such
notice and request shall be deemed to be, and the date on which each such notice
and request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
13.3. Entire Agreement; Integration. This Agreement supersedes all
-----------------------------
prior agreements between or among any of the parties hereto with respect to the
subject matter contained herein, and embodies the entire understanding among the
parties relating to such subject matter.
13.4. Injunctive Relief. Each of the parties hereto acknowledges that
-----------------
in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the parties therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.
-21-
<PAGE>
13.5. Section Headings. Section headings are for convenience of
----------------
reference only and shall not affect the meaning of any provision of this
Agreement.
13.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
13.7. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
13.8. Filing. A copy of this Agreement and of all amendments thereto
------
shall be filed at the principal executive office of the Company with the
corporate recorder of the Company.
13.9. Termination. This Agreement may be terminated at any time by a
-----------
written instrument signed by the parties hereto. Unless sooner terminated in
accordance with the preceding sentence, this Agreement (other than Section 7
---------
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Securities outstanding, provided that any shares of Common Stock
--------
previously subject to this Agreement shall not be Registrable Securities
following the sale of any such shares in an offering registered pursuant to this
Agreement.
13.10. Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
13.11. No Third Party Beneficiaries. Nothing herein expressed or
----------------------------
implied is intended to confer upon any person, other than the parties hereto,
their respective permitted assigns (including, if applicable, the Trustee),
successors, heirs and legal representatives or any Person entitled to
indemnification or contribution under Section 7, any rights, remedies,
---------
obligations or liabilities under or by reason of this Agreement.
-22-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
MONEYGRAM PAYMENT SYSTEMS, INC.
By:
----------------------------
Name:
Title:
INTEGRATED PAYMENT SYSTEMS INC.
By:
----------------------------
Name:
Title:
-23-
<PAGE>
Exhibit 10.4
S E R V I C E M A R K L I C E N S E A G R E E M E N T
-----------------------------------------------------------
THIS SERVICE MARK LICENSE AGREEMENT (this "Agreement") is entered into as
of [________], 1996, by and among Western Union Financial Services, Inc., a
Delaware Corporation ("WU"), Integrated Payment Systems Inc., a Delaware
corporation ("IPS"), and MoneyGram Payment Systems, Inc., a Delaware corporation
("Licensee").
WHEREAS, IPS, First Data Corporation, a Delaware corporation ("FDC"), and
Licensee are parties to the Contribution Agreement dated as of [_________], 1996
(the "Contribution Agreement"), pursuant to which IPS and FDC will contribute
certain assets associated with the Business (as hereafter defined) to Licensee;
and
WHEREAS, pursuant to the Contribution Agreement, FDC agreed to cause WU to
grant to Licensee a license to use certain Licensed Marks (as hereafter defined)
on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and mutual covenants,
representations, conditions and agreements hereafter expressed, the Parties (as
hereafter defined) hereto agree as follows:
1. Definitions. The capitalized terms used herein shall have the
-----------
respective meanings specified or referred to in this Section 1. Each agreement
---------
referred to in this Agreement shall mean such agreement as amended, supplemented
and modified from time to time to the extent permitted by the applicable
provisions thereof and hereof. Each definition in this Agreement includes the
singular and the plural, and reference to the neuter gender includes the
masculine line and feminine where appropriate. References to any statute or
regulation means such statute or regulation as amended at the time and include
any successor legislation or regulation. The headings to the Sections hereof are
for convenience of reference and shall not affect the meaning or interpretation
of this Agreement. Except as otherwise stated, reference to Sections and
Exhibits means the Sections and Exhibits of this Agreement. The Exhibits are
hereby incorporated by reference into and shall be deemed a part of this
Agreement. Unless the context clearly indicates otherwise, whenever the word
"include," "includes," or "including" is used in this Agreement, each such word
shall be deemed to be followed by the words "without limitation."
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person; provided, however, that under no circumstances shall FDC and
-------- -------
its Affiliates be deemed Affiliates of Licensee or shall Licensee and its
Affiliates be deemed Affiliates of FDC.
"Agreement" shall have the meaning set forth in the first paragraph of this
Agreement.
CONFIDENTIAL
<PAGE>
"Business" means the Consumer Money Wire Transfer Services marketed under
the name "MoneyGram/SM/," it being acknowledged and agreed to by the Parties
hereto that the Business shall not include the Consumer Money Wire Transfer
Services marketed under the name "Western Union".
"Consequential Damages" means any liability, Loss, Expense or damage,
whether in an action arising out of or relating to a breach of warranty, breach
of contract, delay, negligence, theory of tort, strict liability or other legal
or equitable theory, for indirect, special, reliance, incidental, punitive,
exemplary or consequential damages or commercial loss, injury or damage,
including loss of revenues, profits or use of capital or production.
Consequential Damages shall not include direct damages.
"Consumer Money Wire Transfer Service" means the service of transferring
the right to money using computer or telephone lines, or any other technology
now existing or later developed, from one person through the location of a
MoneyGram Agent to a different person physically present at the location of a
different MoneyGram Agent, including the services marketed under the phrase
"Express Payment" or "Cash Advance".
"Contribution Agreement" shall have the meaning set forth in the first
recital to this Agreement.
"Costs" means all direct costs, expenses and charges plus all indirect
costs, expenses and charges, including reasonable allocations of overhead.
"Dispute" means any and all disputes, controversies and claims between the
Parties arising from or in connection with this Agreement or the relationship of
the Parties under this Agreement whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise.
"Expenses" means any and all reasonable expenses incurred in connection
with investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, witness fees and reasonable fees and disbursements of legal
counsel, investigators, expert witnesses, accountants and other professionals).
"FDC" shall have the meaning set forth in the first recital to this
Agreement.
"Force Majeure Event" shall have the meaning specified in Section 17(c).
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"Intellectual Property" means any trademark, service mark, trade dress,
logo or trade name.
CONFIDENTIAL
-2-
<PAGE>
"IPS" shall have the meaning set forth in the first paragraph of this
Agreement.
"Languages" means those certain languages in which the Licensed Marks are
licensed to Licensee as set forth in Exhibit A of this Agreement.
---------
"Licensed Marks" means the service marks set forth in Exhibit A of this
---------
Agreement.
"Licensee" shall have the meaning set forth in the first paragraph of this
Agreement.
"Licensee Signage" shall have the meaning set forth in Section 6(b).
------------
"Losses" means any and all losses, Costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, deficiencies
or other charges.
"MoneyGram Agent" means a Person that now or in the future has contracted
to provide the Consumer Money Wire Transfer Services.
"Operations Agreement" shall have the meaning set forth in Section 11.
----------
"Party" means a party to this Agreement and its permitted successors and
assigns.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"Prohibited Additional Element" means any term that Licensee is precluded
from using in connection with each Licensed Mark as set forth in Exhibit A of
---------
this Agreement.
"Prohibited Marks" means the marks set forth in Exhibit B of this
---------
Agreement.
"Required Additional Element" means any additional term that Licensee must
use in connection with each Licensed Mark as set forth in Exhibit A of this
---------
Agreement.
"Requirements of Law" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Govern mental Body.
"Territory" means the countries specified in Exhibit A of this Agreement.
---------
"WU" shall have the meaning set forth in the first paragraph of this
Agreement.
"WU Signage" shall have the meaning set forth in Section 7(b).
------------
CONFIDENTIAL
-3-
<PAGE>
2. License Grant. WU hereby grants to Licensee a non-exclusive and
-------------
royalty-free license to:
(a) use the Licensed Marks solely in connection with the Business in
the Languages and in the designated Territories as specified on Exhibit A,
---------
provided that: (i) Licensee uses each Licensed Mark with each Required
--------
Additional Element and (ii) Licensee does not use each Licensed Mark with
any Prohibited Additional Element, it being understood that Licensee may
use with each Licensed Mark elements in addition to each Required
Additional Element so long as such additional elements otherwise comply
with Licensee's obligations and covenants set forth herein;
(b) permit MoneyGram Agents to use the Licensed Marks solely in
connection with the Business in the Languages and in the designated
Territories as specified on Exhibit A, provided that: (i) each such
--------- --------
MoneyGram Agent uses each Licensed Mark with each Required Additional
Element (it being understood that each such MoneyGram Agent may use with
each Licensed Mark elements in addition to each Required Additional Element
so long as such additional elements otherwise comply with each MoneyGram's
Agents obligations and covenants set forth herein), (ii) each such
MoneyGram Agent does not use each Licensed Mark with any Prohibited
Additional Element, (iii) each such MoneyGram Agent that, after the date
hereof, enters into an agreement with Licensee to provide the services
offered by the Business, or amends any agreement that exists on the date
hereof to provide the services offered by the Business, agrees to be bound
in writing to the terms and conditions set forth in this Agreement,
pursuant to which WU is an express third party beneficiary of each such
agreement, and (iv) to the extent necessary, Licensee promptly provides WU
with a copy of each such agreement to enforce WU's rights under such
agreement should Licensee fail to enforce WU's rights in a timely manner;
and
(c) sublicense the rights granted to Licensee pursuant to Sections
--------
2(a) and 2(b) to any Affiliate of Licensee engaged in the Business,
---- ----
provided that (i) each such Affiliate agrees to be bound in writing to the
terms and conditions set forth in this Agreement, (ii) WU is an express
third party beneficiary of each such agreement and (iii) to the extent
necessary, Licensee promptly provides WU with a copy of each such agreement
to enforce WU's rights under such agreement should Licensee fail to enforce
WU's rights in a timely manner.
3. Standards For Use Of Licensed Marks.
------------------------------------
(a) Use of the Licensed Marks by Licensee, each MoneyGram Agent and
any Affiliate of Licensee pursuant to this Agreement shall be in accordance
with the standards of quality set forth in Exhibit C. Licensee shall
---------
conduct the Business in which the Licensed Marks are used in substantial
compliance with all Requirements of Law.
(b) In connection with the use of Licensed Marks, Licensee shall, and
shall cause each MoneyGram Agent and each Affiliate of Licensee to, apply
the notice (e.g., the
CONFIDENTIAL
-4-
<PAGE>
(R) symbol, the "SM" symbol or the "TM" symbol) specified by WU in writing.
WU shall provide Licensee with written notice of changes to the notation
requirements for the Licensed Marks. Licensee shall, and shall cause each
MoneyGram Agent and each Affiliate of Licensee to, implement such changes
as soon as reasonably practicable, provided that Licensee shall not be
required to remove, replace or reprint, or cause to be removed, replaced or
reprinted, any signage, advertising, promotional materials, paper goods and
any other materials and supplies that contain the Licensed Marks with the
former notations, except as would be necessary in the ordinary course of
Licensee's business.
4. Review of Use of Licensed Marks. Upon WU's reasonable request,
-------------------------------
which shall not be more often than quarterly, Licensee shall provide WU with a
representative sample of sales literature, documents, instruments, printed media
or other materials bearing the Licensed Marks for purpose of verifying
compliance with the terms of this Agreement by Licensee, each MoneyGram Agent
and each Affiliate of Licensee. If WU reasonably considers such products or
services or such documents, instruments, media and other material to be of a
type or quality that is inconsistent with the terms of this Agreement, WU may
request Licensee to, and Licensee shall and shall cause each MoneyGram Agent and
each Affiliate of Licensee to (unless Licensee or such MoneyGram Affiliate of
Licensee elects to discontinue use of the Licensed Marks as they relate to such
products, services, documents, instruments, media or other material), improve
such products or services or such documents, instruments, media and other
materials such that such products or services or such documents, instruments,
media and other materials are of a type and quality that is consistent with the
terms of this Agreement. If Licensee fails or fails to cause any MoneyGram
Agent or Affiliate of Licensee to exercise either of the foregoing options, WU
may proceed under Section 15.
----------
5. WU's Retention of Ownership.
---------------------------
(a) Licensee acknowledges and agrees that as between Licensee and WU,
WU owns all right, title and interest in and to the Licensed Marks and the
Prohibited Marks, and Licensee agrees and shall cause each MoneyGram Agent
that, after the date hereof, enters into an agreement with Licensee to
provide the services offered by the Business, or amends any agreement that
exists on the date hereof to provide the services offered by the Business,
and each Affiliate of Licensee to agree that the use of the Licensed Marks
or the Prohibited Marks shall not create in the favor of Licensee, any such
MoneyGram Agent or any Affiliate of Licensee any ownership interest
therein. All right, title and interest in and to the Licensed Marks and the
Prohibited Marks, other than those rights expressly granted herein, shall
remain in WU.
(b) Licensee agrees and shall cause each MoneyGram Agent that, after
the date hereof, enters into an agreement with Licensee to provide the
services offered by the Business, or amends any agreement that exists on
the date hereof to provide the services offered by the Business, and each
Affiliate of Licensee to agree to execute all documents reasonably
requested by WU to effect any necessary or appropriate registration,
-5- CONFIDENTIAL
<PAGE>
maintenance or renewal of any of the Licensed Marks in any Language in any
Territory or recordation of Licensee, any MoneyGram Agent or any Affiliate
of Licensee as a registered user of any of the Licensed Marks. WU shall
reimburse Licensee, any MoneyGram Agent or any Affiliate of Licensee for
any reasonable out-of-pocket costs incurred by Licensee, any MoneyGram
Agent or any Affiliate of Licensee in connection therewith.
(c) Except as required by applicable Requirements of Law and except
as otherwise provided in this Agreement, during the term of this Agreement
and at any time after the expiration, cancellation, annulment or
termination of this Agreement or any license granted pursuant hereto with
respect to any Territory, Licensee shall not, and shall cause each
MoneyGram Agent and each Affiliate of Licensee not to: (i) use any trade
name or any other name, mark or trade dress that is confusingly similar to
any of the Licensed Marks in any language (whether or not such language is
delineated in Exhibit A) in any Territory; or (ii) use any of the
---------
Prohibited Marks anywhere in the world in any language.
(d) IPS acknowledges and agrees that as between IPS and WU, WU owns
all right, title and interest in and to the Licensed Marks and the
Prohibited Marks in all languages anywhere in the world, and hereby
releases any and all right, title and interest (if any) that IPS may have
in and to the Licensed Marks and the Prohibited Marks in all languages
anywhere in the world.
6. Licensee and MoneyGram Agent Nonconforming Uses; Signage.
--------------------------------------------------------
(a) Nonconforming Uses. The Parties acknowledge and agree that as of
------------------
the date of this Agreement, Licensee and MoneyGram Agents are using in the
Territories the Prohibited Marks or the Licensed Marks in a manner that
does not comply with the terms and conditions of this Agreement. Except as
set forth in Section 6(b), within one-hundred eighty (180) days after the
------------
date of this Agreement, Licensee shall cease and shall cause all MoneyGram
Agents and Affiliates of Licensee to cease (i) all such uses of the
Prohibited Marks and (ii) all nonconforming uses of the Licensed Marks.
(b) Signage. The Parties acknowledge and agree that as of the date of
-------
this Agreement, Licensee and MoneyGram Agents have signage in Territories
that contain the Prohibited Marks or the Licensed Marks that do not comply
with the terms and conditions of this Agreement (the "Licensee Signage").
Licensee and MoneyGram Agents may continue to use the Licensee Signage
and, prior to one-hundred eighty (180) days after the date of this
Agreement, may put in place additional Licensee Signage, provided that the
Licensee Signage is, as of the date that is one-hundred eighty (180) days
after the date of this Agreement: (i) affixed permanently to a fixture at a
location of Licensee or a Money Gram Agent; (ii) professionally
manufactured; and (iii) not a billboard or bench advertisement. If, after
the date that is one-hundred eighty (180) days after the date of this
Agreement: (x) such Licensee Signage is damaged, broken or ceases in whole
or in part to be affixed to the fixture to which it is affixed currently
for any reason whatsoever (including, a Force Majeure Event); (y) Licensee
or any MoneyGram Agent ceases to use
-6- CONFIDENTIAL
<PAGE>
the location containing such Licensee Signage, then such Licensee Signage
shall be (A) removed and destroyed and (B) at the option of Licensee or the
MoneyGram Agent, replaced with signage that complies with the terms and
conditions of this Agreement.
7. WU, WU Affiliates and Its and Their Respective Agents'
------------------------------------------------------
Nonconforming Uses; Signage.
- ---------------------------
(a) Nonconforming Uses. The Parties acknowledge and agree that as of
------------------
the date of this Agreement, WU, WU Affiliates, and its and their respective
agents are using the Licensed Marks in Territories in ways that do not
comply with the terms and conditions of this Agreement. Except as set forth
in Section 7(b), within one-hundred eighty (180) days after date of this
------------
Agreement, WU shall cease, and shall cause its Affiliates and its and its
Affiliates' agents to cease, all such uses of the Licensed Marks in
Territories that do not comply with the terms and conditions of this
Agreement.
(b) Signage. The Parties acknowledge and agree that as of the date of
-------
this Agreement, WU, WU Affiliates, and its and their respective agents have
signage in the Territories that contain the Licensed Marks in ways that do
not comply with the terms and conditions of this Agreement (the "WU
Signage"). WU, WU Affiliates, and its and their respective agents may
continue to use the WU Signage and, prior to one-hundred eighty (180) days
after the date of this Agreement, may put in place additional WU Signage,
provided that the WU Signage is, as of the date that is one-hundred eighty
--------
(180) days after the date of this Agreement: (i) affixed permanently to a
fixture at a location of WU, a WU Affiliate, or an agent of WU or a WU
Affiliate; (ii) professionally manufactured; and (iii) not a billboard or
bench advertisement. If, after the date that is one-hundred eighty (180)
days after the date of this Agreement: (x) such WU Signage is damaged,
broken or ceases in whole or in part to be affixed to the fixture to which
it is affixed currently for any reason whatsoever (including, a Force
Majeure Event); (y) WU, or any WU Affiliate or agent of WU or any WU
Affiliate ceases to use the location containing such WU Signage, then such
WU Signage shall be (A) removed and destroyed and (B) at the option of WU,
a WU Affiliate or agent of WU or any WU Affiliate, replaced with signage
that complies with the terms and conditions of this Agreement.
8. Unauthorized Use or Infringement of Licensed Marks. Licensee
--------------------------------------------------
agrees to cooperate with WU as reasonably requested by WU in protecting,
enforcing and defending the Licensed Marks. Licensee agrees to notify promptly
WU in writing of any infringement, imitation, claim or other problem with
respect to the Licensed Marks that may arise or otherwise come to Licensee's
attention. Subject to the further provisions of this Section 8, WU shall have
---------
the right, but not the obligation, to take any action on account of any such
infringement, imitation, claim or problem, at its sole expense. Licensee shall
have the right, but not the obligation, to participate in any action taken on
account of any such infringement, imitation, claim or problem, at its sole
expense. Licensee shall not institute any suit or take any other action on
account of any such infringement, imitation, claim or problem without the prior
express written consent of WU, which consent WU may withhold in its sole
discretion. If WU initiates litigation against any
-7- CONFIDENTIAL
<PAGE>
Person, WU shall choose the attorneys, control the litigation, pay the Expenses
and retain any damages recovered as a result of any judgment in favor of WU. If
WU takes no action to stop an alleged unauthorized use or infringement of a
Licensed Mark within a reasonable period of time following notice by Licensee of
such unauthorized use or infringement, then Licensee may, by written notice to
WU, request that WU bring an action with respect to such alleged unauthorized
use or infringement at the expense of Licensee, in which event WU shall promptly
commence such action, but only if (a) Licensee certifies to WU that, in the good
faith judgment of Licensee, the failure to take action against the unauthorized
use or infringement in question is reasonably likely to have a material adverse
effect on the Business and (b) Licensee delivers to WU an opinion of trademark
counsel (which such counsel is reasonably acceptable to WU) to the effect that
WU is more likely than not to prevail in such action. Any damages awarded in any
such suit shall, after payment of Expenses incurred by WU, be paid to Licensee.
9. Transactions Affecting the Licensed Marks. Licensee shall not,
-----------------------------------------
without informing WU in advance of the material facts relating thereto and
without obtaining WU's prior written consent, which consent WU may withhold in
its sole discretion, effect the settlement, defense of, consent to a judgment or
decree or other action with respect to any suit, action or proceeding before any
Governmental Body involving any Licensed Mark.
10. Registration. WU shall obtain such registrations of the Licensed
------------
Marks in each of the Territories and in each of the Languages as it deems
appropriate or necessary in its sole discretion, and Licensee, MoneyGram Agents
and Affiliates of Licensee shall not be entitled to obtain any such
registration. WU shall use commercially reasonable efforts to maintain the
registrations of any of the Licensed Marks that are currently registered in the
Territories and in the Languages where such Licensed Marks are currently
registered. In addition to those registrations obtained and maintained by WU as
provided in the first two sentences of this Section 10, if Licensee desires WU
----------
to register the Licensed Marks in other Territories or in other Languages, upon
Licensee's reasonable written request, WU shall use reasonable commercial
efforts to register and maintain, or cause to be registered or maintained, such
Licensed Marks in each of the Territories specified by Licensee, provided that:
--------
(a) Licensee reimburses WU for all Costs relating thereto; and (b) Licensee,
MoneyGram Agents and Affiliates of Licensee shall not be entitled to obtain any
such registration.
11. Confidentiality. The Parties hereby agree to be bound by
---------------
the provisions of Article 7 of the Operations Agreement dated as of the date
hereof (the "Operations Agreement") among Licensee, First Data Technologies,
Inc., a Delaware corporation, and IPS, the provisions of which are hereby
incorporated by reference.
12. Representations and Warranties; Disclaimers.
-------------------------------------------
(a) By WU. WU represents and warrants to Licensee that: (i) WU has all
-----
right, power and authority to enter into and perform its obligations set
forth in this Agreement in accordance with its terms without the consent of
any third Person; (ii) the Licensed Marks if used as contemplated herein
will not infringe any Intellectual Property
-8- CONFIDENTIAL
<PAGE>
of any third Person; (iii) WU will not use the term "WIRE" or the term
"WORLDWIDE" in connection with the mark MONEY IN MINUTES in any Language or
in any Territory for which Licensee has received a license to use the mark
WIRE MONEY IN MINUTES or MONEY IN MINUTES WORLDWIDE; (iv) subject to the
provisions of Section 7(b), after one-hundred eighty (180) days after date
------------
of this Agreement, WU shall not use the mark THE BETTER WAY TO WIRE MONEY
in English in any Territory for which Licensee has received a license to
use such mark pursuant to this Agreement; and (v) WU shall not license any
of the Licensed Marks to any third Person other than to WU Affiliates and
its and their respective agents.
(b) By Licensee. Licensee represents and warrants to WU that: Licensee
-----------
has all right, power and authority to enter into and perform its
obligations set forth in this Agreement in accordance with its terms
without the consent of any third Person.
(c) No Other Warranties; Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES
-------------------------------
SET FORTH HEREIN, THE LICENSED MARKS PROVIDED TO LICENSEE HEREUNDER ARE
PROVIDED ON AN "AS-IS" BASIS WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY
KIND WHATSOEVER. EXCEPT AS SET FORTH HEREIN, WU AND IPS MAKE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO LICENSEE OR ANY
OTHER PERSON, INCLUDING ANY WARRANTIES REGARDING THE MERCHANTABILITY,
SUITABILITY, ORIGINALITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
(IRRESPECTIVE OF ANY PREVIOUS COURSE OF DEALINGS BETWEEN THE PARTIES OR
CUSTOM OR USAGE OF TRADE).
13. Disclaimer of Liability. NOTWITHSTANDING ANY OTHER PROVISION TO THE
-----------------------
CONTRARY SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL WU, IPS, ANY OF THEIR
RESPECTIVE AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES
UNDER THIS AGREEMENT, WHICH ARE HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES
REGARDLESS OF WHETHER OR NOT ANY PARTY OR ANY OTHER SUCH PERSON HAS BEEN ADVISED
OR COULD HAVE FORESEEN, OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING
REPRESENTS AN EXPRESS ALLOCATION OF RISK AMONG THE PARTIES.
14. Indemnification.
---------------
(a) Indemnification by WU. Subject to Section 15, WU shall indemnify
--------------------- ----------
and hold Licensee harmless against any and all Losses and Expenses arising
out of or related to: (i) the material breach of any warranty or the
inaccuracy of any representation of WU contained in this Agreement; (ii)
the material breach by WU of any of its covenants in this Agreement; or
(iii) any claim against Licensee based on Licensee's use of the Licensed
Marks in accordance with this Agreement or the license granted hereunder
infringes or violates the Intellectual Property of any third Person.
-9- CONFIDENTIAL
<PAGE>
(b) Indemnification by Licensee. Subject to Section 15, Licensee shall
---------------------------- ----------
indemnify and hold WU harmless against any and all Losses and Expenses arising
out of or relating to: (i) the material breach of any warranty or the inaccuracy
of any representation of Licensee contained in this Agreement; (ii) the material
breach by Licensee, any Affiliate of Licensee or any MoneyGram Agent of its or
their covenants in this Agreement; or (iii) the use of the Licensed Marks by
Licensee, any Affiliate of Licensee or any MoneyGram Agent in contravention with
the material terms of this Agreement.
(c) Procedure. Each Party shall indemnify the other as set forth in this
----------
Section 14 provided that: (i) the indemnified party promptly notifies the
- ----------
indemnifying party in writing of the claim, provided that the failure to notify
--------
the indemnifying party shall not relieve it from any liability which it may have
to the indemnified party except to the extent the indemnifying party was
prejudiced by such failure; (ii) WU has sole control of the defense and all
related settlement negotiations with respect to the claim, provided, however,
that Licensee has the right, but not the obligation, to participate in the
defense of any such claim or action through counsel of its own choosing; and
(iii) Licensee cooperates fully to the extent deemed necessary or desirable by
WU, and executes all documents deemed necessary or desirable by WU for the
defense of such claim, provided that WU shall reimburse Licensee for any
reasonable out-of-pocket costs incurred by Licensee in connection therewith.
15. Dispute Resolution. The Parties hereby agree to be bound by and to
-------------------
resolve any Dispute in accordance with Article 11 of the Operations Agreement,
the provisions of which are hereby incorporated by reference.
16. Term and Termination.
--------------------
(a) Term. Notwithstanding anything to the contrary set forth herein, this
-----
Agreement (and the license granted herein) shall continue indefinitely unless
terminated as set forth herein.
(b) Termination by Licensee. Licensee may terminate this Agreement in its
------------------------
entirety or the license granted herein as it relates to any Territory upon
written notice to WU:
(i) if WU breaches any of its material obligations under this
Agreement which breach is not substantially cured within sixty (60) days
after notice specifying the breach is given by Licensee to WU; or
(ii) for its convenience as of a future date specified in such notice.
(c) Partial Termination of Agreement by WU. If Licensee breaches any of
---------------------------------------
its material obligations set forth in Sections 2, 3 or 4 in any Territory
----------- - -
(determined pursuant to the provisions incorporated by reference in Section 15),
----------
which breach is not substan-
-10-
CONFIDENTIAL
<PAGE>
tially cured within sixty (60) days after notice specifying the breach is given
by WU to Licensee, then, upon written notice to Licensee, WU may terminate the
license granted pursuant to Section 2 with respect to all of the Licensed Marks
---------
in each Territory in which such breach occurred and was not cured.
(d) Termination by WU of Agreement in its Entirety. WU may terminate this
-----------------------------------------------
Agreement (and the license granted herein) in its entirety, upon written notice
to Licensee, if:
(i) Licensee breaches any of its material obligations under this
Agreement (other than a breach of Sections 2, 3 or 4), which breach is not
--------- - -
substantially cured within sixty (60) days after notice specifying the
breach is given by WU to Licensee; or
(ii) Licensee becomes insolvent, makes a general assignment for the
benefit of creditors, files a voluntary petition for bankruptcy, suffers or
permits the appointment of a receiver for its business or assets, or
becomes subject to any proceedings under any bankruptcy or insolvency law,
whether domestic or foreign, or has wound up or liquidated, voluntarily or
otherwise, and if such condition or event is not cured or if adequate
assurances are not provided within sixty (60) days of any such event
occurring.
(e) Consequences of Termination of Agreement in its Entirety. Upon
---------------------------------------------------------
termination of this Agreement in its entirety for any reason, one-hundred eighty
(180) days after the receipt by Licensee of the notice specified in Section
-------
16(d) or receipt by WU of the notice specified in Section 16(b) (unless an
- ----- -------------
earlier date is specified in a notice under Section 16(b)(ii)): (i) the license
----------
granted to Licensee shall terminate; (ii) Licensee shall cease all use of the
Licensed Marks in all Territories and in all Languages; (iii) Licensee shall
terminate all sublicenses granted pursuant to this Agreement and cause such
sublicensees (whether such sublicensees are Affiliates of Licensee or MoneyGram
Agents) to cease all use of the Licensed Marks in all Territories and in all
Languages; (iv) the obligations of WU, WU Affiliates and its and their
respective agents set forth in Section 7 shall cease; and (v) Licensee shall
---------
comply with the provisions incorporated by reference in Section 11 as they
----------
related to any Confidential Information (as defined in the Operations Agreement)
of WU obtained by Licensee in connection with the performance by the Parties of
their respective obligations hereunder.
(f) Consequences of Termination of License Relating to a Territory. Upon
--------------------------------------------------------------
termination of the license granted herein with respect to any Territory for any
reason, one-hundred eighty (180) days following the receipt by WU of the notice
specified in Section 16(b) (unless an earlier date is specified in a notice
-------------
under Section 16(b)(ii) or the receipt by Licensee of the notice specified in
-----------------
Section 16(c): (i) the license granted to Licensee with respect to such
- -------------
Territory shall terminate; (ii) Licensee shall cease all use of the Licensed
Marks in such Territory and in all Languages in such Territory; (iii) Licensee
-11-
CONFIDENTIAL
<PAGE>
shall terminate all sublicenses granted pursuant to this Agreement with respect
to each such Territory and shall cause such sublicensees (whether such
sublicensees are Affiliates of Licensee or MoneyGram Agents) to cease all use of
the Licensed Marks in such Territory and in all Languages in each such
Territory; (iv) the obligations of WU, WU Affiliates and its and their
respective agents set forth in Section 7 as they relate to such Territory shall
---------
cease; and (v) Licensee shall comply with the provisions incorporated by
reference in Section 11 as they relate to such Territory and the applicable
----------
Licensed Marks.
17. Miscellaneous.
-------------
(a) Expenses. Except as otherwise provided herein, each Party shall pay
---------
all Costs incurred by it or on its behalf in connection with the negotiation and
preparation of this Agreement and its performance and compliance with all its
obligations hereunder, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) Relationship of Parties. Nothing in this Agreement shall be deemed by
------------------------
the Parties, or by any third Person, to create a partnership, joint venture or
similar relationship between or among any of the Parties and, except as
otherwise expressly provided herein, no Party shall be deemed to be the agent of
any other Party. No Party has, and shall not hold itself out as having, any
authority to enter into any contract or create any obligation or liability on
behalf of, in the name of, or binding upon any other Party except as specifi-
cally provided herein.
(c) Force Majeure. Each Party shall be excused from the performance of
--------------
obligations (other than payment obligations) under this Agreement, for any
period and to the extent that it is prevented, restricted or delayed from or
interfered with in performing any of its obligations under this Agreement, in
whole or in part, as a result of labor disputes, strikes, work stoppages or
delays, acts of God, severe weather, failures or fluctuations in utilities or
telecommunications equipment or service, shortages of materials or rationing,
civil disturbance, acts of public enemies, blockade, embargo or any law, order,
proclamation, regulation, ordinance or court order or requirement having legal
effect of any judicial authority or Governmental Body, or any other act or
omission whatsoever, whether similar or dissimilar to the foregoing, which are
beyond the reasonable control of such Party (each, a "Force Majeure Event"), and
such nonperformance shall not be a breach or default under this Agreement, or a
ground for termination of this Agreement. Each Party shall give the other
Parties prompt notice of any Force Majeure Event affecting the notifying Party's
ability to perform under this Agreement and shall promptly update the other
Parties regarding the notifying Party's efforts to mitigate and resolve such
Force Majeure Event.
(d) Entire Agreement. This Agreement, including the Exhibits hereto and
-----------------
the provisions of Articles 7 and 11 the Operations Agreement, which WU
acknowledges it has reviewed and understands, constitutes the entire agreement
among the Parties with regard to the subject matter hereof, and supersedes all
other prior agreements, understandings or
-12- CONFIDENTIAL
<PAGE>
discussions among the Parties concerning the subject matter. There are no
representations, warranties, understandings or agreements (written or oral)
relative to the subject matter hereof which are not expressly set forth herein.
This Agreement may not be amended or modified except in writing signed by an
authorized representative of each Party to this Agreement.
(e) Assignment. Except as otherwise provided herein, the rights and
-----------
obligations of both WU and Licensee under this Agreement are personal and not
assignable, either voluntarily or by operation of law, without the prior written
consent of the other Party. Notwithstanding the foregoing, (i) WU may assign all
its rights and delegate its duties and obligations hereunder to any Affiliate,
provided such Affiliate remains an Affiliate of WU after such an assignment and
that notwithstanding such assignment WU shall remain primarily liable for all of
its obligations hereunder, and (ii) Licensee may assign all its rights and
delegate its duties and obligations hereunder to any Person who purchases
substantially all of the Business, provided the assignee agrees to be bound in
--------
writing to the terms and conditions set forth in this Agreement, and,
notwithstanding such assignment, Licensee shall remain primarily liable for all
of its obligations hereunder. Subject to the foregoing, this Agreement shall
extend to and be binding upon and inure to the benefit of the Parties and their
respective Affiliates, successors and permitted assigns. Nothing in this
Agreement is intended to or shall be construed to confer upon any Person other
than the Parties and their respective Affiliates, successors and permitted
assigns, any right, remedy or claim under or by reason of this Agreement.
(f) Notices. All notices which any Party may be required or desire to give
--------
to any other Party shall be in writing and shall be given by personal service,
telecopy, registered mail or certified mail (or its equivalent) or overnight
courier to the other Parties at their respective addresses or telecopy telephone
numbers set forth below. Mailed notices and notices by overnight courier shall
be deemed to be given upon actual receipt by the Party to be notified. Notice
delivered by telecopy shall be confirmed in writing by overnight courier and
shall be deemed to be given upon actual receipt by the Party to be notified.
In the case of IPS:
Integrated Payment Systems Inc.
6200 So. Quebec St.
Englewood, Colorado 80111
Attention: General Counsel
Telephone Number: 303-488-8973
Telecopy Number: 303-488-8902
-13- CONFIDENTIAL
<PAGE>
With a copy to:
First Data Corporation
2121 N. 117th Ave. NP 30
Omaha, Nebraska 68164
Attention: General Counsel
Telephone Number: 402-498-4085
Telecopy Number: 402-498-4123
In the case of Licensee:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: President
Telephone Number: 303-716-8600
Telecopy Number: 303-716-6997
With a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: General Counsel
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
In the case of WU:
Western Union Financial Services, Inc.
6200 So. Quebec Street
Englewood, Colorado 80111
Attention: President
Telephone Number: (303) 488-8182
Telecopy Number: (303) 488-8292
CONFIDENTIAL
-14-
<PAGE>
With a copy to:
First Data Corporation
2121 N. 117th Ave. NP 30
Omaha, Nebraska 68164
Attention: General Counsel
Telephone Number: 402-498-4085
Telecopy Number: 402-498-4123
A Party may from time to time change its address for notification purposes by
giving the other Parties prior written notice of the new address and the date
upon which it shall become effective.
(g) Counterparts. This Agreement may be executed in several
-------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) Governing Law. Subject to the provisions referenced in Section 15,
-------------- ----------
this Agreement shall be governed by and construed in accordance with the
internal laws (as opposed to the conflict of laws provisions) of the State of
New York.
(i) Survival. The provisions of Sections 5, 11, 12, 13, 14, 15, 16(e),
-------- -------- - -- -- -- -- -- -----
16(f)and 17 shall survive the termination of this Agreement for any reason.
- ---- --
(j) Waiver. Any term or provision of this Agreement may be waived, or the
------
time for its performance may be extended, by the Party entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently authorized for the
purposes of this Agreement if, as to any Party, it is authorized in writing by
an authorized representative of such Party. The failure of any Party hereto to
enforce at any time any provision of this Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any Party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach. Except as
specifically provided otherwise, all remedies provided for in this Agreement
shall be cumulative and in addition to and not in lieu of any other remedies
available to any Party at law, in equity or otherwise.
(k) Severability. Wherever possible, each provision hereof shall be
------------
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
CONFIDENTIAL
-15-
<PAGE>
(l) Recordation. Licensee shall have the right to prepare and record a
-----------
memorandum of this Agreement or otherwise record notice of its license rights or
permitted user status with respect to the Licensed Marks in the appropriate
office of a Governmental Body, subject to WU's prior review and approval, which
approval shall not be unreasonably withheld or delayed. WU shall cooperate
fully to the extent reasonably necessary, and execute all documents relating
thereto, provided that Licensee shall reimburse WU for any reasonable out-of-
pocket costs incurred by WU in connection therewith.
-16-
CONFIDENTIAL
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed as of the date first above written.
MONEYGRAM PAYMENT SYSTEMS, INC.
Signed By: _____________________________
Print Name: ____________________________
Title: __________________________________
INTEGRATED PAYMENT SYSTEMS INC.
Signed By: ____________________________
Print Name: ___________________________
Title: _________________________________
WESTERN UNION FINANCIAL SERVICES, INC.
Signed By: _________________________________
Print Name: ________________________________
Title: _____________________________________
CONFIDENTIAL
-17-
<PAGE>
Exhibit 10.5
================================================================================
HUMAN RESOURCES AGREEMENT
DATED AS OF __________ __, 1996
AMONG
FIRST DATA CORPORATION
INTEGRATED PAYMENT SYSTEMS INC.
AND
MONEYGRAM PAYMENT SYSTEMS, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS.............................. 1
ARTICLE 2
ALLOCATION OF LIABILITIES....................... 5
ARTICLE 3
SAVINGS PLAN............................. 5
Section 3.1. Establishment of Company Savings Plan........................ 5
Section 3.2. Transfer of Account Balances from FDC
Savings Plan to Company Savings Plan......................... 5
ARTICLE 4
PENSION PLAN............................. 6
ARTICLE 5
WELFARE BENEFITS............................ 6
Section 5.1. Welfare Benefits Provided Under Company Plans................ 6
Section 5.2. Accounts under FDC Cafeteria Plan............................ 7
Section 5.3. Treatment of COBRA Beneficiaries............................. 7
ARTICLE 6
MISCELLANEOUS PLANS AND AGREEMENTS................... 7
Section 6.1. Stock Option Plans........................................... 7
Section 6.2. Bonus and Incentive Plans.................................... 8
Section 6.3. Workers' Compensation........................................ 8
Section 6.4. Vacation Pay Policy.......................................... 8
Section 6.5. Tuition Reimbursement Plan................................... 9
Section 6.6. Severance Pay Plan........................................... 9
ARTICLE 7
INDEMNIFICATION............................ 9
Section 7.1. Indemnification.............................................. 9
Section 7.2. Notification................................................. 10
Section 7.3. Claims Period................................................ 11
Section 7.4. Subrogation.................................................. 12
Section 7.5. Exclusive Remedy............................................. 12
Section 7.6. No Special Damages........................................... 12
Section 7.7. Timely Payment............................................... 12
ARTICLE 8
MISCELLANEOUS............................. 12
Section 8.1. No Rights.................................................... 12
Section 8.2. Corporate Action; Delegation of Authority.................... 12
Section 8.3. No Solicitation.............................................. 13
Section 8.4. Termination.................................................. 13
Section 8.5. Survival of Obligations...................................... 14
Section 8.6. Notices...................................................... 14
Section 8.7. Successors and Assigns....................................... 14
</TABLE>
-i-
<PAGE>
<TABLE>
Page
____
<S> <C>
Section 8.8. Access to Records after Closing.............................. 15
Section 8.9. Entire Agreement; Amendments................................. 15
Section 8.10. Partial Invalidity........................................... 16
Section 8.11. Execution in Counterparts.................................... 16
Section 8.12. Further Assurances........................................... 16
Section 8.13. Governing Law................................................ 16
</TABLE>
-ii-
<PAGE>
HUMAN RESOURCES AGREEMENT
THIS HUMAN RESOURCES AGREEMENT (this "Agreement") is dated as of
, 1996, among First Data Corporation, a Delaware corporation ("FDC"),
---
Integrated Payment Systems Inc., a Delaware corporation and a wholly owned
subsidiary of FDC ("IPS"), and MoneyGram Payment Systems, Inc., a Delaware
---
corporation (the "Company").
-------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Company, IPS and FDC have entered into a Contribution
Agreement dated as of , 1996 (the "Contribution Agreement") pursuant
----------------------
to which IPS and certain of its Affiliates (as defined below) contributed to
Company certain assets of the Business (as defined in Article I of the
Contribution Agreement); and
WHEREAS, IPS intends to make a public offering of its shares of
Company common stock in a transaction that will cause the Company to cease to be
a member of the FDC Group (as defined below); and
WHEREAS, following the date on which Company ceases to be a member of
the FDC Group, FDC and Company intend to cause certain of their respective plans
to transfer accrued liabilities and assets relating to such liabilities between
such plans; and
WHEREAS, the Parties (as defined below) intend that Company provide
certain benefits to certain employees after Company is no longer a member of the
FDC Group; and
WHEREAS, FDC, IPS and Company wish to enter into this Agreement in
order to effect such intentions.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the sufficiency of which is
acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
In this Agreement, unless the context otherwise requires, the capitalized
terms used herein shall have the respective meanings set forth above in the
preamble or specified or referred to in this Article 1, except that any
---------
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Contribution Agreement. Each agreement referred to in this
Agreement shall mean such agreement as amended, supplemented and modified from
time to time to the extent permitted by the applicable provisions thereof and
hereof. Each definition in this Agreement includes the singular and the plural,
and reference to the neuter gender includes the masculine and feminine where
appropriate. References to any statute or
<PAGE>
regulations means such statute or regulations as amended at the time and include
any successor legislation or regulations. The heading to the Articles and
Sections hereof and the table of contents herein are for convenience of
reference and shall not affect the meaning or interpretation of this Agreement.
Except as otherwise stated, references to Articles, Sections, Exhibits mean the
Articles, Sections and Exhibits of this Agreement. The Exhibits are hereby
incorporated by reference into and shall be deemed a part of this Agreement.
Unless the context clearly indicates otherwise, the word "including" means
"including but not limited to".
"Affected Business Employee" means any (i) any "Moneygram Business
Employee" as defined in Section 5.9 of the Contribution Agreement, and (ii)
any individual whose relationship with Company or any Affiliate of Company
is, as of the Effective Date, under common law that of an employee,
including any such individual who on the Effective Date is not actively at
work on account of short-term disability or approved leave of absence,
other than a nonresident alien who receives no earned income from Company,
or an Affiliate thereof, constituting income from sources within the United
States.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person; provided, however, that FDC and its Affiliates shall not be deemed
-------- -------
Affiliates of Company and Company and its Affiliates shall not be deemed
Affiliates of FDC and its Affiliates.
"Agreement" means this Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and any applicable state law requiring continuation
coverage under a medical plan.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Company" means MoneyGram Payment Systems, Inc., a Delaware
corporation, and any corporation which shall succeed to the business of
such corporation.
"Company Cafeteria Plan" means [INSERT NAME OF PLAN].
"Company Group" means Company and (a) any corporation which is a
member of the same controlled group of corporations (within the meaning of
section 414(b) of the Code) as Company, (b) a trade or business (whether or
not incorporated) under common control (within the meaning of section
414(c) of the Code) with Company, (c) any
-2-
<PAGE>
organization (whether or not incorporated) which is a member of an
affiliated service group (within the meaning of section 414(m) of the Code)
which includes Company, a corporation described in clause (a) of this
definition or a trade or business described in clause (b) of this
definition, or (d) any other entity which is required to be aggregated with
Company pursuant to regulations promulgated under section 414(o) of the
Code.
"Company Indemnified Parties" shall mean any Company Group member, its
officers, directors and employees, each of Company's Employee Benefit Plans
and any contract administrator or service provider for any such plan (and
the agents and employees of such administrators and providers).
"Company Plan" means the Company Cafeteria Plan, the Company Savings
Plan and the Company Welfare Plans, and any other Employee Benefit Plan
contributed to or maintained at any time by the Company or its Affiliates.
"Company Savings Plan" means the defined contribution plan which shall
be established by Company after the Effective Date for the benefit of
certain eligible employees.
"Company Welfare Plans" means the welfare benefit plans established by
Company following the Effective Date which provide benefits which
correspond to benefits provided under the FDC Welfare Plans.
"Effective Date" means the date on which Company ceases to be a member
of the FDC Group.
"Employee Benefit Plan" means any plan, program, agreement or
arrangement providing compensation or benefits to employees or their
beneficiaries or dependents, including but not limited to any "employee
benefit plan" within the meaning of section 3(3) of ERISA, and any cash or
stock bonus, deferred compensation, stock option, stock purchase
disability, tuition reimbursement, vacation, cafeteria or severance plan,
arrangement or program.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"FDC Cafeteria Plans" means the First Data Corporation Health Care
Reimbursement Account Plan, the First Data Corporation Dependent Care
Account Plan and the First Data Corporation Flexible Benefit Plan.
"FDC Group" means FDC and (a) any corporation which is a member of the
same controlled group of corporations (within the meaning of section 414(b)
of the Code) as FDC,
-3-
<PAGE>
(b) a trade or business (whether or not incorporated) under common control
(within the meaning of section 414(c) of the Code) with FDC, (c) any
organization (whether or not incorporated) which is a member of an
affiliated service group (within the meaning of section 414(m) of the Code)
which includes FDC, a corporation described in clause (a) of this
definition or a trade or business described in clause (b) of this
definition, or (d) any other entity which is required to be aggregated with
FDC pursuant to regulations promulgated under section 414(o) of the Code.
"FDC Indemnified Parties" shall mean any FDC Group member, its
officers, directors and employees, each of FDC's Employee Benefit Plans and
any contract administrator or service provider for any such plan (and the
agents and employees of such administrators and providers).
"FDC Pension Plan" means the First Data Corporation Retirement Plan.
"FDC Plan" means the FDC Cafeteria Plan, the FDC Pension Plan, the FDC
Savings Plan, the FDC Welfare Plans and any other Employee Benefit Plan
maintained or contributed to by FDC and any other employee benefit plan or
program maintained by FDC that immediately before the Effective Date
covered or provided benefits to any Affected Business Employee or any
dependent or beneficiary thereof.
"FDC Savings Plan" means First Data Corporation Incentive Savings
Plan.
"FDC Welfare Plans" means an "employee welfare plan" as defined in
section 3(1) of ERISA maintained or contributed to by FDC and which covers
or otherwise provides benefits to any Affected Business Employee or the
dependents or beneficiaries thereof. For purposes of this Agreement, any
plan, program or policy providing for severance pay or benefits shall be
treated as an "employee welfare plan" without regard to whether such plan,
program or policy is in fact subject to ERISA.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.
"Other Agreements" shall mean the Contribution Agreement among the
parties and the Operations Agreement among Company, IPS and First Data
Technologies, Inc.
"Party" means FDC, IPS or Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association,
-4-
<PAGE>
joint-stock company, trust, unincorporated organization or Governmental
Body.
ARTICLE 2
ALLOCATION OF LIABILITIES
Except as otherwise provided in this Agreement or the Other
Agreements, the obligations and liabilities of FDC, Company and their respective
Affiliates under the applicable FDC Plans and Company Plans shall be determined
pursuant to the terms of such plans as in effect on the Effective Date.
ARTICLE 3
SAVINGS PLAN
SECTION 3.1. ESTABLISHMENT OF COMPANY SAVINGS PLAN. On the Effective
-------------------------------------
Date, each Affected Business Employee shall cease to accrue any additional
benefit under the FDC Savings Plan. Company shall take any and all action
necessary to establish the Company Savings Plan effective on the Effective Date
(including, but not limited to, any and all action necessary to enable Company
to administer such plan on the Effective Date) and to obtain as soon thereafter
as is administratively practicable a determination letter from the Internal
Revenue Service stating that such plan is, as of the Effective Date, qualified
under section 401(a) of the Code. The Company Savings Plan shall contain such
terms and conditions as the Company shall determine, provided that the Company
--------
Savings Plan shall provide that (i) any Affected Business Employee who
immediately before the Effective Date is a participant in the FDC Savings Plan
shall be on the Effective Date a participant in the Company Savings Plan, (ii)
periods of employment with the FDC Group prior to the Effective Date shall be
taken into account under the Company Savings Plan as if it were employment by
the Company Group for purposes of determining an individual's eligibility to
participate and such individual's vested interest in his or her accounts under
such plan, (iii) the Company Savings Plan shall contain such provisions,
including optional forms of benefit, as are reasonably necessary or appropriate
in the opinion of FDC and the Company, to allow the transfer of accounts
described in Section 3.2, (iv) the interest of each Affected Business Employee
(or the beneficiaries thereof) under the Company Savings Plan in any amount
transferred thereto from the FDC Savings Plan (including any future earnings
thereon) shall be fully vested and nonforfeitable and (v) subject to applicable
law and the provisions of the FDC Savings Plan, the account balances (including
outstanding loans) of each Affected Business Employee shall be spun off from the
FDC Savings Plan and merged into the Company Savings Plan within three months of
the Effective Date.
SECTION 3.2. TRANSFER OF ACCOUNT BALANCES FROM FDC SAVINGS PLAN TO
-----------------------------------------------------
COMPANY SAVINGS PLAN. Subject to applicable law
- --------------------
-5-
<PAGE>
and the provisions of the FDC Savings Plan, not later than the first day of the
second calendar month beginning after the Effective Date, or effective as of any
other date as agreed to in writing by the plan administrator for the FDC Savings
Plan and the plan administrator for the Company Savings Plan, the account
balances (including outstanding loans) of all Affected Business Employees and
any beneficiaries thereof shall be transferred from the FDC Savings Plan to the
Company Savings Plan in the manner prescribed by section 414(l) of the Code. As
of the effective date of such transfer, the Company Savings Plan shall assume
all obligations and liabilities of the FDC Savings Plan to the Affected
Employees and their beneficiaries, and the FDC Plan shall have no further
obligations or liabilities with respect thereto.
ARTICLE 4
PENSION PLAN
Each Affected Business Employee shall be treated as having terminated
employment with an "Employer" as defined in the FDC Pension Plan as of the
Effective Date, and thereafter, such employees shall be entitled to
distributions thereunder as provided pursuant to the terms thereof.
ARTICLE 5
WELFARE BENEFITS
SECTION 5.1. WELFARE BENEFITS PROVIDED UNDER COMPANY PLANS. On the
----------------------------------------------
Effective Date, each Affected Business Employee shall cease to accrue any
additional benefit under the FDC Welfare Plans. On the Effective Date, the
Company shall establish the Company Welfare Plans to the extent such plans are
not already in existence prior to the Effective Date. The Company Welfare Plans
shall duplicate the types of benefits (but shall not be required by this
Agreement to duplicate the amount or level of benefits) provided by the FDC
Welfare Plans pursuant to such terms and conditions as the Company shall
determine, provided that (i) each Affected Business Employee who immediately
--------
before the Effective Date is covered by a FDC Welfare Plan shall on the
Effective Date be eligible for coverage under comparable the Company Welfare
Plan, (ii) periods of employment with the FDC Group prior to the Effective Date
shall be taken into account for all purposes under the Company Welfare Plans as
if it were employment by the Company Group, (iii) any amounts paid or incurred
by Affected Employees during 1996 under the FDC Welfare Plans shall be taken
into account under the Company Welfare Plans for purposes of satisfying
deductible and determining whether maximum out-of-pocket or similar requirements
have been satisfied and (iv) no condition of an Affected Business Employee
covered by the applicable FDC Welfare Plan shall be excluded from coverage under
the applicable Company Welfare Plans as a pre-existing condition. On the
Effective Date, the Company shall assume and be responsible for all liabilities
and obligations to Affected
-6-
<PAGE>
Business Employees in respect of claims made under the applicable Company
Welfare Plan by or on behalf of Affected Business Employees on and after the
Effective Date. FDC shall, pursuant to the terms of the applicable FDC Welfare
Plan, retain responsibility for all claims relating to Affected Business
Employees made up to, but not including, the Effective Date.
SECTION 5.2. ACCOUNTS UNDER FDC CAFETERIA PLAN. On the Effective
----------------------------------
Date, Company shall establish the Company Cafeteria Plan. On the Effective Date,
each Affected Business Employee shall cease to accrue any additional benefit
under the FDC Cafeteria Plans. The Company Cafeteria Plan shall contain such
terms and conditions as the Company shall determine, provided that any Affected
--------
Business Employee who was immediately before the Effective Date a participant in
any FDC Cafeteria Plan shall be eligible to be a participant in the
corresponding portion of the Company Cafeteria Plan on the Effective Date. On
and after the Effective Date, the Company Cafeteria Plan shall assume and be
responsible for any claims under, and no Affected Business Employee shall be
entitled to submit any further claims under, any FDC Cafeteria Plan to the
extent of any balance to the credit of such employee under any FDC Cafeteria
Plan as of the Effective Date, and each Affected Business Employee shall be
credited with an opening balance under the corresponding portion of the Company
Cafeteria Plan as of the Effective Date equal to the balance, if any, to the
benefit of such employee under such FDC Cafeteria Plan as of the Effective Date.
SECTION 5.3. TREATMENT OF COBRA BENEFICIARIES. The appropriate
---------------------------------
Company Welfare Plans shall retain or assume, as the case may be, any and all
obligations for and liabilities to any individual claiming coverage or benefits
with respect to welfare benefits on account of a relationship or former
relationship with an Affected Business Employee pursuant to COBRA or any similar
provision of federal or state law requiring continued coverage of such
individuals. Any provisions of this Agreement applicable to Affected Business
Employees also shall be applicable in determining the rights of or benefits
provided to any persons claiming coverage or benefits with respect to the
coverage provided to such Affected Business Employees pursuant to COBRA or any
similar provision of federal or state law requiring continued coverage of such
persons.
ARTICLE 6
MISCELLANEOUS PLANS AND AGREEMENTS
SECTION 6.1. STOCK OPTION PLANS. On the Effective Date, the
-------------------
Company's and its Affiliates' employees shall no longer be eligible to receive
options under the terms of the First Data Corporation 1992 Long-Term Incentive
Plan. Affected Business Employees who hold options under such plans shall be
treated as having terminated their employment with the FDC Group on the
Effective Date, and any stock options remaining outstanding
-7-
<PAGE>
thereunder that are not fully exercisable pursuant to their terms shall become
fully exercisable on the Effective Date for the remainder of the post-
termination of employment period specified therein.
SECTION 6.2. BONUS AND INCENTIVE PLANS. (a) Company and its
--------------------------
Affiliates shall retain or assume, as the case may be, all obligations to pay
bonuses or incentive compensation to or on behalf of Affected Business Employees
that are accrued or accruable under generally accepted accounting principles
consistently applied on the books of FDC, Company or their Affiliates as of the
Effective Date. Except as set forth in paragraph (b) below, after the Effective
Date, FDC shall have no further obligation for the payment of any such bonuses
or incentive compensation.
(b) IPS agrees to pay to the Company, on or before thirty (30) days
after the Effective Date, an amount equal to the product of (i) the number of
days from January 1, 1996 to the Effective Date (inclusive) and (ii) $2,085.
SECTION 6.3. WORKERS' COMPENSATION. (a) FDC shall retain the
----------------------
responsibility for all claims relating to Company employees and former Company
employees relating to incidents occurring up to but not including the Effective
Date (including, but not limited to, claims which are filed after the Effective
Date but which relate to incidents occurring prior to the Effective Date). Any
amount by which actual claims expenses vary from the reserve established by FDC
for such expenses for periods prior to the Effective Date shall be retained by
FDC.
(b) Company shall assume responsibility for all claims relating to
Company employees and former employees under applicable workers' compensation
laws relating to periods beginning on the Effective Date. Company shall take
any and all action necessary to effect timely return to work for all Company
employees and former Company employees who are on a leave of absence from
employment during which they were entitled to receive workers' compensation
(including, but not limited to, persons with respect to whom FDC has the
liability to pay workers' compensation claims).
SECTION 6.4. VACATION PAY POLICY. Company shall assume liability for
--------------------
accrued but unpaid vacation of Affected Business Employees, determined under
generally accepted accounting principles consistently applied, as of the
Effective Date. After the Effective Date, it is expected that Company shall
maintain for its employees a vacation pay policy, and Company shall be
responsible for costs incurred to provide vacation pay to Company employees
following such date. Periods of employment by Affected Business Employees with
the FDC Group prior to the Effective Date shall be taken into account under
-8-
<PAGE>
Company's vacation pay policy for purposes of determining the amount of vacation
to which such employees are entitled.
SECTION 6.5. TUITION REIMBURSEMENT PLAN. On the Effective Date,
---------------------------
Company shall assume any obligation of FDC or its affiliates to or on behalf of
Affected Business Employees under the IPS tuition reimbursement plan, including
(without limitation) the obligation to pay or make reimbursements for expenses
incurred during 1996 with respect to any course of study commenced prior to the
Effective Date. In assuming such liabilities and making such payments and
reimbursements, Company shall apply terms and conditions set forth in the IPS
tuition reimbursement plan and applicable law.
SECTION 6.6. SEVERANCE PAY PLAN. Until the first anniversary of the
-------------------
Effective Date, the Company shall provide Affected Business Employees severance
benefits pursuant to a severance plan, program or policy not less favorable to
such employees than that maintained by FDC immediately before the Effective
Date.
ARTICLE 7
INDEMNIFICATION
SECTION 7.1. INDEMNIFICATION. (a) Company shall indemnify and hold
----------------
harmless the FDC Indemnified Parties for all Losses and Expenses sustained in
connection with the benefits provided or the actions taken or omitted to be
taken in connection with this Agreement, or otherwise relating to the provision
of employee benefits to employees or former employees of Company, their
beneficiaries, alternate payees or any other person claiming benefits through
them (except to the extent such Losses or Expenses are specifically allocated to
FDC pursuant to this Agreement, including without limitation Losses and Expenses
arising in connection with (1) Company's reduction, elimination or failure to
provide any benefit previously provided to its employees or employees of any of
its subsidiaries, (2) the provision of benefits to Affected Business Employees
under the FDC Welfare Plans where such Losses or Expenses arise after the
Effective Date, (3) the transfer of account balances from the FDC Savings Plan
to the Company Savings Plan where such Losses or Expenses are incurred as a
result of (A) any act or omission by Company (or Company's representative) or
(B) a determination by the Internal Revenue Service that the Company Savings
Plan is not a tax-qualified plan and (4) any failure of Company or its
Affiliates to fulfill any of its obligations under this Agreement or any
Employee Benefit Plan of the Company Group.
(b) FDC shall indemnify and hold harmless the Company Indemnified
Parties for all Losses and Expenses sustained in connection with (1) the
provision of benefits to Affected Business Employees under FDC Employee Benefit
Plans where such Losses or Expenses arise prior to the Effective Date (2) the
-9-
<PAGE>
transfer of account balances from the FDC Savings Plan to the Company Savings
Plan where such Losses or Expenses are incurred as a result of (A) any act or
omission by FDC (or FDC's representative) or (B) (a) determination by the
Internal Revenue Service that the FDC Savings Plan is not a tax-qualified plan
and (3) any failure of FDC or its Affiliates to fulfill any of its obligations
under this Agreement or any Employee Benefit Plan of the FDC Group not assumed
by Company and its affiliates under this Agreement.
(c) In the event that any Party retains the services of an attorney
to enforce any term of this Agreement, or to obtain a remedy for a breach of
this Agreement, the prevailing Party shall be entitled to recover its reasonable
costs and attorney fees, including the costs and attorney fees on appeal, if
any.
SECTION 7.2. NOTIFICATION. (a) Any Person (the "Indemnified Party")
------------- -------------------
seeking indemnification hereunder shall give promptly to the Party obligated to
provide indemnification to such Indemnified Party (the "Indemnifying Party") a
--------------------
notice (a "Claim Notice") describing in reasonable detail the facts giving rise
--------------
to any claim for indemnification hereunder and shall include in such Claim
Notice (if then known) the amount or the method of computation of the amount of
such claim, and a reference to the provision of this Agreement or any other
agreement, document or instrument executed hereunder or in connection herewith
upon which such claim is based; provided, however, that a Claim Notice in
--------- -------
respect of any action at law or suit in equity by or against a third party as to
which indemnification will be sought shall be given promptly after the action or
suit is commenced.
(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article 7 shall be determined: (i) by the written agreement between the
- ---------
Indemnified Party and the Indemnifying Party; (ii) by a final judgment, decree
or decision of any court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnifying Party shall agree. The
judgment or decree of a court shall be deemed final when the time for appeal, if
any, shall have expired and no appeal shall have been taken or when all appeals
taken shall have been finally determined. The Indemnified Party shall have the
burden of proof in establishing the amount of Loss and Expense suffered by it.
(c) In the event a claim, suit or proceeding by a third party for
which indemnification may be available under this Agreement is made or filed
against an Indemnified Party, the Indemnified Party shall promptly notify the
Indemnifying Party in writing of such claim, suit or proceeding. The
Indemnifying Party, within thirty (30) days, or such shorter period as is
required to avoid any prejudice in the claim, suit or proceeding,
-10-
<PAGE>
after the notice, may elect to defend, compromise or settle the third party
claim, suit or proceeding at its expense. There after, the Indemnified Party
shall deliver to the Indemnifying Party, within ten (10) Business Days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the third
party claim. In any third party claim, suit or proceeding which the
Indemnifying Party has elected to defend, compromise or settle, the Indemnifying
Party shall not after such election be responsible for the expenses of legal
counsel for the Indemnified Party, but the Indemnified Party may participate
therein and retain counsel at its own expense. In any third party claim, suit
or proceeding the defense of which the Indemnifying Party shall have assumed,
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the consent of the
Indemnifying Party and the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement affecting the Indemnified Party
without the written consent of the Indemnified Party to the extent that the
judgment or settlement involves more than the payment of money. The Indemnified
Party shall provide to the Indemnifying Party all information, assistance and
authority reasonably requested in order to evaluate any third party claim, suit
or proceeding and effect any defense, compromise or settlement. To the extent
the Indemnifying Party elects not to defend such proceeding, claim or demand,
and the Indemnified Party defends against or otherwise deals with any such
proceeding, claim or demand, the Indemnified Party may retain counsel, at the
expense of the Indemnifying Party, and control the defense of such proceeding.
After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the
time in which to appeal therefrom has expired, or a settlement shall have been
consummated, or the Indemnified Party and the Indemnifying Party shall arrive
at a binding agreement with respect to each separate matter alleged to be
indemnified by the Indemnifying Party hereunder, the Indemnified Party shall
forward to the Indemnifying Party notice of any sums due and owing by it with
respect to such matter and the Indemnifying Party shall pay all of the sums owed
to the Indemnified Party by wire transfer, certified or bank cashier's check
within thirty (30) days after the date of such notice.
SECTION 7.3. CLAIMS PERIOD. No cause of action, dispute or claim for
-------------
indemnification under this Agreement may be asserted or made against any Party
or submitted to arbitration on a date later than the earlier of: (a) one year
after the date in which facts giving rise to such cause of action, dispute or
claim are discovered or, with the exercise of due diligence, should reasonably
have been discovered, or if such event for which indemnification is claimed is
an action or proceeding brought against the Indemnified Party, the end of the
related
-11-
<PAGE>
notification period provided in Section 7.1; or (b) the second anniversary of
the Effective Date.
SECTION 7.4. SUBROGATION. In the event that an Indemnifying Party
-----------
shall be obligated to indemnify an Indemnified Party pursuant to Sections 7.1,
------------
the Indemnifying Party shall, upon payment of such indemnity in full, be
subrogated to all rights of the Indemnified Party with respect to the claims and
defenses to which such indemnification relates.
SECTION 7.5. EXCLUSIVE REMEDY. Except for (i) remedies that cannot
----------------
be waived as a matter of law and injunctive and provisional relief, and (ii) any
Party's obligation to make any payments or reimbursements hereunder this Article
7 shall be the sole and exclusive remedy for breach of this Agreement, including
with respect to any claim, demand, cause of action, debt, Loss, Expense or
liability subject thereto.
SECTION 7.6. NO SPECIAL DAMAGES. IN NO EVENT SHALL FIRST DATA, IPS,
------------------
COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES BE LIABLE FOR ANY CONSEQUENTIAL
DAMAGES UNDER THIS AGREEMENT, WHICH ARE HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER FIRST DATA, COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES HAS BEEN ADVISED, OR COULD HAVE FORESEEN, OF THE POSSIBILITY SUCH
DAMAGES. THE FOREGOING REPRESENTS AN EXPRESS ALLOCATION OF RISK BETWEEN THE
PARTIES.
SECTION 7.7. TIMELY PAYMENT. Each Party shall be required to pay any
--------------
amount due to the other Party pursuant to this Agreement in a timely manner on
the date on which such payment is due, and if no due date is specified, within
30 days after the date on which the Party to whom payment is owed makes written
demand for such payment from the other Party.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. NO RIGHTS. This Agreement shall not give any employee
---------
(including any Affected Business Employee) or any Person any right to continued
employment or to any employee benefits. This Agreement shall not give any
Person other than a Party any rights, including in particular any third-party
beneficiary or other right to enforce any provision of this Agreement or to
receive damages for a breach of any such provision. Nothing in this Agreement
shall obligate FDC, IPS, Company or any of their Affiliates to assist any
Company employee to enforce any rights such employee may have with respect to
any of the employee benefits described in this Agreement.
SECTION 8.2. CORPORATE ACTION; DELEGATION OF AUTHORITY. Any action
-----------------------------------------
taken by an officer at the level of Vice-President or above shall be considered
to be action taken by
-12-
<PAGE>
either FDC or Company for purposes of this Agreement. Without limiting the
foregoing, the Chief Executive Officer of FDC or Company may delegate in writing
to any other person the authority to act on behalf of FDC or Company,
respectively, with respect to actions required under the terms of this
Agreement.
SECTION 8.3. NO SOLICITATION. For a period of one year after the
---------------
Effective Date, neither the Company nor any of its Affiliates shall (i) induce
or attempt to persuade any current or future employee of IPS or Western Union
Financial Services, Inc. ("WU"), as the case may be, to terminate his or her
employment relationship with IPS or WU, as the case may be, in order to enter
into employment with the Company or any of its Affiliates, or (ii) hire or
retain, as an employee, independent contractor or otherwise, any current or
future employee of IPS or WU, as the case may be, unless, in each case, waived
in writing by IPS or WU, as the case may be. For a period of one year after the
Effective Date, neither FDC nor any of its Affiliates shall (i) induce or
attempt to persuade any current or future employee of any member of the Company
Group to terminate his or her employment relationship with such member in order
to enter into employment with IPS or WU or (ii) hire or retain for or on behalf
of IPS or WU as an employee, independent contractor or otherwise, any current or
future employee of any member of the Company Group unless, in each case, waived
in writing by the Company. The parties hereto acknowledge that a violation of
this Section 8.3 may cause IPS, WU, Company or their respective Affiliates, as
the case may be, irreparable harm which may not be adequately compensated for by
money damages. The parties therefore agree that in the event of any actual or
threatened violation of this Section 8.3, any affected FDC Group member or
Company Group member, as the case may be, shall be entitled, in addition to
other remedies it may have, to a temporary restraining order and to preliminary
and final injunctive relief against Company, FDC or their respective Affiliates,
as the case may be, to prevent any violation of this Section 8.3, without the
necessity of posting a bond. The prevailing party in any action commenced under
this Section 8.3 shall also be entitled to receive reasonable attorney's fees
and court costs. It is the intent and the understanding of each party hereto,
if, in any action before any court, agency or arbitration panel legally
empowered to enforce this Section 8.3, any term, restriction, covenant or
promise in this Section 8.3 is found to be unreasonable and for that reason
unenforceable, then such terms, restriction, covenant or promise shall be deemed
modified to the extent necessary to make it enforceable by such court, agency or
arbitration panel.
SECTION 8.4. TERMINATION. Anything contained in this Agreement to
-----------
the contrary notwithstanding, this Agreement may be terminated at any time prior
to the Effective Date by the mutual consent of the Company, FDC and IPS. In the
event this Agreement shall be terminated, no party shall have any liability to
any other party hereunder.
-13-
<PAGE>
SECTION 8.5. SURVIVAL OF OBLIGATIONS. All covenants and obligations
-----------------------
contained in this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.
SECTION 8.6. NOTICES. All notices or other communications required
-------
or permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or when sent by registered or certified mail
or by private courier addressed as follows:
If to the Company, to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 68164
Attention: Chief Executive Officer
with a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 68164
Attention: General Counsel
If to FDC or to IPS to:
First Data Corporation
2121 North 117th Avenue
Omaha, Nebraska 68164
Attention: General Counsel
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
SECTION 8.7. SUCCESSORS AND ASSIGNS. (a) The rights of any party
----------------------
under this Agreement shall not be assignable by such party hereto without the
written consent of the other parties, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, (i) FDC and IPS may assign all their
respective rights and delegate their respective duties and obligations hereunder
to any of their Affiliates, provided such Affiliate remains an Affiliate of FDC
--------
and IPS after such an assignment and that notwithstanding such assignment FDC
and IPS, respectively, shall remain primarily liable for all of their respective
obligations hereunder; and (ii) subsequent to the consummation of the Offering
in accordance with the Registration Statement, the Company may assign all its
rights and delegate its duties and obligations hereunder to any of its
Affiliates or to any Person who purchases substantially all of the Business,
provided the assignee agrees to be bound in writing to the terms and conditions
- --------
set forth in this Agreement, and, notwithstanding such assignment, the Company
shall remain primarily liable for all of its obligations hereunder.
-14-
<PAGE>
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. Except as to any
Company Indemnified Party or IPS Indemnified Party entitled to indemnity under
Article 7, nothing in this Agreement, expressed or implied, is intended or shall
- ---------
be construed to confer upon any Person other than the parties and successors and
assigns permitted by this Section 8.7 any right, remedy or claim under or by
-----------
reason of this Agreement.
SECTION 8.8. ACCESS TO RECORDS AFTER CLOSING. (a) Subject to
-------------------------------
applicable laws and regulations relating to confidentiality and privacy of
employee information and records, for a period of six years after the Effective
Date, IPS, FDC and their Affiliates and their respective representatives shall
have reasonable access to all of the books and records of the Business to the
extent that such access may reasonably be required by IPS, FDC or their
Affiliates in connection with matters which are the subject matter of this
Agreement. Such access shall be afforded by the Company upon receipt of
reasonable advance written notice and during normal business hours. IPS shall be
solely responsible for any costs or expenses incurred by it pursuant to this
Section 8.8(a). If the Company shall desire to dispose of any of such books and
- --------------
records prior to the expiration of such six-year period, the Company shall,
prior to such disposition, give IPS a reasonable opportunity, at IPS' expense,
to segregate and remove such books and records as IPS may select.
(b) Subject to applicable laws and regulations relating to
confidentiality and privacy of employee information and records, for a period of
six years after the Effective Date, the Company and its representatives shall
have reasonable access to all of the books and records relating to the Business
which IPS or any of its Affiliates may retain after the Effective Date. Such
access shall be afforded by IPS and its Affiliates upon receipt of reasonable
advance written notice and during normal business hours. The Company shall be
solely responsible for any costs and expenses incurred by it pursuant to this
Section 8.8(b). If IPS or any of its Affiliates shall desire to dispose of any
- --------------
of such books and records prior to the expiration of such six-year period, IPS
shall, prior to such disposition, give the Company a reasonable opportunity, at
the Company's expense, to segregate and remove such books and records as the
Company may select.
SECTION 8.9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the
----------------------------
Exhibits and Schedules referred to herein and the agreements and documents
delivered pursuant hereto contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and supersede all
other prior agreements, understandings or letters of intent between or among any
of the parties hereto. This Agreement shall not be amended, modified or
supplemented except by a written
-15-
<PAGE>
instrument signed by an authorized representative of each of the parties hereto.
SECTION 8.10. PARTIAL INVALIDITY. Wherever possible, each provision
------------------
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 8.11. EXECUTION IN COUNTERPARTS. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to each of FDC, IPS and the
Company.
SECTION 8.12. FURTHER ASSURANCES. On and after the Effective Date,
------------------
each party hereto shall take such other actions and execute such other documents
and instruments as may be reasonably requested by the other party hereto from
time to time to effectuate or confirm the consummation of the transaction
contemplated by this Agreement in accordance with the terms of this Agreement.
SECTION 8.13. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (as opposed to the conflict of
laws provisions) of the State of New York.
-16-
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by their respective authorized officers as of the date first set forth
above.
FIRST DATA CORPORATION
By:_________________________________
Name:____________________________
Title:___________________________
INTEGRATED PAYMENT SYSTEMS INC.
By:_________________________________
Name:____________________________
Title:___________________________
MONEYGRAM PAYMENT SYSTEMS, INC.
By:_________________________________
Name:____________________________
Title:___________________________
-17-
<PAGE>
Exhibit 10.6
TELECOMMUNICATIONS SERVICES SHARING AGREEMENT
DATED AS OF ________, 1996
BETWEEN
MONEYGRAM PAYMENT SYSTEMS, INC.
AND
FIRST DATA CORPORATION
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION Page
- ------- ----
ARTICLE 1
Definitions.......................................................... 1
ARTICLE 2................................................................. 5
SERVICES.................................................................. 5
Section 2.1. Telecommunications Services............................ 5
Section 2.2. No Guarantee or Provision of Services.................. 5
Section 2.3. Related Services....................................... 6
ARTICLE 3
GENERAL AGREEMENTS OF THE PARTIES.................................... 6
Section 3.1. Terms of Telecommunications Agreements................. 6
Section 3.2. Termination of a Telecommunications
Agreement............................................. 6
Section 3.3. Prohibition on Resale.................................. 6
Section 3.4. Third Party Consents................................... 6
Section 3.5. Covenants.............................................. 7
Section 3.6. Service Orders......................................... 7
ARTICLE 4
BILLING AND PAYMENTS................................................. 7
Section 4.1. Billing................................................ 7
Section 4.2. Payments............................................... 7
Section 4.3. Other Charges.......................................... 8
ARTICLE 5
CONFIDENTIALITY...................................................... 8
Section 5.1. General Confidentiality Obligations.................... 8
Section 5.2. Confidentiality Obligations of MG...................... 8
ARTICLE 6
TERM AND TERMINATION................................................. 8
Section 6.1. Term................................................... 8
Section 6.2. Termination by FDC..................................... 8
Section 6.3. Termination by MG...................................... 9
Section 6.4. Partial Termination of Agreement by FDC................ 10
Section 6.5. Effect of Termination.................................. 10
-i-
<PAGE>
Section Page
- ------- ----
ARTICLE 7
INDEMNIFICATION..................................................... 11
Section 7.1. Indemnification by MG................................. 11
Section 7.2. Third-Party Beneficiaries............................. 11
Section 7.3. No Special Damages.................................... 11
ARTICLE 8
DISPUTE RESOLUTION.................................................. 11
Section 8.1. Dispute Resolution.................................... 11
ARTICLE 9
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES........................ 12
ARTICLE 10
MISCELLANEOUS....................................................... 12
Section 10.1. Expenses............................................. 12
Section 10.2. Relationship of Parties.............................. 12
Section 10.3. Entire Agreement..................................... 12
Section 10.4. Assignment........................................... 13
Section 10.5. Notices.............................................. 13
Section 10.6. Counterparts......................................... 14
Section 10.7. Governing Law........................................ 14
Section 10.8. Waiver............................................... 14
Section 10.9. Severability......................................... 15
Section 10.10. Construction Rules.................................. 15
-ii-
<PAGE>
TELECOMMUNICATIONS SERVICES SHARING AGREEMENT
THIS TELECOMMUNICATIONS SERVICES SHARING AGREEMENT (this "Agreement")
---------
dated as of __________, 1996 between MoneyGram Payment Systems, Inc., a Delaware
corporation ("MG"), and First Data Corporation, a Delaware corporation ("FDC").
-- ---
W I T N E S S E T H:
-------------------
WHEREAS, MG, FDC and Integrated Payment Systems Inc., a Delaware
corporation and a wholly-owned subsidiary of FDC ("IPS"), have entered into a
---
Contribution Agreement dated as of __________, 1996 (the "Contribution
------------
Agreement"), pursuant to which IPS and certain of its Affiliates (as defined
- ---------
below) contributed to MG certain assets of the Business (as defined below); and
WHEREAS, MG, IPS and First Data Technologies, Inc., a Delaware
Corporation and a wholly owned subsidiary of FDC ("FDT"), have entered into an
Operations Agreement dated as of the date hereof (the "Operations Agreement"),
--------------------
pursuant to which FDT, IPS and certain of their Affiliates provide certain
services relating to the Business to MG; and
WHEREAS, MG and FDC desire to enter into this Agreement pursuant to
which MG agrees to use and FDC agrees to provide access to telecommunications
services provided to FDC pursuant to the Telecommunications Agreements (as
defined below);
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, MG and FDC agree as follows:
ARTICLE 1
DEFINITIONS
-----------
In this Agreement, unless the context shall otherwise require, the
capitalized terms used herein shall have the respective meanings specified or
referred to in this Article 1. Each agreement referred to in this Agreement
---------
shall mean such agreement as amended, supplemented and modified from time to
time to the extent permitted by the applicable provisions thereof and hereof.
Each definition in this Agreement includes the singular
<PAGE>
and the plural, and reference to the neuter gender includes the masculine and
feminine where appropriate. References to any statute or regulations means such
statute or regulations as amended at the time and include any successor
legislation or regulations. The headings to the Articles and Sections hereof
and the table of contents herein are for convenience of reference and shall not
affect the meaning or interpretation of this Agreement. Except as otherwise
stated, reference to Articles, Sections, and Exhibits mean the Articles,
Sections and Exhibits of this Agreement. The Exhibits are hereby incorporated
by reference into and shall be deemed a part of this Agreement. Unless the
context clearly indicates otherwise, the word "including" means "including but
not limited to".
"Affiliate" of any Person means any other Person which, directly or
---------
indirectly, controls, is controlled by or is under common control with such
Person through the ownership or control, directly or indirectly, of more than
50% of all the voting power of the shares or other interests entitled to vote
for the election of directors or other governing authority; provided, however,
-------- -------
that FDC and its Affiliates shall not be deemed Affiliates of MG and its
Affiliates and MG shall not be deemed Affiliates of FDC and its Affiliates.
"AT&T" means American Telephone and Telegraph Company.
----
"AT&T Agreement" means the proposed agreement between AT&T and FDC, a
--------------
copy of which shall be attached hereto as Exhibit A if and when completed.
---------
"Bankruptcy" means, with respect to any Party, the happening of any
----------
one or more of the following events: (a) a Party: (i) makes an assignment for
the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii)
is adjudged a bankrupt or insolvent, or there has been entered against such
Party an order for relief, in any bankruptcy or insolvency proceeding; (iv)
files a petition or answer seeking in respect of such Party any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against such Party in any proceeding of a nature described above; (vi)
seeks, consents or acquiesces in the appointment of a trustee, receiver,
conservator or liquidator of such Party or of all or any substantial part of
such Party's properties; or (vii) in respect of clauses (i), (ii), (iv), (v) or
(vi) above, such Party takes any corporate action to authorize any action
contemplated by any of such clauses; or (b) 90 days
-2-
<PAGE>
after the commencement of any proceeding against any Party seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, if such proceeding has
not been dismissed, or within 60 days after the appointment without such Party's
consent or acquiescence of a trustee, receiver or liquidator of the Party or of
all or any substantial part of such Party's properties, if such appointment is
not vacated or stayed, or within 60 days after the expiration of any such stay,
if such appointment is not vacated.
"Charges" means all direct charges, fees, tariffs and Taxes and all
---------
indirect charges, fees, tariffs and Taxes assessed by a Telecommunications
Services Provider pursuant to a Telecommunications Services Agreement.
"Consequential Damages" means any liability, Loss, Expense or damage,
-----------------------
whether in an action arising out of breach of warranty, breach of contract,
delay, negligence, theory of tort, strict liability or other legal equitable
theory, for indirect, special, reliance, incidental, punitive or consequential
damages or commercial loss, injury or damage, including loss of revenues,
profits or use of capital or production.
"Costs" means all direct costs, expenses and charges plus all indirect
-------
costs, expenses and charges, including reasonable allocations of overhead,
incurred by a Party in performing its obligations under this Agreement.
"Dispute" means any and all disputes, controversies and claims
---------
between the Parties arising from or in connection with this Agreement or the
relationship of the Parties under this Agreement whether based on contract,
tort, common law, equity, statute, regulation, order or otherwise.
"Expenses" means any and all reasonable expenses incurred in
----------
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including court
filing fees, court costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, accountants and other
professionals).
"Governmental Body" means any foreign, federal, state, local or other
-------------------
governmental authority or regulatory body.
-3-
<PAGE>
"Losses" means any and all losses, obligations, liabilities,
--------
settlement payments, awards, judgments, fines, penalties, damages, deficiencies
or other charges.
"MCI" means MCI Telecommunications Corporation.
-----
"MCI Agreement" means the proposed agreement between MCI and FDC, a
---------------
copy of which shall be attached hereto as Exhibit B if and when completed.
---------
"Party" means FDC or MG and its Affiliates as the context requires.
-------
"Person" means any individual, corporation, partnership, limited
--------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Solvent", when used with respect to any Person, means that at the
---------
time of determination: (i) the fair market value of its assets is in excess of
the total amount of its liabilities (including contingent liabilities determined
in accordance with generally accepted accounting principles); (ii) the present
fair saleable value of its assets is greater than its probable liability on its
existing debts (including contingent liabilities) as such debts become absolute
and matured; (iii) it is then able, and is reasonably expected to be able, to
pay its debts (including contingent debts and other commitments) as they mature;
and (iv) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.
"Sprint" means Sprint Communications Company L.P., a Delaware limited
--------
partnership.
"Sprint Agreement" means the Custom Network Services Agreement between
------------------
Sprint and FDC dated as of February 26, 1996 as attached hereto as Exhibit C.
----------
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
----- ------- ---------
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, govern mental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Body.
-4-
<PAGE>
"Telecommunications Agreements" means the AT&T Agreement, the MCI
-------------------------------
Agreement and the Sprint Agreement and any other agreement listed in Schedule
--------
1.1A, as such schedule may be modified from time to time during the Term
- -----
pursuant to the written agreement of the Parties.
"Telecommunications Services" means services provided pursuant to the
-----------------------------
Telecommunications Agreements that are used in connection with the Business.
"Telecommunications Services Providers" means AT&T, MCI and Sprint and
---------------------------------------
any other provider listed in Schedule 1.1B, as such schedule may be modified
--------------
from time to time during the Term pursuant to the written agreement of the
Parties.
"Term" means the period commencing on the date hereof and ending on
------
December 31, 1998.
"Travel Related Services" means American Express Travel Related
-------------------------
Services Company, Inc., a New York corporation.
ARTICLE 2
SERVICES
--------
SECTION 2.1. TELECOMMUNICATIONS SERVICES. During the Term, MG and
----------------------------
its Affiliates agree to be bound by the terms of the Telecommunications
Agreements as if MG and its Affiliates were Affiliates of FDC and to exclusively
use the Telecommunications Services offered thereunder for all of the person-to-
person telephone calls (both incoming and outgoing where either MG or its
Affiliates is the customer of record) used in each of their businesses. MG may
choose, from time to time, under which Telecommunications Agreement to receive
Telecommunications Services by written notice to FDC. During the term, FDC
shall cooperate and use reasonable efforts to facilitate the provision of the
Telecommunications Services by the Telecommunications Services Providers to MG
and its Affiliates at the respective rates in effect from time to time, pursuant
to and in accordance with the terms of the respective Telecommunications
Agreements as if MG and its Affiliates were Affiliates of FDC.
SECTION 2.2. NO GUARANTEE OR PROVISION OF SERVICES. It is understood
--------------------------------------
by the Parties that FDC is not providing any guarantee as to the level or
quality of services provided under any Telecommunications Agreement and is not
responsible for the provision of any such services to MG or any Affiliate of MG.
-5-
<PAGE>
SECTION 2.3. RELATED SERVICES. MG and its Affiliates shall be
-----------------
entitled to a portion of any services other than Telecommunications Services
provided pursuant to any Telecommunications Services Agreement, including
training of employees, in accordance with MG's and its Affiliates' pro rata
portion of the total aggregate Telecommunications Services used by FDC and its
Affiliates and MG and its Affiliates.
ARTICLE 3
GENERAL AGREEMENTS OF THE PARTIES
---------------------------------
SECTION 3.1. TERMS OF TELECOMMUNICATIONS AGREEMENTS. MG shall, and
---------------------------------------
shall cause its Affiliates to, comply with and abide by all terms of each of the
Telecommunications Agreements, including any terms regarding levels of service
and form of payment.
SECTION 3.2. TERMINATION OF A TELECOMMUNICATIONS AGREEMENT. In the
event that one or more of the Telecommunications Agreements is terminated for
whatever reason during the Term, any rights that MG or any Affiliate of MG
received pursuant to this Agreement under such Telecommunications Agreement also
shall be terminated, and any and all obligations of FDC under this Agreement
with respect to each terminated Telecommunications Agreement also shall
terminate without liability of FDC to MG or any Affiliate of MG; provided,
---------
however, that FDC shall provide MG with prompt notice of any such termination
- -------
and provided further that if FDC enters into another agreement with a
----------------
telecommunications services provider to provide substantially the same services
as those provided under the terminated Telecommunications Agreement (a
"Replacement Agreement"), FDC will cooperate and use reasonable efforts to
- -----------------------
facilitate the receipt by MG and its Affiliates of services pursuant to the
Replacement Agreement for the remainder of the Term.
SECTION 3.3. PROHIBITION ON RESALE. MG and each of its Affiliates
----------------------
agrees not to resell or share any services provided under any of the
Telecommunications Agreements at any time during the Term without the prior
written consent of FDC.
SECTION 3.4. THIRD PARTY CONSENTS. Each Party will act diligently and
---------------------
reasonably to secure the consent, approval or waiver from any Telecommunications
Services Provider necessary to perform its obligations hereunder; provided that
--------
neither Party
-6-
<PAGE>
shall have any obligation to offer or pay any consideration in order to obtain
any such consents or approvals.
SECTION 3.5. COVENANTS. (a) MG's and each of its Affiliates' usage of
----------
each of the services available under each of the Telecommunications Agreements
shall comply with and be governed by the specifications and provisions set forth
in the corresponding Telecommunications Agreement.
(b) MG agrees to cause its Affiliates to comply with all covenants and
obligations of MG set forth herein.
SECTION 3.6. SERVICE ORDERS. MG agrees to provide FDC with a copy of
---------------
any order for any Telecommunications Services or any other services pursuant to
the Telecommunications Agreement within 10 days of such order.
ARTICLE 4
BILLING AND PAYMENTS
--------------------
SECTION 4.1. BILLING. (a) Billing of Telecommunications Services to
--------
MG and its Affiliates shall be in accordance with the terms of each of the
Telecommunications Agreements; provided, however, that the Parties shall use
--------- -------
their reasonable best efforts to cause each Telecommunications Services Provider
to bill MG and its Affiliates directly for the Telecommunications Services, or
any other services provided under the relevant Telecommunications Agreement,
furnished to MG or its Affiliates by such provider.
SECTION 4.2. PAYMENTS. (a) MG agrees to pay promptly all bills
---------
presented to it or its Affiliates by the Telecommunications Services Providers
pursuant to the Telecommunications Agreements in the manner and time period
specified in such agreements.
(b) In the event that any Telecommunications Services Provider does
not bill MG or its Affiliates directly for the Telecommunications Services, or
any other services provided under the relevant Telecommunications Agreement,
furnished to MG or its Affiliates by such provider, FDC shall pay for such
services on MG's or its Affiliates behalf and MG agrees to repay FDC promptly,
but in no event later than 10 days after written notice of, any monies so paid
by FDC on behalf of MG or its Affiliates.
-7-
<PAGE>
SECTION 4.3. OTHER CHARGES. During the Term, MG shall be responsible
--------------
for and pay its and its Affiliates' pro rata portion of any ordinary and
customary charges incurred by FDC or MG and its Affiliates in connection with
ordinary and customary Telecommunications Services provided under any of the
Telecommunications Agreements. Each Party shall be solely responsible for any
expenses and charges that relate solely to services provided under a
Telecommunications Agreement solely for or at the request of the other Party.
ARTICLE 5
CONFIDENTIALITY
---------------
SECTION 5.1. GENERAL CONFIDENTIALITY OBLIGATIONS. Each Party hereby
------------------------------------
agrees to be bound by the provisions of Article 7 of the Operations Agreement,
the provisions of which are hereby incorporated by reference, with respect to
the Confidential Information (as defined in the Operations Agreement) of the
other Party obtained in connection with the performance of this Agreement.
SECTION 5.2. CONFIDENTIALITY OBLIGATIONS OF MG. In addition to any
----------------------------------
confidentiality obligation set forth in Section 5.1, during the Term, MG shall,
-----------
and shall cause its Affiliates to, abide by all provisions of each of the
Telecommunications Agreements relating to maintaining the confidentiality of
information provided in connection therewith.
ARTICLE 6
TERM AND TERMINATION
--------------------
SECTION 6.1. TERM. This Agreement shall commence on the date hereof
-----
and, unless earlier terminated as provided in this Article 6, shall continue
--------
until December 31, 1998.
SECTION 6.2. TERMINATION BY FDC. This Agreement shall terminate upon
-------------------
the occurrence of any of the following events and (i) in the case of clause (a),
(c) or (d) below, at the option of FDC following 30 days prior written notice to
MG and (ii) in the case of clause (b) below, immediately and without prior
written notice or any other action by FDC:
-8-
<PAGE>
(a) If MG or any Affiliate of MG shall fail to perform, or repudiates
or seeks to avoid or invalidate, any material obligation to be performed by it
under this Agreement or any Telecommunications Agreement, provided that (i) in
--------
the case of any breach which is capable of being cured, or otherwise
discontinued, MG has received notice of such breach from FDC or from any
Telecommunications Services Provider demanding such breach be cured and MG has
not cured or discontinued such breach within 30 days of receipt of such notice;
and (ii) the Parties have exhausted the dispute resolution proceedings provided
for in Article 8; provided, however, that if the continuation of services
--------- --------- -------
pursuant to any Telecommunications Agreement to MG or any Affiliate of MG during
the dispute resolution proceedings will, in the opinion of FDC, jeopardize the
continued provision of services to FDC pursuant to any Telecommunications
Agreement, FDC may terminate the rights of MG and its Affiliates hereunder;
(b) In the event of Bankruptcy of MG;
(c) If a Governmental Body enjoins the performance by a Party of any
of its material obligations under this Agreement; or
(d) If FDC reasonably determines that MG is not Solvent.
SECTION 6.3. TERMINATION BY MG. This Agreement shall terminate (a) at
------------------
the option of MG at any time following 60 days prior written notice to FDC or
(b) upon the occurrence of any of the following events and (i) in the case of
clause (A), (C) or (D) below, at the option of MG following 30 days prior
written notice to FDC and (ii) in the case of clause (B) below, immediately and
without prior written notice or any other action by MG:
(A) If FDC or any Affiliate of FDC shall fail to perform, or
repudiates or seeks to avoid or invalidate, any material obligation to be
performed by it under this Agreement or any Telecommunications Agreement,
provided that (i) in the case of any breach which is capable of being cured, or
- --------
otherwise discontinued, FDC has received notice of such breach from MG or from
any Telecommunications Services Provider demanding such breach be cured and FDC
has not cured or discontinued such breach within 30 days of receipt of such
notice; and (ii) the Parties have exhausted the dispute resolution proceedings
provided for in Article 8;
---------
(B) In the event of Bankruptcy of FDC;
-9-
<PAGE>
(C) If a Governmental Body enjoins the performance by a Party of any
of its material obligations under this Agreement; or
(D) If MG reasonably determines that FDC is not Solvent.
SECTION 6.4. PARTIAL TERMINATION OF AGREEMENT BY FDC. If MG or any
----------------------------------------
Affiliate of MG breaches any of its material obligations or covenants in any
Telecommunications Agreement (a "Breached Telecommunications Agreement"), as
---------------------------------------
determined pursuant to the provisions of the Breached Telecommunications
Agreement, which breach is not substantially cured within 30 days after notice
specifying the breach is given by the Telecommunications Services Provider under
the Breached Telecommunications Agreement or by FDC, then upon written notice to
MG, FDC may terminate this Agreement as it relates to the Breached
Telecommunications Agreement. Nothing in this Section 6.4 shall limit FDC's
-----------
termination rights pursuant to Section 6.2.
-----------
SECTION 6.5. EFFECT OF TERMINATION. Upon the termination of this
----------------------
Agreement, each Party shall have no further obligation to perform any obligation
hereunder to the other Party and all outstanding unpaid amounts due and owing by
MG to FDC or any Telecommunications Services Provider under the terms of this
Agreement or any Telecommunications Agreement shall become immediately due and
payable, provided, however, that the termination of this Agreement shall not
--------- -------
affect the following:
(a) The obligation of MG to pay for any services rendered or any
other obligation or liability owing or which becomes owing under this Agreement
or any Telecommunications Agreement whether the obligations arise prior to or
after the date of termination;
(b) The provisions of Article 7 or any other indemnification
---------
obligations of any Party;
(c) The provisions of Article 5 or any other confidentiality
---------
obligations of any Party; and
(e) The provisions of Article 8.
---------
In addition, upon the termination of this Agreement, each Party shall
return to the other Party all copies of such Party's Confidential Information
(as defined in the Operations Agreement) obtained in connection with the
performance of this
-10-
<PAGE>
Agreement, and shall erase all versions of such Confidential Information from
its data files.
ARTICLE 7
INDEMNIFICATION
---------------
SECTION 7.1. INDEMNIFICATION BY MG. Subject to the provisions of this
----------------------
Article 7, MG shall indemnify and hold harmless FDC, each of its Affiliates and
- ---------
each of their respective directors, officers, employees and agents (collectively
the "Indemnified Parties"), from and against any and all Losses, Costs and
---------------------
Expenses based on, arising out of, pertaining to or in connection with
circumstances in which (i) any act or omission of MG or any Affiliate of MG
gives rise to a breach of any Telecommunications Agreement; or (ii) MG or any
Affiliate of MG breaches any of its covenants or obligations in this Agreement.
This indemnity shall be applicable whether or not such Loss, Expense or Cost or
the facts or transactions giving rise to such Loss, Expense or Cost arose prior
to, on or subsequent to the date hereof.
SECTION 7.2. THIRD-PARTY BENEFICIARIES. The provisions of this
--------------------------
Article 7 are for the benefit of, and are intended to create, third-party
- ---------
beneficiary rights in favor of each of the Indemnified Parties that is not a
Party.
SECTION 7.3. NO SPECIAL DAMAGES. IN NO EVENT SHALL FDC, MG OR ANY OF
-------------------
THEIR RESPECTIVE AFFILIATES BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES UNDER THIS
AGREEMENT, WHICH ARE HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF
WHETHER FDC, MG OR ANY OF THEIR RESPECTIVE AFFILIATES HAS BEEN ADVISED, OR COULD
HAVE FORESEEN, OF THE POSSIBILITY SUCH DAMAGES. THE FORE GOING REPRESENTS AN
EXPRESS ALLOCATION OF RISK BETWEEN THE PARTIES.
ARTICLE 8
DISPUTE RESOLUTION
------------------
SECTION 8.1. DISPUTE RESOLUTION. The Parties hereby agree to be bound
-------------------
by and to resolve any Dispute in accordance with Article 11 of the Operations
Agreement, the provisions of which are hereby incorporated by reference.
-11-
<PAGE>
ARTICLE 9
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
--------------------------------------------
IT IS UNDERSTOOD AND AGREED THAT FDC DOES NOT REPRESENT, WARRANT OR
GUARANTEE IN ANY WAY THAT THE PERFORMANCE OF SERVICES BY THE TELECOMMUNICATIONS
SERVICES PROVIDERS WILL BE UNINTERRUPTED OR ERROR FREE. NO PARTY HERETO MAKES
ANY, AND EACH PARTY HERETO HEREBY EXPRESSLY DISCLAIMS ANY, REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING OUT OF OR RELATED TO THIS
AGREEMENT, INCLUDING AS TO ANY SERVICES, HARDWARE, SOFTWARE, EQUIPMENT OR
MATERIALS PROVIDED OR USED BY OR ON BEHALF OF ANY PARTY UNDER THIS AGREEMENT.
EACH PARTY HERETO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 10
MISCELLANEOUS
-------------
SECTION 10.1. EXPENSES. Except as otherwise provided herein, each of
---------
the Parties shall pay all Costs incurred by it or on its behalf in connection
with the negotiation and preparation of this Agreement and its performance and
compliance with all its obligations hereunder, including fees and expenses of
its own counsel.
SECTION 10.2. RELATIONSHIP OF PARTIES. (a) Except as set forth in
------------------------
this Agreement, FDC does not and shall not undertake by this Agreement or
otherwise to perform any obligation for or on behalf of MG or any Affiliate of
MG, whether regulatory or contractual, or assume any responsibility for MG's or
its Affiliates' businesses or operations.
(b) Nothing in this Agreement shall be deemed by the Parties, or by
any third Person, to create a partnership, joint venture or similar relationship
between the Parties and, except as otherwise expressly provided herein, no Party
shall be deemed to be the agent of any other Party. No Party has, and shall not
hold itself out as having, any authority to enter into any contract or create
any obligation or liability on behalf of, in the name of, or binding upon any
other Party.
SECTION 10.3. ENTIRE AGREEMENT. This Agreement, including the
-----------------
Exhibits and Schedules hereto, and Article 7 and Article 11 of the Operations
Agreement constitute the entire
-12-
<PAGE>
agreement among the Parties with regard to the subject matter hereof, and
supersede all other prior agreements, understandings or discussions among the
Parties concerning such subject matter. Except as provided herein, this
Agreement may not be amended or modified except in writing signed by an
authorized representative of each Party.
SECTION 10.4. ASSIGNMENT. Except as otherwise provided herein, the
----------
rights and obligations of both FDC and MG under this Agreement are personal and
not assignable, either voluntarily or by operation of law, without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. Except as provided in Section 7.2, nothing in this Agreement is
-----------
intended to or shall be construed to confer upon any Person other than the
Parties and their respective successors and permitted assigns, any right, remedy
or claim under or by reason of this Agreement.
SECTION 10.5. NOTICES. All notices which any Party may be required
-------
or desire to give to any other Party shall be in writing and shall be given by
personal service, telecopy, registered mail or certified mail (or its
equivalent) or overnight courier to the other Party at its respective address or
telecopy telephone number set forth below. Mailed notices and notices by
overnight courier shall be deemed to be given upon actual receipt by the Party
to be notified. Notice delivered by telecopy shall be confirmed in writing by
overnight courier and shall be deemed to be given upon actual receipt by the
Party to be notified.
In the case of FDC:
First Data Corporation
2121 N. 117th Ave. NP 30
Omaha, Nebraska 68164
Attention: General Counsel
Telephone Number: 402-498-4085
Telecopy Number: 402-498-4123
-13-
<PAGE>
In the case of MG:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: Chief Executive Officer
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
With a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
Attention: General Counsel
Telephone Number: 303-716-6800
Telecopy Number: 303-716-6997
A Party may from time to time change its address for notification purposes by
giving the other Party prior written notice of the new address and the date upon
which it shall become effective.
SECTION 10.6. COUNTERPARTS. This Agreement may be executed in
------------
several counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION 10.7. GOVERNING LAW. Except as otherwise specified in
-------------
Article 8, this Agreement shall be governed by and construed in accordance with
- ---------
the internal laws (as opposed to the conflict of laws provisions) of the State
of New York.
SECTION 10.8. WAIVER. Any term or provision of this Agreement may be
------
waived, or the time for its performance may be extended, by the Party entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any Party, it is
authorized in writing by an authorized representative of such Party. The
failure of any Party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any Party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach. Except as specifically provided otherwise, all remedies
provided for in this Agreement shall be cumulative and in addition to and not in
lieu of any other remedies available to any Party at law, in equity or
otherwise.
-14-
<PAGE>
SECTION 10.9. SEVERABILITY. Wherever possible, each provision hereof
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable.
SECTION 10.10. CONSTRUCTION RULES. The Parties hereto represent that
------------------
in the negotiation and drafting of this Agreement they have been represented by
and relied upon the advice of counsel of their choice. The Parties affirm that
their counsel have had a substantial role in the drafting and negotiation of
this Agreement and, therefore, the rule of construction to the effect that any
ambiguities are to be resolved against the drafting Person shall not be employed
in the interpretation of this Agreement, including any Exhibit or Schedule.
-15-
<PAGE>
IN WITNESS WHEREOF, each Party has caused this Agreement to be signed
and delivered by its duly authorized officer as of the date first written above.
MONEYGRAM PAYMENT SYSTEMS, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
FIRST DATA CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
-16-
<PAGE>
Exhibit 10.8
MONEYGRAM PAYMENT SYSTEMS, INC.
1996 STOCK OPTION PLAN
(AS ADOPTED ____,1996)
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1996 Stock Option Plan (the "Plan") of
MoneyGram Payment Systems, Inc. (the "Company") are to align the interests of
the Company's stockholders and the recipients of options under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, to advance the interests of the Company by attracting and retaining
officers and other key employees and to motivate such persons to act in the
long-term best interests of the Company's stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of two or more members of the Board. Each member of the Committee,
(i) prior to August 15, 1996, shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and on and after August 15, 1996, shall be a "Non-Employee
Director" within the meaning of Rule 16b-3 and (ii) shall be an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
The Committee shall, subject to the terms of this Plan, select eligible
officers and other key employees of the Company and its Subsidiaries (as defined
in Section 1.3) for participation in this Plan and shall determine the number of
shares of Common Stock subject to each option granted hereunder, the exercise
price of such option, the time and conditions of exercise of such option and all
other terms and conditions of such option, including, without limitation, the
form of the option agreement. The Committee shall, subject to the terms of this
Plan, interpret this Plan and the application thereof, establish rules and
regulations it deems necessary or desirable for the administration of this Plan
and may impose, incidental to the grant of an option, conditions with respect to
the grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive. The Committee may, in its sole discretion and for any reason at any
time, subject to the requirements imposed under Section 162(m) of the Code and
regulations promulgated thereunder in the case of an option intended to be
qualified performance-based compensation, take action such that any or all
outstanding options shall become exercisable in part or in full. Each option
shall be evidenced by a written agreement (an "Agreement") between the Company
and the optionee setting forth the terms and conditions of such option.
<PAGE>
The Committee may delegate some or all of its power and authority hereunder
to an executive officer of the Company as the Committee deems appropriate;
provided, however, that the Committee may not delegate its power and authority
with regard to (i) the grant of an option to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code or who, in the
Committee's judgment, is likely to be a covered employee at any time during the
period an option granted hereunder to such employee would be outstanding or (ii)
the selection for participation in this Plan of an officer or other person
subject to Section 16 of the Exchange Act or decisions concerning the timing,
pricing or amount of an option grant to such an officer or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such officers and
-----------
other key employees of the Company, its subsidiaries from time to time and any
other entity designated by the Board or the Committee (individually a
"Subsidiary" and collectively the "Subsidiaries") as the Board or Committee may
---------- ------------
select from time to time. For purposes of this Plan, references to employment
shall also mean an agency or independent contractor relationship and references
to employment by the Company shall also mean employment by a Subsidiary. The
Committee's selection of a person to participate in this Plan at any time shall
not require the Committee to select such person to participate in this Plan at
any other time.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 3.7,
----------------
1,400,000 shares of the common stock, $.01 par value, of the Company ("Common
------
Stock"), shall be available for grants of options under this Plan, reduced by
- -----
the sum of the aggregate number of shares of Common Stock which become subject
to outstanding options. To the extent that shares of Common Stock subject to an
outstanding option are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such option or by reason of the
delivery or withholding of shares of Common Stock to pay all or a portion of the
exercise price of such option, or to satisfy all or a portion of the tax
withholding obligations relating to such option, then such shares of Common
Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and unissued
shares of Common Stock, or authorized and
-2-
<PAGE>
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options may be granted during any calendar year to any person
shall be 500,000, subject to adjustment as provided in Section 3.7.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its discretion, grant
-----------------------
options to purchase shares of Common Stock to such eligible persons as may be
selected by the Committee. Each option, or portion thereof, that is not an
incentive stock option, shall be a non-qualified stock option. An incentive
stock option shall mean an option to purchase shares of Common Stock that meets
the requirements of Section 422 of the Code, or any successor provision, which
is intended by the Committee to constitute an incentive stock option. Each
incentive stock option shall be granted within ten years of the effective date
of this Plan. To the extent that the aggregate Fair Market Value (determined as
of the date of grant) of shares of Common Stock with respect to which options
designated as incentive stock options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or subsidiary as defined in Section 424 of the Code)
exceeds the amount (currently $100,000) established by the Code, such options
shall constitute non-qualified stock options. "Fair Market Value" shall mean
-----------------
the closing transaction price of a share of Common Stock as reported in the New
York Stock Exchange Composite Transactions on the date as of which such value is
being determined or, if there shall be no reported transaction on such date, on
the next preceding date for which a transaction was reported; provided that if
Fair Market Value for any date cannot be determined as above provided, Fair
Market Value shall be determined by the Committee by whatever means or method as
the Committee, in the good faith exercise of its discretion, shall at such time
deem appropriate.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms
----------------------
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
-----------------------------------
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of any option shall not be less than 100% of the
-3-
<PAGE>
Fair Market Value of a share of Common Stock on the date of grant of such
option; provided further, that if an incentive stock option shall be granted to
any person who, at the time such option is granted, owns capital stock
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Company (or of any parent or subsidiary) (a "Ten
---
Percent Holder"), the purchase price per share of Common Stock shall be the
- --------------
price (currently 110% of Fair Market Value) required by the Code in order to
constitute an incentive stock option.
(b) Option Period and Exercisability. The period during which an option
--------------------------------
may be exercised shall be determined by the Committee; provided, however, that
no incentive stock option shall be exercised later than ten years after its date
of grant; provided further, that if an incentive stock option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five
years after its date of grant. The Committee may, in its discretion, establish
performance measures or other criteria which shall be satisfied or met as a
condition to the grant of an option or to the exercisability of all or a portion
of an option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
------------------
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery of previously owned whole shares of Common Stock (which the optionee
has held for at least six months prior to the delivery of such shares or which
the optionee purchased on the open market and in each case for which the
optionee has good title, free and clear of all liens and encumbrances) having a
Fair Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable by reason of such exercise, (C) by authorizing the
Company to withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable by reason
of such exercise, (D) in cash by a broker-dealer acceptable to the Company to
whom the optionee has submitted an irrevocable notice of exercise or (E) a
combination of (A), (B) and (C), in each case to the extent set forth in the
Agreement relating to the option and (ii) by executing such documents as the
Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E) and in the case of
an optionee who is subject to Section 16 of the Exchange Act, the Company may
require that the method of
-4-
<PAGE>
making such payment be in compliance with Section 16 and the rules and
regulations thereunder. Any fraction of a share of Common Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the optionee. No certificate representing
Common Stock shall be delivered until the full purchase price therefor has been
paid (or arrangement made for such payment to the Company's satisfaction).
2.3 TERMINATION OF EMPLOYMENT.
-------------------------
(a) Disability and Retirement. Subject to paragraph (f) below and unless
-------------------------
otherwise specified in the Agreement relating to an option, if an optionee's
employment with the Company terminates by reason of Disability or retirement on
or after age 55 after a minimum of ten years of employment with the Company
("Retirement"), each option held by such optionee shall be exercisable only to
----------
the extent that such option is exercisable on the effective date of such
optionee's termination of employment and may thereafter be exercised by such
optionee (or such optionee's legal representative or similar person) until and
including the earliest to occur of (i) the date which is three years (or such
other period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of employment and (ii) the
expiration date of the term of such option. For purposes of this Plan,
"Disability" shall mean the inability of an optionee substantially to perform
----------
such optionee's duties and responsibilities for a continuous period of at least
six months.
(b) Termination by the Company other than for Cause. Subject to paragraph
-----------------------------------------------
(f) below and unless otherwise specified in the Agreement relating to an option,
if an optionee's employment with the Company is terminated by the Company for
any reason other than for Cause, each option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the effective
date of such optionee's termination of employment and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earliest to occur of (i) the date which is three
months (or such other period as set forth in the Agreement relating to such
option) after the effective date of such optionee's termination of employment
and (ii) the expiration date of the term of such option. For purposes of this
Plan, "Cause" shall mean the willful and continued failure to substantially
perform the duties with the Company (other than a failure resulting from the
optionee's Disability), the willful engaging in conduct which is demonstrably
injurious to the Company or any Subsidiary, monetarily or otherwise, including
conduct that, in the reasonable judgment of the Company, no longer conforms to
the standard of the Company's executives, any act of dishonesty,
-5-
<PAGE>
commission of a felony, or a significant violation of any statutory or common
law duty of loyalty to the Company.
(c) Death. Subject to paragraph (f) below and unless otherwise specified
-----
in the Agreement relating to an option, if an optionee's employment with the
Company terminates by reason of death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earliest to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
(d) Other Termination. Subject to paragraph (f) below and unless
-----------------
otherwise specified in the Agreement relating to an option, if an optionee's
employment with the Company terminates for any reason other than Disability,
Retirement, termination of employment by the Company for any reason other than
for Cause or death, each option held by such optionee shall terminate
automatically on the effective date of such optionee's termination of
employment.
(e) Death Following Termination of Employment. Subject to paragraph (f)
-----------------------------------------
below and unless otherwise specified in the Agreement relating to an option, if
an optionee dies during the period set forth in Section 2.3(a) following
termination of employment by reason of Disability or Retirement, or if an
optionee dies during the period set forth in Section 2.3(b) following
termination of employment by the Company other than for Cause, (or, in each
case, such other period as set forth in the Agreement relating to an option),
each option held by such optionee shall be exercisable only to the extent that
such option is exercisable on the date of such optionee's death and may
thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.
(f) Termination of Employment - Incentive Stock Options. Unless otherwise
---------------------------------------------------
specified in the Agreement relating to the option, if the employment with the
Company of a holder of an incentive stock option terminates by reason of
Permanent and Total Disability (as defined in Section 22(e)(3) of the Code) or
death, each incentive stock option held by such optionee shall be exercisable
only to the extent that such option is exercisable on the effective date of such
optionee's termination of employment by reason of Permanent and Total Disability
date of death, as the
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<PAGE>
case may be, and may thereafter be exercised by such optionee (or such
optionee's executor, administrator, legal representative, beneficiary or similar
person) until and including the earliest to occur of (i) the date which is one
year (or such shorter period as set forth in the Agreement relating to such
option) after the effective date of such optionee's termination of employment by
reason of Permanent and Total Disability or date of death, as the case may be,
and (ii) the expiration date of the term of such option.
If the employment with the Company of a holder of an incentive stock option
terminates for any reason other than Permanent and Total Disability or death,
each incentive stock option held by such optionee shall be exercisable only to
the extent such option is exercisable on the effective date of such optionee's
termination of employment, and may thereafter be exercised by such holder (or
such holder's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months after the effective date
of such optionee's termination of employment and (ii) the expiration date of the
term of such option.
If the holder of an incentive stock option dies during the period set forth
in the first paragraph of this Section 2.3(f) following termination of
employment by reason of Permanent and Total Disability (or such shorter period
as set forth in the Agreement relating to such option), or if the holder of an
incentive stock option dies during the period set forth in the second paragraph
of this Section 2.3(f) following termination of employment for any reason other
than Permanent and Total Disability, each incentive stock option held by such
optionee shall be exercisable only to the extent such option is exercisable on
the date of the optionee's death and may thereafter be exercised by the
optionee's executor, administrator, legal representative, beneficiary or similar
person until and including the earliest to occur of (i) the date which is one
year (or such shorter period as set forth in the Agreement relating to such
option) after the date of death and (ii) the expiration date of the term of such
option.
(g) Participation in Severance Pay Plan. Notwithstanding anything to the
-----------------------------------
contrary above, if an optionee is receiving severance benefits under the
MoneyGram Payment Systems, Inc. Severance Pay Plan for Executives and such
benefits are being paid in installments, then such optionee shall be deemed to
be an active employee for purposes of Sections 2.3(b) and (d) and the second
paragraph of Section 2.3(f) during the period such installments are being paid.
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<PAGE>
III. GENERAL
3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the sole
-------------------------------
stockholder of the Company for approval and, if approved by the sole
stockholder, shall become effective on the date of such approval. This Plan
shall terminate when shares of Common Stock are no longer available for grants
of options, unless terminated earlier by the Board. Termination of this Plan
shall not affect the terms or conditions of any option granted prior to
termination.
In the event that this Plan is not approved by the sole stockholder of the
Company or in the event that the initial public offering of Common Stock is not
completed before November 1, 1996, this Plan and any options granted hereunder
shall be null and void.
3.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
----------
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Rule 16b-3 under the Exchange Act and Section
162(m) of the Code; provided, however, that no amendment shall be made without
stockholder approval if such amendment would (a) increase the maximum number of
shares of Common Stock available under this Plan (subject to Section 3.7) or (b)
effect any change inconsistent with Section 422 of the Code. No amendment may
impair the rights of a holder of an outstanding option without the consent of
such holder.
3.3 GOVERNING LAW. This Plan, each option hereunder and the related
-------------
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
3.4 NON-TRANSFERABILITY. No option hereunder shall be transferable other than
-------------------
(i) by will or the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as otherwise set forth in
the Agreement relating to such option. Except to the extent permitted by the
foregoing sentence, each option may be exercised during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no option hereunder shall
be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any
option
-8-
<PAGE>
hereunder, such option and all rights thereunder shall immediately become null
and void.
3.5 TAX WITHHOLDING. The Company shall have the right to require, prior to
---------------
the issuance or delivery of any shares of Common Stock, payment by the optionee
of any Federal, state, local or other taxes which may be required to be withheld
or paid in connection with an option hereunder. An Agreement may provide that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered upon exercise of the option having an aggregate Fair
Market Value determined as of the date the obligation to withhold or pay taxes
arises in connection with the option (the "Tax Date") in the amount necessary to
--------
satisfy any such obligation or (ii) the optionee may satisfy any such obligation
by any of the following means: (A) a cash payment to the Company, (B) delivery
to the Company of previously owned whole shares of Common Stock (which the
optionee has held for at least six months prior to the delivery of such shares
or which the optionee purchased on the open market and in each case for which
the optionee has good title, free and clear of all liens and encumbrances)
having an aggregate Fair Market Value determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (C) authorizing the Company
to withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having an aggregate Fair Market Value, determined as of
the Tax Date, equal to the amount necessary to satisfy any such obligation, (D)
a cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement relating to
the option; provided, however, that the Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E) and that in the
case of an optionee who is subject to Section 16 of the Exchange Act, the
Company may require that the method of satisfying any such obligation be in
compliance with Section 16 and the rules and regulations thereunder. An
Agreement may provide for shares of Common Stock to be delivered or withheld
having a Fair Market Value in excess of the minimum amount required to be
withheld, but not in excess of the amount determined by applying the optionee's
maximum marginal tax rate. Any fraction of a share of Common Stock which would
be required to satisfy such an obligation shall be disregarded and the remaining
amount due shall be paid in cash by the optionee.
3.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
----------------------
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary
-9-
<PAGE>
or desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any option hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
3.7 ADJUSTMENT. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security shall be appropriately adjusted by the Committee,
such adjustments to be made in the case of outstanding options without an
increase in the aggregate purchase price. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive. If any
adjustment would result in a fractional security being (a) available under this
Plan, such fractional security shall be disregarded, or (b) subject to an option
under this Plan, the Company shall pay the optionee, in connection with the
first exercise of the option in whole or in part occurring after such
adjustment, an amount in cash determined by multiplying (A) the fraction of such
security (rounded to the nearest hundredth) by (B) the excess, if any, of (x)
the Fair Market Value on the exercise date over (y) the exercise price of the
option.
3.8 CHANGE IN CONTROL.
-----------------
(a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common stock
that are registered under Section 12 of the Exchange Act, all outstanding
options shall immediately be exercisable in full and there shall be substituted
for each share of Common Stock available under this Plan, whether or not then
subject to an outstanding option, the number and class of shares into which each
outstanding share of Common Stock shall be converted pursuant to such Change in
Control. In the event of any such substitution, the purchase price per share of
each option shall be appropriately adjusted by the Committee, such adjustments
to be made without an increase in the aggregate purchase price or base price.
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<PAGE>
(2) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of common stock that are registered under Section 12 of the Exchange
Act, each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control pursuant to Section (b)(1) or (2) below or within ten days of the
approval of the stockholders of the Company contemplated by Section (b)(3) or
(4) below, a cash payment from the Company in an amount equal to the number of
shares of Common Stock then subject to such option, multiplied by the excess, if
any, of (i) the greater of (A) the highest per share price offered to
stockholders of the Company in any transaction whereby the Change in Control
takes place or (B) the Fair Market Value of a share of Common Stock on the date
of occurrence of the Change in Control over (ii) the purchase price per share of
Common Stock subject to the option. The Company may, but is not required to,
cooperate with any person who is subject to Section 16 of the Exchange Act to
assure that any cash payment in accordance with the foregoing to such person is
made in compliance with Section 16 and the rules and regulations thereunder.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
------
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Common
------------------
Stock") or (ii) the combined voting power of the then outstanding securities of
- -----
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (A) any
-----------------------------
acquisition directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Company), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this Section 3.8(b);
(2) individuals who, as of the date the Company's registration
statement under Section 12 of the Exchange Act
-11-
<PAGE>
becomes effective, constitute the Board of Directors (the "Incumbent Board")
---------------
cease for any reason to constitute at least a majority of such Board; provided
that any individual who becomes a director of the Company subsequent to such
date whose election or nomination for election by the Company's stockholders was
approved by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall not be deemed a member of the
Incumbent Board;
(3) consummation by the Company 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, a
---------------------
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior
to such Corporate Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock, and the
combined voting power of the outstanding securities of such corporation 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
indirectly) in substantially the same proportions relative to each other as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Common Stock and the Outstanding Voting Securities, as the case may
be, (ii) no Person (other than: the Company; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 25% or more of the Outstanding
Common Stock or the Outstanding Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 25% 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 securities
of such corporation entitled to vote generally in the election of directors and
(iii) 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
-12-
<PAGE>
(4) consummation by the Company of a plan of complete liquidation or
dissolution of the Company.
(c) With respect to any optionee who is subject to Section 16 of the
Exchange Act, (i) notwithstanding the exercise periods set forth in subsections
(a), (b), (c), (e) and (f) of Section 2.3 or as set forth pursuant to such
subsections in any Agreement to which such optionee is a party and (ii)
notwithstanding the expiration date of the term of such option (other than an
Incentive Stock Option), in the event the Company is involved in a business
combination which is intended to be treated as a pooling of interests for
financial accounting purposes (a "Pooling Transaction") or pursuant to which
-------------------
such optionee receives a substitute option to purchase securities of any entity,
including an entity directly or indirectly acquiring the Company, then each
option (or option in substitution thereof) held by such optionee shall be
exercisable to the extent set forth in the Agreement evidencing such option
until and including the latest of (x) the expiration date of the option or, in
the event the optionee's employment with the Company is terminated, the date
determined pursuant to Section 2.3 or 3.2(c) (or as set forth pursuant to such
subsections in any Agreement to which such optionee is a party), as applicable,
(y) the date which is six months and one day after the consummation of such
business combination and (z) the date which is ten business days after the date
of expiration of any period during which such optionee may not dispose of a
security issued in the Pooling Transaction in order for the Pooling Transaction
to be accounted for as a pooling of interests.
3.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right
---------------------------------------
to participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
3.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder
---------------------
of the Company with respect to any shares of Common Stock which are subject to
an option hereunder until such person becomes a stockholder of record with
respect to such shares of Common Stock.
3.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
--------------------------
file with the Committee a written designation of one or more persons as such
optionee's beneficiary or beneficiaries (both primary and contingent) in the
event of the optionee's death. To the extent an outstanding option granted
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<PAGE>
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in writing
with the Committee during the optionee's lifetime on a form prescribed by the
Committee. The spouse of a married optionee domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse. The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.
If an optionee fails to designate a beneficiary, or if all designated
beneficiaries of an optionee predecease the optionee, then each outstanding
option hereunder held by such optionee, to the extent exercisable, may be
exercised by such optionee's executor, administrator, legal representative or
similar person.
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<PAGE>
EXHIBIT 10.9
MONEYGRAM PAYMENT SYSTEMS, INC.
1996 BROAD-BASED STOCK OPTION PLAN
(AS ADOPTED ______, 1996)
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1996 Broad-Based Stock Option Plan (the
"Plan") of MoneyGram Payment Systems, Inc. (the "Company") are to align the
interests of the Company's stockholders and the recipients of options under this
Plan by increasing the proprietary interest of such recipients in the Company's
growth and success, to advance the interests of the Company by attracting and
retaining employees and to motivate employees to act in the long-term best
interests of the Company's stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of two or more members of the Board.
The Committee shall, subject to the terms of this Plan, select eligible
employees of the Company and its Subsidiaries (as defined in Section 1.3) for
participation in this Plan and shall determine the number of shares of Common
Stock subject to each option granted hereunder, the exercise price of such
option, the time and conditions of exercise of such option and all other terms
and conditions of such option, including, without limitation, the form of the
option agreement. The Committee shall, subject to the terms of this Plan,
interpret this Plan and the application thereof, establish rules and regulations
it deems necessary or desirable for the administration of this Plan and may
impose, incidental to the grant of an option, conditions with respect to the
grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive. The Committee may, in its sole discretion and for any reason at any
time, subject to the requirements imposed under Section 162(m) of the Code and
regulations promulgated thereunder in the case of an option intended to be
qualified performance-based compensation, take action such that any or all
outstanding options shall become exercisable in part or in full. Each option
shall be evidenced by a written agreement or certificate (an "Agreement")
setting forth the terms and conditions of such option.
The Committee may delegate some or all of its power and authority hereunder
to an executive officer of the Company as the Committee deems appropriate.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
<PAGE>
1.3 ELIGIBILITY. Participants in this Plan shall consist of such employees of
-----------
the Company, its subsidiaries from time to time and any other entity designated
by the Board or the Committee (individually a "Subsidiary" and collectively the
----------
"Subsidiaries") as the Board or Committee may select from time to time;
------------
provided, however, that officers and other key employees of the Company who are
eligible to participate in the Company's 1996 Stock Option Plan and members of
the Board shall not be eligible to participate in this Plan. For purposes of
this Plan, references to employment shall also mean employment by a Subsidiary.
The Committee's selection of a person to participate in this Plan at any time
shall not require the Committee to select such person to participate in this
Plan at any other time.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 3.7,
----------------
100,000 shares of the common stock, $.01 par value, of the Company ("Common
------
Stock"), shall be available for grants of options under this Plan, reduced by
- -----
the sum of the aggregate number of shares of Common Stock which become subject
to outstanding options. To the extent that shares of Common Stock subject to an
outstanding option are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such option, then such shares of
Common Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and unissued
shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its discretion, grant
-----------------------
options to purchase shares of Common Stock to such eligible persons as may be
selected by the Committee. Each option shall be a non-qualified stock option.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms
----------------------
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
-----------------------------------
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of any option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option. "Fair Market
-----------
Value" shall mean the closing transaction price of a share of Common Stock as
- -----
reported in the New York Stock Exchange Composite Transactions on the date as of
-2-
<PAGE>
which such value is being determined or, if there shall be no reported
transaction on such date, on the next preceding date for which a transaction was
reported; provided that if Fair Market Value for any date cannot be determined
as above provided, Fair Market Value shall be determined by the Committee by
whatever means or method as the Committee, in the good faith exercise of its
discretion, shall at such time deem appropriate.
(b) Option Period and Exercisability. The period during which an option
--------------------------------
may be exercised shall be determined by the Committee. The Committee may, in
its discretion, establish performance measures or other criteria which shall be
satisfied or met as a condition to the grant of an option or to the
exercisability of all or a portion of an option. The Committee shall determine
whether an option shall become exercisable in cumulative or non-cumulative
installments and in part or in full at any time. An exercisable option, or
portion thereof, may be exercised only with respect to whole shares of Common
Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
------------------
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by a cash payment therefor in full or arrangement
made to the Company's satisfaction for a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise. No certificate representing Common Stock shall be delivered
until the full purchase price therefor has been paid (or arrangement made for
such payment to the Company's satisfaction).
2.3 TERMINATION OF EMPLOYMENT.
-------------------------
(a) Disability and Retirement. Unless otherwise specified in the
-------------------------
Agreement relating to an option, if an optionee's employment with the Company
terminates by reason of Disability or retirement on or after age 55 after a
minimum of ten years of employment with the Company ("Retirement"), each option
----------
held by such optionee shall be exercisable only to the extent that such option
is exercisable on the effective date of such optionee's termination of
employment and may thereafter be exercised by such optionee (or such optionee's
legal representative or similar person) until and including the earliest to
occur of (i) the date which is three years (or such other period as set forth in
the Agreement relating to such option) after the effective date of such
optionee's termination of employment and (ii) the expiration date of the term of
such option. For purposes of this Plan, "Disability" shall mean the inability
----------
of an optionee substantially to perform such optionee's duties and
responsibilities for a continuous period of at least six months.
(b) Termination by the Company other than for Cause. Unless otherwise
-----------------------------------------------
specified in the Agreement relating to an
-3-
<PAGE>
option, if an optionee's employment with the Company is terminated by the
Company for any reason other than for Cause, each option held by such optionee
shall be exercisable only to the extent that such option is exercisable on the
effective date of such optionee's termination of employment and may thereafter
be exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months (or such other period as set forth in the Agreement relating to
such option) after the effective date of such optionee's termination of
employment and (ii) the expiration date of the term of such option. For
purposes of this Plan, "Cause" shall mean the willful and continued failure to
-----
substantially perform the duties with the Company (other than a failure
resulting from the optionee's Disability), the willful engaging in conduct which
is demonstrably injurious to the Company or any Subsidiary, monetarily or
otherwise, including conduct that, in the reasonable judgment of the Company, no
longer conforms to the standard of the Company's employees, any act of
dishonesty, commission of a felony, or a significant violation of any statutory
or common law duty of loyalty to the Company.
(c) Death. Unless otherwise specified in the Agreement relating to an
-----
option, if an optionee's employment with the Company terminates by reason of
death, each option held by such optionee shall be exercisable only to the extent
that such option is exercisable on the date of such optionee's death and may
thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.
(d) Other Termination. Unless otherwise specified in the Agreement
-----------------
relating to an option, if an optionee's employment with the Company terminates
for any reason other than Disability, Retirement, termination of employment by
the Company for any reason other than for Cause or death, each option held by
such optionee shall terminate automatically on the effective date of such
optionee's termination of employment.
(e) Death Following Termination of Employment. Unless otherwise specified
-----------------------------------------
in the Agreement relating to an option, if an optionee dies during the period
set forth in Section 2.3(a) following termination of employment by reason of
Disability or Retirement, or if an optionee dies during the period set forth in
Section 2.3(b) following termination of employment by the Company other than for
Cause, (or, in each case, such other period as set forth in the Agreement
relating to an option), each option held by such optionee shall be exercisable
only to the extent that such option is exercisable on the date of such
optionee's death
-4-
<PAGE>
and may thereafter be exercised by such optionee's executor, administrator,
legal representative, beneficiary or similar person until and including the
earliest to occur of (i) the date which is one year (or such other period as set
forth in the Agreement relating to such option) after the date of death and (ii)
the expiration date of the term of such option.
(f) Effect of Leave of Absence. A leave of absence for a period and
--------------------------
purposes conforming to the personnel policies of the Company and approved by the
optionee's employer shall not be deemed a termination of employment or
interruption of continuous service.
(g) Participation in Severance Pay Plan. Notwithstanding anything to the
-----------------------------------
contrary above, if an optionee is receiving severance benefits under the
MoneyGram Payment Systems, Inc. Severance Pay Plan for Non-Exempt and Exempt
Employees and such benefits are being paid in installments, then such optionee
shall be deemed to be an active employee for purposes of Sections 2.3(b) and (d)
during the period such installments are being paid.
III. GENERAL
3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the sole
-------------------------------
stockholder of the Company for approval and, if approved by the sole
stockholder, shall become effective on the date of such approval. This Plan
shall terminate when shares of Common Stock are no longer available for grants
of options, unless terminated earlier by the Board. Termination of this Plan
shall not affect the terms or conditions of any option granted prior to
termination.
In the event that this Plan is not approved by the sole stockholder of the
Company or in the event that the initial public offering of Common Stock is not
completed before November 1, 1996, this Plan and any options granted hereunder
shall be null and void.
3.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
----------
subject to any requirement of stockholder approval required by applicable law,
rule or regulation; provided, however, that no amendment shall be made without
stockholder approval if such amendment would increase the maximum number of
shares of Common Stock available under this Plan (subject to Section 3.7). No
amendment may impair the rights of a holder of an outstanding option without the
consent of such holder.
3.3 GOVERNING LAW. This Plan, each option hereunder and the related
-------------
Agreement, and all determinations made and actions taken pursuant thereto shall
be governed by the laws of the State of
-5-
<PAGE>
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.
3.4 NON-TRANSFERABILITY. No option hereunder shall be transferable other than
-------------------
by will or the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company. Except to the extent permitted
by the foregoing sentence, each option may be exercised during the optionee's
lifetime only by the optionee or the optionee's legal representative or similar
person. Except as permitted by the second preceding sentence, no option
hereunder shall be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
any option hereunder, such option and all rights thereunder shall immediately
become null and void.
3.5 TAX WITHHOLDING. The optionee shall pay, prior to the issuance or
---------------
delivery of any shares of Common Stock, any Federal, state, local or other taxes
which may be required to be withheld or paid in connection with an option
hereunder. The optionee may satisfy any such obligation by a cash payment to
the Company or a cash payment by a broker-dealer acceptable to the Company to
whom the optionee has submitted an irrevocable notice of exercise.
3.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
----------------------
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any option hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
3.7 ADJUSTMENT. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each
-6-
<PAGE>
outstanding option and the purchase price per security shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options without an increase in the aggregate purchase price. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any adjustment would result in a fractional security being
(a) available under this Plan, such fractional security shall be disregarded, or
(b) subject to an option under this Plan, the Company shall pay the optionee, in
connection with the first exercise of the option in whole or in part occurring
after such adjustment, an amount in cash determined by multiplying (A) the
fraction of such security (rounded to the nearest hundredth) by (B) the excess,
if any, of (x) the Fair Market Value on the exercise date over (y) the exercise
price of the option.
3.8 CHANGE IN CONTROL.
-----------------
(a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common stock
that are registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), all outstanding options shall immediately be
------------
exercisable in full and there shall be substituted for each share of Common
Stock available under this Plan, whether or not then subject to an outstanding
option, the number and class of shares into which each outstanding share of
Common Stock shall be converted pursuant to such Change in Control. In the
event of any such substitution, the purchase price per share of each option
shall be appropriately adjusted by the Committee, such adjustments to be made
without an increase in the aggregate purchase price or base price.
(2) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the
event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of common stock that are registered under Section 12 of the Exchange
Act, each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control pursuant to Section (b)(1) or (2) below or within ten days of the
approval of the stockholders of the Company contemplated by Section (b)(3) or
(4) below, a cash payment from the Company in an amount equal to the number of
shares of Common Stock then subject to such option, multiplied by the excess, if
any, of (i) the greater of (A) the highest per share price offered to
stockholders of the Company in any transaction whereby the Change in Control
takes place or (B) the
-7-
<PAGE>
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control over (ii) the purchase price per share of Common Stock subject
to the option.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
------
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Common
------------------
Stock") or (ii) the combined voting power of the then outstanding securities of
- -----
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (A) any
-----------------------------
acquisition directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Company), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this Section 3.8(b);
(2) individuals who, as of the date the Company's registration statement
under Section 12 of the Exchange Act becomes effective, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
---------------
majority of such Board; provided that any individual who becomes a director of
the Company subsequent to such date whose election or nomination for election by
the Company's stockholders was approved by the vote of at least a majority of
the directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;
(3) consummation by the Company 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, a
---------------------
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior
to such Corporate Transaction will beneficially
-8-
<PAGE>
own, directly or indirectly, more than 60% of, respectively, the outstanding
shares of common stock, and the combined voting power of the outstanding
securities of such corporation 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 indirectly) in substantially the same proportions
relative to each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding Voting
Securities, as the case may be, (ii) no Person (other than: the Company; any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company; the corporation resulting from
such Corporate Transaction; and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the case may
be) will beneficially own, directly or indirectly, 25% 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 securities
of such corporation entitled to vote generally in the election of directors and
(iii) 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) consummation by the Company of a plan of complete liquidation or
dissolution of the Company.
3.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right
---------------------------------------
to participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
3.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder
---------------------
of the Company with respect to any shares of Common Stock which are subject to
an option hereunder until such person becomes a stockholder of record with
respect to such shares of Common Stock.
3.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
--------------------------
file with the Committee a written designation of one or more persons as such
optionee's beneficiary or beneficiaries (both primary and contingent) in the
event of the optionee's death. To the extent an outstanding option granted
-9-
<PAGE>
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in writing
with the Committee during the optionee's lifetime on a form prescribed by the
Committee. The spouse of a married optionee domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse. The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.
If an optionee fails to designate a beneficiary, or if all designated
beneficiaries of an optionee predecease the optionee, then each outstanding
option hereunder held by such optionee, to the extent exercisable, may be
exercised by such optionee's executor, administrator, legal representative or
similar person.
3.12 FOREIGN EMPLOYEES. Without amending this Plan, the Committee may grant
-----------------
options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of the
purposes of this Plan and, in furtherance of such purposes the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Company or its Subsidiaries operates or has
employees.
-10-
<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED
OFFICE LEASE
by and between
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
a New York corporation
Landlord,
and
INTEGRATED PAYMENT SYSTEMS INC.,
a Delaware corporation
Tenant
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
Number TITLE Number
- --------------------------------------------------------------------------------
<S> <C> <C>
I. TERMS AND DEFINITIONS 1
II. PROPERTY LEASED 4
A. Premises 4
B. Common Areas 4
C. Minor Variations In Area 4
D. Expansion Premises 4
III. COMMENCEMENT OF TERM; ACCEPTANCE; RENEWAL OPTION 7
A. Lease Commencement Date 7
B. Acceptance and Suitability 7
C. Renewal Option; Renewal Rent 8
IV. RENT 9
A. Monthly Rental 9
B. Additional Rent 9
V. REIMBURSEMENT OF COMMON EXPENSES 10
A. Definitions 10
B. Reimbursement 15
C. Rebate of Excess Charges or Payment of Additional
Charges 17
D. Tenant's Audit of Operating Costs 17
E. Control of Common Areas 18
VI. SECURITY DEPOSIT 20
VII. TENANT'S TAXES 20
VIII. USE OF PREMISES 21
A. Permitted Uses 21
B. Compliance with Laws 21
C. Hazardous Materials 22
D. Asbestos 24
E. Landlord's Rules and Regulations 25
IX. SERVICE AND UTILITIES 25
A. Standard Building Services and
Reimbursement by Tenant 27
B. Limitation on Landlord's Obligations 27
C. Excess Water Service 28
D. Security Services 28
X. MAINTENANCE AND REPAIRS 28
A. Landlord's Obligations 28
B. Tenant's Obligations 29
C. Right to Make Repairs 30
D. Condition of Premises Upon Surrender 31
XI. ENTRY BY LANDLORD 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
XII. ALTERATIONS, ADDITIONS AND TRADE FIXTURES 32
XIII. MECHANIC'S LIENS 35
XIV. INSURANCE 35
A. Tenant 35
B. Landlord 36
XV. INDEMNITY 37
A. Tenant 37
B. Landlord 38
C. Limitation on Recovery for Property Damage 38
D. Limitation on Landlord's Liability; Release
of Trustees, Director, Officers and Partners
of Landlord 38
XVI. ASSIGNMENT AND SUBLETTING BY TENANT 39
XVII. TRANSFER OF LANDLORD'S INTEREST 43
XVIII. DAMAGE AND DESTRUCTION 44
A. Minor Insured Damage 44
B. Major or Uninsured Damage 44
C. Abatement of Rent 45
XIX. CONDEMNATION 46
A. Total or Partial Taking 46
B. Award 46
C. Abatement in Rent 47
D. Temporary Taking 47
E. Transfer of Landlord's Interest to Condemnor 47
F. Private Power of Condemnation 47
XX. DEFAULT 48
A. Tenant's Default 48
B. Remedies 49
XXI. LATE PAYMENTS/DEFAULT INTEREST AND LATE CHARGES 51
A. Default Interest 51
B. Late Charges 52
C. No Waiver 52
XXIII. HOLDING OVER 52
XXIV. ATTORNEYS' FEES 53
XXV. MORTGAGEE PROTECTION 53
A. Subordination; Nondisturbance 53
B. Attornment 54
XXVI. ESTOPPEL CERTIFICATE/FINANCIAL STATEMENTS 54
A. Estoppel Certificate 54
B. Furnishing of Financial Statements 55
XXVII. PARKING 56
XXVIII. SIGNS; NAME OF BUILDING 57
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
XXIX. QUIET ENJOYMENT 58
XXX. BROKERS AND AGENTS 58
XXXI. NOTICES 58
XXXII. NOTICE AND CURE TO LANDLORD AND MORTGAGEE 59
XXXIII. RIGHTS OF FIRST OFFER AND FIRST REFUSAL 59
A. Right of First Offer 59
B. Right of First Refusal 60
XXXIV. GENERAL 60
A. Section Headings 60
B. Incorporation of Prior Agreements;
Amendments 61
C. Waiver 61
D. Short Form or Memorandum of Lease 61
E. Time of Essence 61
F. Examination of Lease 62
G. Severability 62
H. Surrender of Lease Not Merger 62
I. Corporate Authority 62
J. Governing Law 62
K. Force Majeure 62
L. Use of Language 63
M. Successors 63
N. No Reduction of Rental 63
O. No Partnership 63
P. Exhibits 63
Q. Survival 64
R. Rights Personal To Integrated Payment
Systems Inc. 64
S. Reasonableness 64
XXXIV. EXECUTION 64
EXHIBIT "A" SITE PLAN FOR THE PROJECT A-1
EXHIBIT "B" FLOOR PLAN OF THE PREMISES B-1
EXHIBIT "C" TENANT'S WORK (Intentionally Left Blank) C-1
EXHIBIT "D" RENT SCHEDULE D-1
EXHIBIT "E" RULES AND REGULATIONS E-1
EXHIBIT "F" AMENDMENT OF LEASE EXPIRATION DATE F-1
EXHIBIT "G" AMENDMENT TO RESTATED LEASE G-1
EXHIBIT "H" ABS CONSULTING, INC. HVAC REPORT H-1
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
OFFICE LEASE
THIS AMENDED AND RESTATED OFFICE LEASE is entered into by and between Landlord
and Tenant effective as of the 15th day of April, 1996 ("Effective Date") with
respect to the following facts:
R E C I T A L S
A. Landlord and American Express Travel Related Services Company, Inc.
("Original Tenant") are parties to a Lease dated March 2, 1989 (the "Initial
Lease"), as amended by Amendment to Lease effective July 15, 1990 (the "First
Amendment").
B. Original Tenant's interest in the Initial Lease, as amended by the
First Amendment, was assigned to Tenant pursuant to a Lease Assignment effective
as of April 1, 1993 (the "Lease Assignment").
C. The Initial Lease, as amended by the First Amendment and as assigned
by the Lease Assignment, was further amended by a Second Amendment to Lease
between Landlord and Tenant effective as of April 14, 1994 (the "Second
Amendment," which with the Initial Lease, the First Amendment and the Lease
Assignment, is hereinafter collectively referred to as the "Original Lease").
D. Pursuant to the Original Lease, Tenant is presently leasing from
Landlord approximately 53,324 rentable square feet of space, together with
appurtenant rights (the "Demised Premises") in the building owned by Landlord
having a street address of 7401 West Mansfield Avenue, Lakewood, Colorado 80235
(the "Building") for a term expiring on April 14, 1996.
E. Landlord and Tenant now desire to extend the term of the Original
Lease, to provide for the expansion of the Demised Premises and otherwise to
amend and restate the Original Lease in its entirety as set forth below.
NOW, THEREFORE, for and in consideration of the foregoing recitals, the
covenants and agreements contained herein, and for Ten Dollars and other good
and valuable consideration, Landlord and Tenant agree that the Original Lease is
hereby amended and restated in its entirety as follows:
OFFICE LEASE
SECTION I. TERMS AND DEFINITIONS
The following terms as used herein shall have the meanings as set forth below:
A. "Landlord" means THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York
corporation, and its successors and assigns.
B. "Tenant" means INTEGRATED PAYMENT SYSTEMS INC., a Delaware
1
<PAGE>
corporation, and its successors and assigns.
C. "Building" means the building in which the Premises are located, which
Building has approximately 70,886 net rentable square feet and is located
at 7401 West Mansfield Avenue, Lakewood, Colorado 80235. For purposes of
this Lease, the Building shall, as of the effective date of this Lease, be
deemed to comprise thirty-four percent (34%) of the net rentable square
feet of space in the Project, but which percentage shall, however, be
subject to adjustment as and when changes may be made to the composition of
the Project.
D. "Project" means the Corporate Center at Academy Park, located in the City
of Lakewood, Colorado, consisting of three (3) office buildings (including
the Building), parking lots, pedestrian walks, access and service roads,
landscaping and other improvements, all as shown on the site plan attached
hereto as Exhibit A (the "Site Plan"). For purposes of this Lease, the
---------
Project shall be deemed to consist of 210,109 net rentable square feet.
E. "Premises" means, as of the effective date of this Lease, Suites 100, 200
and 300 located on and comprising the first, second and third floors of the
Building, and Suites 408 and 420 located on and comprising a portion or the
fourth floor of the Building (inclusive the BOR Training Room and adjacent
Break Room on the north side of the fourth floor as depicted on Exhibit B),
---------
collectively consisting of approximately Sixty-one Thousand Three Hundred
Twenty-five (61,325) net rentable square feet (the "Original Premises"),
all as more particularly shown on Exhibit B attached hereto and
---------
incorporated herein by this reference.
F. "Term" means six (6) years, commencing on the Lease Commencement Date, and
expiring on the Expiration Date.
G. "Lease Commencement Date" means April 15, 1996.
H. "Expiration Date" means April 14, 2002; provided, however, that if the Term
of this Lease shall be extended in accordance with the provisions of
Section III.D. below, then Landlord and Tenant shall execute and attach
hereto as a new Exhibit F, an Amendment of Lease Termination Date, in form
---------
of that attached hereto as Exhibit F, which shall specify such amended
---------
Lease Termination Date.
I. "Monthly Rental" means the amounts specified in Section IV below and in the
Rent Schedule attached hereto as Exhibit D and incorporated herein, subject
---------
to adjustments as set forth in Section IV. B. below.
J. "Base Operating Expense" means an amount calculated at the rate of Zero and
No/100ths Dollars ($0.00) per net rentable square foot of Premises per
annum of Operating Costs (as defined in Section V below), which shall be
paid by Landlord and not Tenant (except to the extent that such amounts are
deemed incorporated into the Monthly Rental).
2
<PAGE>
K. "Security Deposit" means Zero and No/100ths Dollars ($0.00).
L. "Permitted Use" means a general office (including limited business retail)
and related storage, to be operated twenty-four (24) hours a day, three
hundred sixty-five (365) days a year, all in compliance with all applicable
laws, rules and regulations affecting the Premises. Permitted Use shall
include, without limitation, Tenant's current use of the Original Premises
as a "call center," or telephone answering and call placement facility.
M. "Broker" means ARES, Inc.
N. "Landlord's Address for Notice" means ARES, Inc., 3900 South Wadsworth
Boulevard, Suite 300, Lakewood, Colorado 80235 Attention: Property Manager;
With a copy to: Asset Management, MONY Real Estate, 7600 East Eastman
Avenue, Suite 300, Denver, Colorado 80231.
O. "Tenant's Address for Notice" means First Data Corporation, Integrated
Payment Systems Inc., 7401 West Mansfield, Lakewood, Colorado 80235
Attention: Director, Voice Operations; with a copy to: First Data
Corporation, Integrated Payment Systems, Inc., IPS General Counsel's
Office, 6200 South Quebec, Suite 330, Englewood, Colorado 80111 Attention:
Todd W. Buchardt.
P. "Tenant's Proportionate Share" for Tenant's reimbursement of Operating
Costs and other Building expenses to be pro-rated among Building tenants
generally, means the quotient obtained by dividing the total number of
square feet of net rentable floor area in the Building into the total
number of square feet of net rentable floor area within the Premises.
Changes in the calculation of Tenant's Proportionate Share shall be
effective upon the date that Tenant adds any Suite of Additional Premises
to the Premises leased hereunder.
Q. "Tenant's Parking Spaces" means five (5) parking spaces for each One
Thousand (1,000) net rentable square feet in the Premises, and divided as
follows: fifteen (15) reserved for Tenant's exclusive use and the remainder
of which shall be non-exclusive, unassigned and unreserved spaces on the
surface parking lots in the Project. Tenant's fifteen (15) reserved parking
spaces shall be located reasonably adjacent to the Building.
Notwithstanding the provisions of Section XXVII, "Parking," Tenant's
Parking Spaces shall be available to Tenant and Tenant's employees,
customers and invitees 24 hours a day, 7 days a week (subject, however, to
such closure or interruption as may be necessary for Landlord to perform
its maintenance and repair obligations [provided that Landlord shall use
reasonable efforts to make adequate substitute parking areas available],
and to such closure as may be necessary for Landlord to prevent the parking
areas from being deemed dedicated for public use), at no additional cost to
Tenant.
R. "Monthly Parking Rent" means, for the Initial Term, Zero and No/100ths
Dollars ($0.00) per month payable by Tenant for
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Tenant's Parking Spaces.
SECTION II. PROPERTY LEASED
A. Premises
--------
Upon and subject to the terms, covenants and conditions hereinafter set
forth, Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises.
B. Common Areas
------------
Subject to the terms, covenants and conditions of this Lease, Tenant shall
have the right, for the benefit of Tenant and its employees, suppliers,
shippers, customers and invitees, to the non-exclusive use of all of the
Common Areas as hereinafter defined.
C. Minor Variations In Area
------------------------
The area of the Premises contained in Section I. is agreed to be the area
of the Premises regardless of minor variations resulting from construction
or remodeling of the Building and/or tenant improvements.
D. Expansion Premises
------------------
1. Additional Premises. Tenant shall, in accordance with the
provisions of this Paragraph D, take occupancy of Suites 402, 403, 410 and
418, located on the fourth floor of the Building and collectively
consisting of approximately Nine Thousand Five Hundred Sixty-one (9,561)
additional net rentable square feet (collectively, the "Additional
Premises", and each a "Suite of Additional Premises"), all as more
particularly shown on Exhibit B attached hereto and incorporated herein by
this reference. As Tenant takes possession of each Suite of Additional
Premises, the Premises shall thereupon and thereafter be deemed to include
such Suite, and the rent and other charges, and the calculation of Tenant's
Proportionate Share shall be adjusted accordingly. Monthly Rental for each
Suite of Additional Premises shall commence upon the Additional Suite Rent
Commencement Date (defined below) applicable to each such Suite of
Additional Premises in accordance with the then applicable Monthly Rental
rate set forth on the Rental Schedule attached hereto as Exhibit D and made
a part hereof. With respect to each Suite of Additional Premises, Landlord
shall notify Tenant, in writing, of the date upon which Landlord expects
each Suite of Additional Premises to become available for Tenant's
occupancy ("Availability Notice"), which Availability Notice shall be given
not less than fifteen (15) days prior to the date that Landlord expects the
affected Suite to become available for Tenant's possession (the
"Availability Date"). Tenant's obligations to pay rent for the Suite of
Additional Premises shall commence upon the first to occur of (a) the
thirtieth (30th) day following the Availability Date, or (b) the date upon
which Tenant commences business operations in the Suite
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of Additional Premises (the "Additional Suite Rent Commencement Date");
provided that the Availability Date and Additional Suite Rent Commencement
Date shall be extended by an amount of time equal to any delay in Landlord
delivering possession of the Suite of Additional Premises to Tenant; and
provided further that if Tenant shall take possession of the Suite of
Additional Premises prior to the Availability Date set forth in Landlord's
Availability Notice, then the Availability Date shall be deemed to be the
date upon which Tenant takes such early possession. Upon the Availability
Date, as such date may be extended in order for Landlord to recover
possession of the affected Suite of Additional Premises from the prior
tenant, Landlord agrees to deliver possession of the affected Suite to
Tenant. During the period of time prior to the Additional Suite Rent
Commencement Date, Tenant shall have the right to perform such Tenant's
Work in the Suite as Tenant shall deem necessary or desirable, all
consistent with the terms and conditions set forth in this Lease, and all
at Tenant's sole cost and expense. Upon the date that Tenant takes
possession of a Suite of Additional Premises as required under this
Paragraph D, but in no event later than the Availability Date, such Suite
shall be deemed to constitute a part of the Premises leased by Tenant,
subject to all of the terms, conditions and obligations of this Lease;
provided only, however, that Tenant's obligation to pay rent for such Suite
shall not commence until the Additional Suite Rent Commencement Date.
Within ten (10) days following the Additional Suite Rent Commencement Date,
Landlord and Tenant shall execute an Amendment To Restated Lease, in the
form attached hereto as Exhibit G, setting forth the date on which Suite of
Additional Premises was added to the Premises (the "Additional Suite
Commencement Date") and the Additional Suite Rent Commencement Date, and
the resulting changes in the Monthly Rent payable by Tenant and the
calculation of Tenant's Proportionate Share.
2. Suite 402. Tenant acknowledges that Suite 402, consisting of
approximately 1,670 net rentable square feet ("Suite 402"), is as of the
date hereof leased to a third party pursuant to a lease which is scheduled
to terminate on November 30, 1997. Following the expiration or earlier
termination of such third party lease, Tenant hereby commits, pursuant to
Subparagraph 1 above, to add Suite 402 to the Premises demised to Tenant
hereunder. Tenant desires to obtain occupancy of Suite 402 prior to the
scheduled expiration of the existing third party's lease. Landlord agrees
that it will neither renew nor extend, nor suffer any holdover of the
existing lease for Suite 402. Further, Landlord agrees to use reasonable
efforts to effect an early termination of the existing lease for Suite 402;
provided that Landlord shall have no liability for its inability to do so.
Neither Landlord nor Tenant shall be obligated to pay to the current tenant
any moving costs, cancellation fees or payments, or any similar payments;
however if such tenant shall demand any such payments of Landlord in
consideration of such tenant's early termination of his lease of Suite 402,
Tenant shall, within five (5) days of notice from Landlord specifying in
reasonable detail the extent and amount of the
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requested payments, notify Landlord of its agreement or refusal to
reimburse Landlord for said costs. If Tenant agrees to bear such costs,
then Landlord shall use all reasonable efforts to terminate the existing
lease of Suite 402, and make Suite 402 available to Tenant in accordance
with the provisions of this Paragraph D, and Tenant shall reimburse
Landlord for all such payments to the other tenant upon invoice. If Tenant
refuses to bear such costs, then Landlord shall be under no obligation to
continue any further efforts to terminate the existing Suite 402 lease. In
any event, until such time as the other tenant vacates Suite 402, Tenant
agrees to respect and not interfere with such other tenant's right to the
quiet use, occupation and enjoyment of Suite 402.
3. Suite 403. Tenant acknowledges that Suite 403, consisting of
---------
approximately 1,024 net rentable square feet ("Suite 403"), is as of the
date hereof leased to a third party pursuant to a lease which is currently
on a month-to-month basis. Landlord agrees that it will neither renew nor
extend, nor suffer any holdover of the existing lease for Suite 403.
Following the expiration or earlier termination of such third party lease,
Tenant hereby commits, pursuant to Subparagraph 1 above, to add Suite 403
to the Premises demised to Tenant hereunder.
4. Suite 410. Tenant acknowledges that Suite 410, consisting of
---------
approximately 5,995 net rentable square feet ("Suite 410"), is as of the
date hereof leased to a third party pursuant to a lease which is scheduled
to terminate on April 30, 1996. Landlord agrees that it will neither renew
nor extend, nor suffer any holdover of the existing lease for Suite 410.
Following the expiration or earlier termination of such third party lease,
Tenant hereby commits, pursuant to Subparagraph 1 above, to add Suite 410
to the Premises demised to Tenant hereunder.
5. Suite 418. Tenant acknowledges that Suite 418, consisting of
---------
approximately 872 net rentable square feet ("Suite 418"), is as of the date
hereof leased to a third party pursuant to a lease which is scheduled to
terminate on May 31, 1996. Landlord agrees that it will neither renew nor
extend, nor suffer any holdover of the existing lease for Suite 418.
Following the expiration or earlier termination of such third party lease,
Tenant hereby commits, pursuant to Subparagraph 1 above, to add Suite 418
to the Premises demised to Tenant hereunder.
6. Completion of Tenant Improvements and Possession of Additional
--------------------------------------------------------------
Premises. Landlord shall have no obligation, financial or otherwise, for
--------
the construction of any tenant finish improvements in the Premises or in
any Suite of Additional Premises. Following Landlord's Availability Notice
as described in Paragraph 1 above, and provided that any prior parties have
vacated such space, Tenant shall be permitted to take occupancy of the
Suite of Additional Premises desired by Tenant ("Tenant's Work") in
accordance with the provisions of Section XII (Alterations, Additions and
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Trade Fixtures) of this Lease, all at Tenant's sole cost and expense.
Tenant shall cause the performance of all Tenant's Work to comply with the
relevant requirements of this Lease, including, without limitation, Section
XIII (pertaining to mechanics' liens) and Section XII (pertaining to
alterations, which requires, inter alia, that Tenant submit plans for
certain alterations to Landlord for its reasonable approval). All tenant
improvements constructed in the Premises or in the Additional Premises,
whether by Landlord or by (or on behalf of) Tenant and whether at
Landlord's or Tenant's expense, shall become part of the Premises and shall
be and remain the property of Landlord except (i) to the extent Landlord
otherwise specifically agrees in writing, or (ii) as permitted or required
to be removed by Tenant under the provisions of Section X.D. below.
SECTION III. COMMENCEMENT OF TERM; ACCEPTANCE; RENEWAL OPTION
A. Lease Commencement Date
-----------------------
Tenant is, as of the date of this Lease, presently in occupancy of the
Original Premises. Accordingly, the Term of the Lease shall commence on the
Lease Commencement Date, being the date of full execution of this Lease,
and shall continue, subject to earlier termination as provided herein,
until the Expiration Date (as extended only pursuant to Section III C.
below).
B. Acceptance and Suitability
--------------------------
Tenant acknowledges that the Original Premises which it is occupying as of
the Commencement Date are satisfactory to Tenant in all material respects.
Tenant further acknowledges that it has had sufficient opportunity to
inspect the Additional Premises, and accepts the Additional Premises in
their "AS IS" condition. Tenant acknowledges that neither Landlord nor
Broker, nor any agent, employee or servant of Landlord or Broker, has made
any representation with respect to the Premises or the Project, or with
respect to the suitability of them to the conduct of Tenant's business, nor
has Landlord agreed to undertake any modifications, alterations, or
improvements of the Premises or Project, except, in each case, as
specifically provided in this Lease.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD HEREBY
DISCLAIMS, AND TENANT WAIVES THE BENEFIT OF, ANY AND ALL IMPLIED
WARRANTIES, INCLUDING IMPLIED WARRANTIES OF HABITABILITY, FITNESS OR
SUITABILITY FOR PURPOSE, OR THAT THE PROJECT (OTHER THAN THE IMPROVEMENTS
CONSTRUCTED BY LANDLORD IN THE PREMISES) HAVE BEEN CONSTRUCTED IN A GOOD
AND WORKMANLIKE MANNER. TENANT EXPRESSLY ACKNOWLEDGES THAT LANDLORD DID NOT
CONSTRUCT OR APPROVE THE QUALITY OF CONSTRUCTION OF THE BUILDING.
Notwithstanding the foregoing, Landlord hereby represents and warrants
that, to the best of Landlord's actual knowledge as
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of the date hereof, the Additional Premises were originally constructed
(exclusive of any tenant finish improvements subsequently installed) in
compliance with all applicable building codes. In the event that Tenant
discovers that any portion of the Additional Premises were not so
constructed in compliance with the building code applicable at the time of
such construction, then Landlord shall, at Landlord's sole cost and
expense, make such repairs and modifications as may reasonably be required
to bring the identified deficiency into material compliance with the
building code; provided, however, that the foregoing obligation of Landlord
shall not apply to any remedial work which may be necessitated as a result
of any tenant improvements constructed or intended to be constructed by
Tenant in the Additional Premises.
C. Renewal Option; Renewal Rent
----------------------------
Tenant shall have the option to extend the Term of the Lease for one (1)
period of five (5) years (i.e., through April 13, 2007) (the "Renewal
Term") upon the terms set forth in this Subsection D (the "Renewal
Option"). The terms of the Lease for the Renewal Term shall be the same as
the terms of the Lease in effect immediately prior to the commencement of
the Renewal Term, except that the basic Monthly Rent for each year of the
Renewal Term shall be the "Fair Market Value" (as determined in accordance
with the procedures set forth below). Tenant shall notify Landlord of
Tenant's desire to extend the term of the Lease no later than July 14,
2001. Landlord shall respond to Tenant's notification within thirty (30)
days with a quote that reflects Landlord's determination of the Fair Market
Value for the Demised Premises for each year of the Renewal Term. If
Landlord and Tenant have not agreed upon the Fair Market Value for the
Renewal Term by September 30, 2001, then the Renewal Option set forth in
this paragraph shall lapse and be of no further force or effect; provided,
however, that if Tenant shall provide written notice to Landlord, received
by Landlord no later than September 30, 2001, of Tenant's desire to keep
the Renewal Option in effect ("Tenant's Renewal Notice"), then the Renewal
Option shall remain in effect, and Landlord and Tenant shall thereafter
each select an independent Colorado certified general appraiser (with at
least five years experience appraising commercial properties in the
surrounding metropolitan area and having an MAI designation), who shall
submit their written appraisals of the Fair Market Value in the Market
Area, as defined in this section, to Landlord and Tenant. No appraisal
received after sixty days from the date of Tenant's Renewal Notice shall be
considered. Landlord and Tenant shall each be solely responsible for the
fees and costs charged by their selected appraiser. If the higher appraisal
is within ten percent (10%) of the lower appraisal, then the two appraisals
will be averaged to arrive at the Fair Market Value. If the higher
appraisal is more than ten percent (10%) higher than the lower appraisal,
then the two appraisers shall select a third independent appraiser with the
same qualifications as the other two appraisers, the fees and costs of
which appraiser shall be paid equally by Landlord and Tenant, whose
appraisal value of the Fair Market Value will be averaged with
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the appraised value of the other appraisals closest to it to arrive at the
Fair Market Value. Landlord and Tenant each agree to be bound by the Fair
Market Value as determined in accordance with the procedures set forth in
this paragraph.
In determining Fair Market Value, Landlord and the appraisers shall
consider all elements affecting the lease transaction as is reflective of
the then-existing market conditions, including but not limited to the fact
that Tenant is paying its own utility charges, Tenant's creditworthiness,
broker's commission or absence of same, the fact that Tenant may not
require an improvement allowance or work letter credit, rental abatement or
any other concessions as may be typically required by a renewal tenant, the
parking provided to Tenant by Landlord, and that Landlord shall not lose
rent because of any marketing or construction time. The appraisers shall
also endeavor to consider in their review to the extent feasible (i)
buildings and projects similar to the Building and Project with
consideration given to age, construction, finish levels, services,
condition, occupancy, management and which are at least 50,000 net rentable
square feet in size, and (ii) a market area ("Market Area") consisting of
an area bounded on the east by Federal Boulevard, on the west by Kipling
Street, on the north by Alameda Boulevard and on the south by C-470. The
basic annual rent payable by Tenant for the Renewal Term shall be deemed to
include a Base Operating Expense of $0.00 per rentable square foot.
SECTION IV. RENT
A. Monthly Rental
--------------
Commencing on the Lease Commencement Date, Tenant shall pay to Landlord
during the Term, rental for the Premises in the amounts and at the rates as
set forth in the "Rental Schedule" attached hereto as Exhibit D payable in
monthly installments (the "Monthly Rental") in the amounts also set forth
in Exhibit D, (subject, however, to any modifications or adjustments
specified hereinbelow and/or in Exhibit D). Monthly Rental for the
Additional Premises shall commence as provided in Section II.D. above. The
Monthly Rental shall be payable by Tenant on or before the first day of
each calendar month, in advance, without further notice, at the address
specified for Landlord in Section I., or such other place as Landlord shall
designate in writing, without any prior demand therefor and without any
abatement, deduction or setoff whatsoever except as expressly provided in
this Lease. If the Lease Commencement Date should occur on a day other than
the first day of a calendar month, or the Expiration Date should occur on a
day other than the last day of a calendar month, then the rental for such
fractional month shall be prorated on a daily basis upon a thirty (30) day
calendar month.
B. Additional Rent
---------------
As used in this Lease, the term "rent" shall mean the Monthly Rental plus
all "additional rent", which shall mean all other
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amounts payable by Tenant to Landlord pursuant to this Lease other than
Monthly Rental, including without limitation, Tenant's Proportionate Share
of Operating Costs of the Premises, the Building and the Common Areas
within the Building, and a reasonable allocation of Operating Costs for all
Common Areas in the Project outside of the Building (but excluding,
however, Operating Costs which are unique to other buildings in the
Project). Tenant acknowledges that Landlord will incur certain
administrative costs, including the cost of funds used, when purchasing
special materials or services specifically for Tenant's use and at Tenant's
request; therefore, except for Monthly Rent, Tenant's Proportionate Share
of Operating Costs and invoiced electricity, Landlord shall have the right,
at its option, add to the invoice for each such charge, and Tenant agrees
to pay as rental hereunder, an administrative service fee ("Administrative
Fee") in the amount of fifteen percent (15%) of the cost of the materials
and services (inclusive of sales tax and labor for Property Management
Company maintenance personnel performing any special service, at their then
standard billing rates). All rent shall be paid in lawful money of the
United States which shall be legal tender at the time of payment. Where no
other time is stated herein for payment, payment of any amount due from
Tenant to Landlord hereunder shall be made within thirty (30) days after
Tenant's receipt of Landlord's invoice or statement therefor.
SECTION V. REIMBURSEMENT OF COMMON EXPENSES
A. Definitions
-----------
(1) "Common Areas" means all areas, space, equipment and special services
provided by Landlord for the common or joint use and benefit of the
Project tenants, their employees, agents, servants, suppliers,
customers and other invitees, including, by way of illustration, but
not limitation, retaining walls, fences, landscaped areas, parks,
curbs, sidewalks, private roads, restrooms, stairways, elevators,
lobbies, hallways, patios, service quarters, parking areas, all common
areas and other areas within the exterior of the Building and in the
Project or as shown on the site plan attached to this Lease as Exhibit
A; provided, however, that all electrical, mechanical, and telephone
rooms, supply storage rooms, and all janitorial closets shall remain
under the exclusive control of Landlord, notwithstanding that such
areas shall be deemed Common Areas.
(2) "Taxes" shall mean all real property taxes, personal property taxes,
improvement bonds, and other charges and assessments which are levied
or assessed upon or with respect to the Building and Project and the
land on which the Building and Project are located and any
improvements, fixtures and equipment and all other property of
Landlord, real or personal, located in the Building and Project and
used in connection with the operation of the Building and Project and
the land on
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which the Building and Project are located, including any increase in such
taxes, whether resulting from a reassessment of the value of the land, the
Building or the Project, personal property, or for any other reason,
imposed by any governmental authority, and any similar tax which shall be
levied or assessed in addition to or in lieu of such real or personal
property taxes and any license fees, commercial rental tax, or other tax
upon Landlord's business of leasing the Building and the Project, but shall
not include any federal or state income tax, or any franchise, capital
stock, estate, inheritance, succession, transfer and excess profit taxes
imposed upon Landlord, and shall also include any tax consultant fee or
other costs incurred by Landlord to review or contest any tax assessed
against the Premises, Building, or Project. In the event that Landlord
shall elect to enter into a ground lease or consent to ground lease
financing, then in addition to the foregoing, all Taxes levied and assessed
against the fee estate under the ground lease shall be included in the
definition of Taxes. If any special assessment or other Tax is payable by
Landlord over a period of years, then Landlord shall be deemed to have
elected to pay such Tax over the longest permissible period (whether or not
Landlord actually so elects), and, for the purposes of this Lease, such
Taxes shall be deemed to mean only those installment payments which would
fall due during the Term of this Lease (including whatever financing
charges the applicable governmental entity charges in connection with such
extended payments). Taxes shall not include (a) any occupancy permit fees,
building permit fees or other governmental charges incurred by Landlord in
connection with any other tenant's occupancy of any space in the Project,
(b) any fines, penalties or interest incurred as a result of Landlord's
failure to pay any Tax when due, or (c) any payment resulting from the
failure of the Project to comply with any applicable law.
Tenant shall have the right, exercisable by written notice to Landlord, to
require Landlord to contest the amount or assessment of any Taxes. If
Tenant so elects, Landlord shall use reasonable efforts to contest such
Taxes; provided that Landlord shall not be under any obligation to engage
legal counsel or to pursue any court or other action which would require
the use of legal counsel unless Tenant agrees to reimburse Landlord for the
full cost thereof, such legal costs to be paid as incurred by Landlord and
reimbursed by Tenant on an invoice basis; provided, however, that if such
contest shall result in a reduction of Taxes otherwise payable by Landlord,
and to the extent of such tax savings, Landlord shall allocate such contest
costs among the tax parcel(s) in the Project benefitted by such a reduction
in Taxes, and Tenant shall be reimbursed, to the extent of all such tax
savings achieved as a result of such contest, for costs previously paid by
Tenant in connection with such contest. At such time as Landlord is
satisfied that it has obtained such results as are reasonably obtainable in
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any such contest, it shall notify Tenant in writing of such results.
If Tenant still wishes Landlord to further contest such Taxes, then
Tenant shall so notify Landlord, and Landlord shall take such further
action as may be appropriate, provided that Landlord shall not be
required to take any action which Landlord believes to be unreasonable
or which Landlord reasonably believes would be detrimental or
prejudicial to the Property or to Landlord, and provided further that
Tenant shall bear the full cost and expense of all such further
action.
Tenant understands and acknowledges that Landlord may construct an
additional office building and/or parking garage in the Project during
the Term or any renewal of this Lease. Landlord agrees to use all
reasonable efforts to have the new office building and the land under
it, but not the parking garage or any other common areas around the
new office building, separately assessed and taxed, and therefore not
included as part of the Taxes hereunder; provided, however, that
Landlord shall not be required to subdivide the Project in order to
accomplish the same. In the event that such separate assessment is not
reasonably available, then Landlord agrees to exclude from Taxes
hereunder, beginning in the calendar year that the said new building
is fully assessed, the increased assessment attributable to the new
building and the land immediately thereunder, as reasonably determined
by Landlord. Notwithstanding the foregoing, any common areas developed
around the new office building, and any new parking garage, shall, for
purposes of this Lease, and unless intended and designated for the
exclusive use of such new building, become Common Areas for all
purposes under this Lease.
(3) "Operating Costs" shall mean all costs and expenses payable by
Landlord in connection with the operation and maintenance of the
Premises, Building, Project, and Common Areas, including, but not
limited to, (a) the cost of landscaping, repaving, resurfacing,
repairing, replacing, painting, lighting, cleaning, removing trash,
janitorial services, security services and other similar items; (b)
the total cost of compensation and benefits of personnel to implement
the services referenced herein; (c) all Taxes; (d) the cost of any
insurance obtained by Landlord in connection with the Building and
Project, including, but not limited to, the insurance required to be
obtained by Landlord pursuant to this Lease; (e) the cost of
operating, repairing and maintaining the mechanical, electrical,
plumbing, life safety, and access systems; (f) the cost of monitoring
services, if provided by Landlord, including, without limitation, any
monitoring or control devices used by Landlord in regulating the
parking areas; (g) the cost of water, electricity, gas and any other
utilities; (h) legal, accounting and consulting fees and expenses; (i)
compensation (including employment taxes and fringe benefits) of all
persons who perform duties connected with the operation, maintenance
and repair of the
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Premises, Project, Building or Common Areas; (j) energy allocation,
energy use surcharges, or environmental charges; (k) municipal
inspection fees or charges; (l) the costs incurred by Landlord to
provide management services for the Building or Project; (m) the
amortized cost, including commercially reasonable financing costs if
applicable, of any equipment, device or other capital improvement or
replacement installed by Landlord in the Premises, Building or Project
for the purpose of achieving economies in the operation, maintenance
and/or repair thereof, or to reduce Operating Expenses or to comply
with future laws, provided that the amount of such capital
expenditures shall be equally amortized over the normally expected
useful life of the capital improvement or replacement made, with only
each year's amortized amount to be included as part of Operating
Expenses for that year; (n) the cost of keeping the automobile parking
area in a reasonably neat, clean and orderly condition, lighted,
landscaped and repaired; (o) the fees and/or assessments paid to a
property owners' association created for the purpose of providing
common repair, maintenance and/or operation of the outside common
areas in the Academy Park Subdivision, including but not limited to
medians, landscaping and signage, whether participation in such a
property owners' association is voluntary or as a result of the
implementation of a recorded declaration of covenants, provided that
such fees and assessments are reasonably apportioned between the
participating properties in the Academy Park Subdivision; and (p) any
other reasonable and customary costs or expenses incurred by Landlord
under this Lease which are not otherwise required to be paid by other
individual tenants in the Project on a direct reimbursement basis and
not as part of such tenant's general obligation for common expenses.
Notwithstanding the foregoing, however, Operating Costs shall not
include, whether or not such items might otherwise be deemed included
in the description of Operating Costs, and Tenant shall not be
obligated to pay Tenant's Proportionate Share of: (1) costs of
preparing any space in the Building or in any other building in the
Project for occupancy by a tenant or costs of allowances or
concessions provided to such other tenants; (2) wages, salaries, fees
or fringe benefits paid to executive personnel of Landlord or to any
administrative personnel of Landlord, or to any executive level
personnel of the managing agent for the Building (the "Manager"),
except (i) to the extent any such personnel may provide specific
management services for the Building or the Project, or (ii) for
severance payments paid to any personnel of Landlord or Manager; (3)
renting and leasing commissions and legal fees and expenses in
connection therewith; (4) franchise or partnership taxes, income
taxes, inheritance taxes or any similar or like taxes on Landlord; (5)
the cost of any items for which Landlord is specifically to be
reimbursed by Tenant or other occupant of the Building or any other
tenant in the Project (other
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than under operating expense pass-through lease provisions), or by any
other third party or parties pursuant to contractual commitments; (6)
the cost of performing any special services (including redecorating
and painting) furnished to other tenants and not furnished to Tenant
or costs of providing a greater level or amount of services to other
tenants than furnished to Tenant; (7) amounts paid for legal,
arbitration, accounting, brokerage or other professional services in
connection with the leasing of space or in connection with
relationship or disputes with tenants, former tenants or other
occupants of the Building or any other building in the Project; (8)
the cost of installing, operating and maintaining any special amenity,
such as a covered or underground parking facilities or a luncheon,
athletic, or recreational club which is not available for use by all
tenants in the Project or the Building, unless approved by Tenant as
an applicable Operating Expense; (9) any insurance premium to the
extent that Landlord is separately reimbursed therefor by Tenant or by
any other tenant or occupant of the Project; (10) the cost of any work
or services performed for, or facilities furnished to, any tenant
(including Tenant) at such tenant's cost or at no cost (where such
free work, services or facilities are not available to Tenant or not
usable by Tenant); (11) any costs paid by Landlord to Manager or to a
corporation, entity, or person related to Landlord or Manager to the
extent that such costs are in excess of the costs that would have been
paid by Landlord normally to any unrelated party for the same level
and quality of service or item; (12) interest, amortization and other
charges paid in respect of a mortgage or other loans; (13) rent,
additional rent and other charges (other than Taxes) payable under any
ground lease or any lease superior to this Lease; (14) depreciation,
amortization (except as otherwise expressly permitted) and other
non-cash charges; (15) expenditures for capital improvements,
equipment or capital repairs or replacements and other capital items,
except to the extent permitted under Subparagraph (3)(m) above; (16)
increases in insurance cost on account of maintenance of special
insurance requirements or policies at the request or requirement of
other tenants; (17) marketing or advertising costs; (18) any costs,
fines, or penalties incurred due to violation by Landlord or another
tenant of any governmental rule or authority; (19) any repairs,
replacements or other expenses resulting from the gross negligence or
willful misconduct of Landlord or its employees or agents; (20) costs
incurred in the removal, encapsulation, replacement, or other
treatment of any substance determined by applicable judicial or
governmental authorities having jurisdiction therefor to be
detrimental or hazardous to the health, safety, or general environment
of the tenants or occupants of the Building or the Project, subject,
however, to Tenant's obligations under Section VIII. C. and D. hereof;
(21) expenses for which Landlord is or will be reimbursed by insurance
proceeds or condemnation awards;
14
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(22) expenses which are properly allocated to buildings other than the
Building of which the Premises is a part; (23) accounting fees
incurred in connection with the preparation of financial statements,
tax returns and other documents directly relating to the Landlord's
ownership of the Project, except any accounting fees incurred in
connection with the management and operation of the Project; (24)
financing or refinancing costs; (25) rentals and other related
expenses, if any, incurred in leasing air conditioning systems,
elevators or other equipment ordinarily considered to be of a capital
nature, except equipment used in providing janitorial services and
which is not affixed to the Building or any other building in the
Project; (26) costs and expenses for sculptures, paintings or other
original works of art, including costs incurred with respect to the
purchase, ownership, leasing, showing, promotion, repair and/or
maintenance of same, except for the reasonable costs of any decorative
items which Landlord may acquire, install and maintain in the Project;
(27) contributions to operating expense reserves or capital reserves;
(28) contributions to charitable organizations; (29) costs, items or
amounts which are not reasonable in amount or not customarily included
in operating expenses for similar properties located in the vicinity
of the Project; and (30) the costs of repairing or restoring any part
of the Project not reimbursed by a condemnation award.
The computation of Operating Cost shall be made in accordance with
generally accepted accounting principles.
(4) In the event during all or any portion of any calendar year the
Building is not at least ninety-five percent (95%) rented and
occupied, Landlord may elect to make an appropriate adjustment to the
Operating Costs for such year, employing sound accounting and
management principles, to determine the Operating Costs that would
have been paid or incurred by Landlord had the Building been ninety-
five percent (95%) rented and occupied and the amount so determined
shall be deemed to have been the Operating Costs for such year.
B. Reimbursement
-------------
Within a reasonable time before the commencement of each calendar year
during the Term (Landlord agreeing to use all reasonable efforts to do so
by December 1 of each year), Landlord shall deliver to Tenant a reasonable
estimate of the Operating Costs Landlord will incur for the forthcoming
calendar year. Commencing on the Lease Commencement Date, and continuing on
the first day of each calendar month thereafter, Tenant shall pay to
Landlord, as additional rental, an amount equal to one-twelfth (1/12th) of
the product obtained by multiplying (i) the remainder obtained by deducting
the Base Operating Expense, if any, from the then estimated Operating Costs
for the Building for the applicable calendar year of the Lease Term,
together with a reasonable allocation of the then
15
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estimated Operating Costs for the Project, exclusive of the Operating Costs
unique to any other building in the Project for the applicable calendar
year of the Lease Term, times (ii) Tenant's Proportionate Share; provided,
however, that such amount shall not be less than Zero Dollars ($0.00); and
provided further that Tenant shall not be in default for failing to pay any
increased amounts until Tenant shall have received at least thirty (30)
days prior written notice of such increase.
In the event that Landlord intends to incur any expenditure in excess of
$10,000.00 for any one item or contract, which expenditure will constitute
an Operating Cost pursuant to this Section V.A., and such expenditure will
not be for the exclusive benefit of the Building but Landlord intends to
allocate more than thirty-four percent (34%) (or such other percentage
equalling the ratio of the net rentable square footage of the Building to
the net rentable square footage of the Project as may be determined by
Landlord pursuant to Section I.C. of this Lease) of such expenditure to the
Building, then Landlord shall inform Tenant's facility manager previously
identified to Landlord in writing, not less than ten (10) business days
prior to incurring said cost, of Landlord's intention to incur such
expenditure and to allocate it to the Building as an Operating Cost in a
manner which is greater than the percentage contemplated under Section
I.C., and advising Tenant of Landlord's proposed percentage allocation. If
Tenant shall object to Landlord's proposed allocation in writing, within
five (5) business days following receipt of Landlord's notification, then
Tenant and Landlord shall work together, in good faith, to arrive at a fair
and reasonable allocation of such an Operating Cost expenditure to the
Building. Nothing contained in this paragraph shall prohibit Landlord from
making such an expenditure if the parties do not reach agreement as to the
appropriate allocation, or from incurring any such cost which, pursuant to
this Section V, would otherwise constitute a proper Operating Cost, and
Landlord shall not be in default hereunder if it makes such an expenditure
without having first reached agreement with Tenant as to the appropriate
allocation of the cost, or if it fails to notify Tenant or Tenant's
facility manager prior to making such an expenditure; provided that if
Landlord shall fail to notify Tenant of such an expenditure, then Tenant
shall only be liable for thirty-four percent (34%) (or such other
percentage equalling the ratio of the net rentable square footage of the
Building to the net rentable square footage of the Project as may be
determined by Landlord pursuant to Section I.C. of this Lease) of such
expenditure, unless and until Landlord and Tenant shall otherwise agree to
a different allocation; but provided further that Landlord reserves the
right in any event to obtain either a separate contract or separate billing
for the item or work in question, and Landlord may rely upon the judgement
of the contractor, vendor or service provider as to the allocation of the
costs of such items or work for the Building.
The total of such additional monthly payments to be paid by Tenant for such
calendar year shall be called "Tenant's
16
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Estimated Operating Cost". Upon Notice to Tenant, Tenant's Estimated
Operating Cost may be adjusted periodically by Landlord during the calendar
year on the basis of Landlord's reasonably revised estimate of Operating
Costs for such calendar year. Any major expenditure by Landlord (e.g.
resurfacing of parking areas, painting buildings, refurbishing landscaping
or walkways and similar items) during the year which was not included in
determining the estimated Operating Costs, but which otherwise qualify as
Operating Costs, may be billed separately to Tenant according to the
provisions and allocations of this Section V.B.
C. Rebate of Excess Charges or Payment of Additional Charges
---------------------------------------------------------
Within one hundred twenty (120) days after the end of each calendar year,
including the calendar year containing the date of the expiration or
termination of this Lease, Landlord shall furnish Tenant with a statement
showing the Operating Costs actually paid or incurred by Landlord for such
year less the Base Operating Expense, if any, and Tenant's Proportionate
Share thereof ("Tenant's Actual Operating Cost"), which shall in no event
be less than Zero Dollars ($0.00). If the amount of Tenant's Estimated
Operating Cost paid by Tenant for such calendar year exceeds Tenant's
Actual Operating Cost for that year, Landlord shall refund such excess to
Tenant within thirty (30) days after such determination or Landlord may, at
its sole option and election, apply such excess to any outstanding amounts
due from Tenant to Landlord. If Tenant's Estimated Operating Cost actually
paid by Tenant is less than Tenant's Actual Operating Cost, Tenant shall
pay such shortfall to Landlord, as additional rent, within thirty (30) days
after receipt of Landlord's statement showing the amount due. If the Lease
commences on a date other than on the first day of a calendar year or
expires or otherwise terminates, on a date other than on the last day of a
calendar year, the foregoing payments shall be prorated accordingly. If
Landlord fails to provide Tenant with a statement of any balances due for
Tenant's Actual Operating Cost within eighteen (18) months of the end of
the calendar year for which such Operating Costs are payable, then Landlord
shall be deemed to have waived its right to collect the same; provided that
such failure shall not waive Tenant's right to receive such a statement
from Landlord in accordance with the first sentence of this Paragraph.
D. Tenant's Audit of Operating Costs
---------------------------------
Tenant shall have the right, exercisable once during each calendar year
(but not later than six (6) months following the date of Tenant's receipt
of Tenant's Actual Operating Costs), to examine and audit, to be conducted
by appropriate individuals qualified to perform audits, Landlord's books
and records in connection with Landlord's calculation of Operating Costs
and Tenant's Proportionate Share thereof for the calendar year for which
the statement of Tenant's Actual Operating Costs was most recently
received. All such examinations shall be conducted during Landlord's
regular business hours and at Landlord's regular place of business in
17
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the Denver, Colorado metropolitan area. Tenant shall give Landlord not less
than five (5) business days' notice of its desire to conduct an examination
and audit, following which Tenant and Landlord will cooperate in good faith
to establish a schedule and time for such audit. Notwithstanding the
foregoing, Tenant understands that some of Landlord's books and records are
maintained outside the state of Colorado; and with respect to such books
and records, Tenant agrees to provide Landlord with a reasonable
opportunity to assemble such information in the Denver, Colorado
metropolitan area. In any case, any amounts determined by such audit to be
owing by one party to the other shall be paid by the party owing the same
within thirty (30) days thereafter; provided that Landlord shall have a
reasonable opportunity to review, contest and resolve any such discrepancy
to the mutual satisfaction of the parties before Landlord shall be required
to refund any amount to Tenant. In the event that, pursuant to such an
audit, the parties reasonably agree that Tenant has been overcharged by an
amount greater than five percent (5%), then Landlord shall reimburse Tenant
for the reasonable out of pocket cost of the audit; otherwise, all audit
costs shall be the responsibility of Tenant.
E. Control of Common Areas
-----------------------
Tenant's use of the Common Areas shall be subject to the provisions of this
Lease and Landlord's rights, hereby reserved, to (a) restrain the use of
the Common Areas by unauthorized persons, (b) utilize from time to time any
portion of the Common Areas for promotional and related matters, (c)
temporarily close any portion of the Common Areas for repairs, improvements
or alterations, (d) change the shape and size of the Common Areas or change
the location of improvements within the Common Areas, including, without
limitation, parking areas, roadways and curb cuts, and, (e) prohibit access
to or use of Common Areas that are designated for the storage of supplies
or operation of equipment necessary to operate the Project or Building. In
addition, Landlord may determine the nature, size and extent of the Common
Areas as well as make changes to the Common Areas and take such other
actions in connection therewith from time to time which, in its opinion,
are deemed desirable. Notwithstanding the foregoing, no exercise of
Landlord's rights under this Paragraph shall (a) unreasonably prevent,
interfere or make inconvenient Tenant's ordinary performance of Tenant's
business in the Premises, (b) impede Tenant's reasonable access to the
Premises or materially reduce the number of parking spaces available to
Tenant hereunder, or (c) increase Tenant's Proportionate Share. Landlord
agrees to give reasonable advance written notice to Tenant of any
significant alterations to or improvements of the Common Areas.
At such time as Tenant shall take possession and control of all of the net
leasable area of the Building, and provided further that Tenant is not then
in default under any of its obligations under this Lease, and continuing
thereafter for so long as Tenant shall lease the entire Building and
faithfully
18
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observe and perform all of its obligations under this Lease, Tenant shall
have the right, at its election, to be exercised by written notice to
Landlord and to become effective on a date set forth in such notice, which
date shall not be less than sixty (60) days from the effective date of such
notice, to assume and take over, all at Tenant's sole cost, risk and
expense, direct responsibility for any of the following specified services
theretofore provided by Landlord for the Premises and the Common Areas
within the Building, to wit: janitorial services, including cleaning,
dusting, vacuuming, carpet cleaning, restroom supplies, and any related
activities within the Building, interior painting and decoration, lighting
bulb and tube replacement, interior Building security (but not exterior
Common Area security), and such other items as Landlord and Tenant may
mutually agree in their respective discretion; provided, however, that
Landlord shall retain the exclusive control over all structural elements,
all building systems and fixtures, all exterior Common Areas, and all
maintenance and repair obligations which are otherwise not the Tenant's
responsibility. Notwithstanding the foregoing, all janitors closets, all
mechanical, electrical and telephone rooms shall remain under the exclusive
control of Landlord; provided that Tenant shall have the limited right to
use the telephone and electrical rooms in order to integrate Tenant's
electrical and telephone distribution systems, so long as all of Tenant's
equipment is installed and maintained outside of such rooms. In addition,
Landlord shall have the right to maintain a storage room on the first and
fourth floors of the Building for the exclusive use, and under the sole
control, of Landlord, its agents, employees and contractors. The scope of
services which shall be permitted to be directly undertaken by Tenant shall
be set forth in a written agreement executed by Landlord and Tenant, as a
condition to Tenant being permitted to perform any such services. In
discharging all such services, Tenant shall perform the same in a manner
which is consistent with Class A office space in the Market Area, and in
any event at least to the same standards as performed and maintained by
Landlord in the Common Areas inside buildings on the remainder of the
Project. In no event shall Tenant prevent or interfere with any right of
Landlord to enter the Building or any portion of the Premises for any and
all purposes consistent with Landlord's ownership thereof and Landlord's
continuing obligations hereunder, including without limitation, the
performance of such services, maintenance, repairs or replacements to any
and all portions of the Building as Landlord may deem necessary or
desirable, or as may otherwise be required of Landlord under the terms of
this Lease. With respect to any service over which Tenant assumes direct
responsibility, the cost of those same services provided to other buildings
in the Project shall, for purposes of determining Tenant's Actual Operating
Costs, be deleted from the calculation of Operating Costs, commencing on
the first day of the first full calendar month in which Tenant shall be
undertaking such service, provided that Tenant shall pay the cost of such
service for the Building in a timely manner. If Tenant shall fail to
provide and pay the cost of such services after assuming responsibility
therefor, then Tenant shall, if said services are provided or paid by
19
<PAGE>
Landlord, or provided by service providers engaged and paid by Landlord,
pay the costs of all such services directly to Landlord on an invoice
basis.
SECTION VI. SECURITY DEPOSIT
Upon execution of this Lease, Tenant shall deposit with Landlord the Security
Deposit, if any, defined in Section I. above, which shall be held for Landlord
as security for the performance by Tenant of all terms, covenants and conditions
of this Lease. It is expressly understood and agreed that such Security Deposit
is not an advance rental deposit or a measure of Landlord's damages in case of
Tenant's default. If Tenant defaults with respect to any provision of this
Lease, including, but not limited to, the provisions relating to the payment of
rent or the obligation to repair and maintain the Premises or to perform any
other term, covenant or condition contained herein, Landlord may (but shall not
be required to), without prejudice to any other remedy provided herein or
provided by law and without notice to Tenant, use the Security Deposit, or any
portion of it, to cure the default or to compensate Landlord for all damages
sustained by Landlord resulting from Tenant's default. Tenant shall immediately
on demand pay to Landlord a sum equivalent to the portion of the Security
Deposit so expended or applied by Landlord as provided in this paragraph so as
to maintain the Security Deposit in the sum initially deposited with Landlord.
Although the Security Deposit shall be deemed the property of Landlord, if
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return the Security Deposit to Tenant. Landlord shall not be
required to keep the Security Deposit separate from its general funds and
Landlord, not Tenant, shall be entitled to all interest, if any, accruing on any
such deposit. Upon any sale or transfer of its interest in the Building,
Landlord shall transfer the Security Deposit to its successor in interest and
thereupon, Landlord shall be released from any liability or obligation with
respect thereto.
SECTION VII. TENANT'S TAXES
Tenant shall be liable for all taxes levied against the leasehold held by Tenant
or against any personal property, leasehold improvements, additions, alterations
and fixtures placed by or for Tenant in, on or about the Premises, Building and
Project or constructed by Landlord for Tenant in the Premises, Building or
Project; and if any such taxes are levied against Landlord or Landlord's
property, or if the assessed value of such property is increased (whether by
special assessment or otherwise) by the inclusion therein of value placed on
such leasehold, personal property, leasehold improvements, additions,
alterations and fixtures, and Landlord pays any such taxes (which Landlord shall
have the right to do regardless of the validity thereof), Tenant, upon demand,
shall fully reimburse Landlord for the taxes so paid by Landlord or for the
proportion of such taxes resulting from such increase in any assessment.
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SECTION VIII. USE OF PREMISES
A. Permitted Uses
--------------
Tenant shall use the Premises and Common Areas solely for the Permitted Use
specified in subsection I.L. above, and for no other use. Tenant shall, at
its own cost and expense, obtain any and all licenses and permits necessary
for any such use. Tenant shall not do or permit anything to be done by
Tenant's employees, agents or contractors in or about the Premises, Common
Areas, Building or Project which will in any way obstruct or interfere with
the rights of other tenants or occupants of the Project or injure them or
interfere with their right to the quiet use and enjoyment of the Project
and their respective leaseholds. Tenant shall not use or allow the Premises
to be used for any unlawful purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises, the Building or Common
Areas. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises, Common Areas, Building or Project. Tenant shall not do
or permit anything to be done by its employees, agents or contractors in or
about the Premises, Common Areas, Building or Project which may render the
insurance thereon void or increase the insurance risk or cost thereon. If
an increase in any fire and extended coverage insurance premiums paid by
Landlord for the Building and Project is caused by Tenant's use and
occupancy of the Premises, then Tenant shall pay, as additional rental, the
amount of such increase to Landlord.
B. Compliance with Laws
--------------------
Tenant shall not use the Premises, Building, Project or Common Areas in any
way (or permit or suffer anything to be done by its employees, agents or
contractors in or about the same) which will conflict with any law,
statute, ordinance or governmental rule or regulation or any covenant,
condition or restriction (whether or not of public record) affecting the
Premises, Project or Building, now in force or which may hereafter be
enacted or promulgated including, but not limited to, the provisions of any
city or county zoning codes regulating the use thereof. Landlord represents
that it has provided, and Tenant acknowledges receipt of a copy of the
Rules (defined below), as well as any recorded and unrecorded private
restrictive covenants, applicable to the Project. Tenant shall, at its sole
cost and expense, promptly comply with (a) all laws, statutes, ordinances,
and governmental rules and regulations, now in force or which may hereafter
be in force, (b) all requirements, and other covenants, conditions and
restrictions, now in force or which may hereafter be in force which affect
the Premises, provided copies of such have been given by Landlord to
Tenant, and (c) all requirements, now in force or which may hereafter be in
force, of any board of fire underwriters or other similar body now or
hereafter constituted, to the extent that compliance with any of the
foregoing is required because of the nature of Tenant's Permitted Use of,
or Tenant's activities and/or business operations in or upon, the Premises,
Building or Project, or because of Tenant's occupancy density, or because
of the construction or condition of any improvements made to the Premises
by or on behalf of Tenant, or because of any
21
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other actions taken by or on behalf of Tenant. The judgment of any court of
competent jurisdiction or the admission by Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has
violated any law, statute, ordinance, governmental rule or regulation or
any requirement, covenant, condition or restriction shall be conclusive of
the fact as between Landlord and Tenant. Tenant agrees to fully indemnify
Landlord against any liability, claims or damages arising as a result of a
breach of the provisions of this Subsection by Tenant, and against all
costs, expenses, fines or other charges arising therefrom, including,
without limitation, reasonable attorneys' fees and related costs incurred
by Landlord in connection therewith, which indemnity shall survive the
expiration or earlier termination of this Lease. During the Term of this
Lease, Landlord shall not enter into any restrictive covenant or other
agreement affecting the Project or the Premises which would be violated by
Tenant's ordinary business use of the Premises or which would materially
increase Tenant's cost of performing its business operations in the
Premises without Tenant's prior written consent.
C. Hazardous Materials
-------------------
Tenant shall not cause or permit any Hazardous Material (as defined below)
to be brought upon, kept, disposed of, or used in or about the Premises,
Building or Project by Tenant, its agents, employees, contractors, or
invitees, except for such Hazardous Material, in such nominal amounts, as
is necessary or useful to Tenant's business and which will be used, kept,
stored and disposed of in a manner that complies with all laws regulating
any such Hazardous Material so brought upon or used or kept in or about the
Premises, Building and Project, and such storage will not create an undue
risk to other tenants of the Building and Project, giving consideration to
the nature of the Project and Building. If Tenant breaches the obligations
stated in the preceding sentence, or if the presence of Hazardous Material
on the Premises, Building or Project caused by Tenant, its agents,
employees, contractors, or invitees, results in contamination of the
Premises, the Building or the Project, or if contamination of the Premises,
the Building or the Project, by Hazardous Material otherwise occurs for
which Tenant is legally liable to Landlord for damage resulting therefrom,
then Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including, without limitation, diminution in value of the Premises,
the Building or the Project, damages for the loss or restriction on use of
rentable or usable space or of any amenity of the Premises, the Building or
the Project, damages arising from any adverse impact on marketing of space
in the Building or the Project, and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees) which arise during or
after the Lease Term as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, the
obligation to reimburse Landlord for costs incurred in connection with any
investigation of site conditions or any cleanup, remedial,
22
<PAGE>
removal or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in, on, or about the Premises, Building or Project or in the soil
or ground water on or under the Premises, the Building or the Project.
Without limiting the foregoing, if the presence of any Hazardous Material
in, on or about the Premises, Building or Project caused or permitted by
Tenant, its agents, employees, contractors, or invitees, results in any
contamination of the Premises, the Building or the Project, Tenant shall
promptly take all actions at its sole expense as are necessary to return
the Premises, the Building or the Project to the condition existing prior
to the introduction of any such Hazardous Material thereto; provided that
Landlord's approval of such actions shall first be obtained, which approval
shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises, Building or Project or exposes Landlord to any liability therefor
and such actions are undertaken in accordance with all applicable laws,
rules and regulations and accepted industry practices.
"Hazardous Material" is used in this Lease in its broadest sense and shall
mean any petroleum based products, pesticides, paints and solvents,
polychlorinated biphenyl, lead, cyanide, DDT, acids, ammonium compounds and
other chemical products and any substance or material defined or designated
as hazardous or toxic, or other similar term, by any federal, state or
local environmental statute, regulation, or ordinance affecting the
Premises, Building or Project presently in effect or that may be
promulgated in the future, as such statutes, regulations and ordinances may
be amended from time to time, including but not limited to the statutes
listed below, as well as each of their state counterparts, and all of the
rules and regulations implementing any of them:
Resource Conservation and Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq.
------
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. (S) 9601 et seq.
------
Clean Air Act, 42 U.S.C. (S)(S) 7401-7626.
Water Pollution Control Act (Clean Water Act of 1977), 33 U.S.C. (S) 1251
et seq.
------
Insecticide, Fungicide, and Rodenticide Act (Pesticide Act of 1987), 7
U.S.C. (S) 135 et seq.
------
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.
------
Safe Drinking Water Act, 42 U.S.C. (S) 300(f) et seq.
------
National Environmental Policy Act (NEPA) 42 U.S.C. (S) 4321 et seq.
------
Refuse Act of 1899, 33 U.S.C. (S) 407 et seq.
------
23
<PAGE>
D. Asbestos
--------
(a) Except as set forth below in subsection (b), Landlord represents,
--------------
warrants and agrees that, to the best of Landlord's actual knowledge,
neither the Building nor the Premises nor any walls, ceilings, beams or
ducts enclosing or connected to or serving the Demised Premises contain,
will contain or are exposed to asbestos. Further, Landlord represents
warrants and agrees that, without limiting the foregoing: 1) Landlord shall
at all times take all reasonable precautions to prevent exposure of the
Premises, Tenant and Tenant's employees, invitees, agents and
representations to asbestos contamination from the Building or from other
buildings owned by Landlord in the Project, and 2) Landlord shall not
permit the installation of asbestos in the Building.
(b) Landlord has advised Tenant that the roof of the Building, which is
not a part of the Premises, contains asbestos (the "Roof Asbestos") that is
not considered to be friable in its undisturbed state. Landlord represents,
warrants and agrees that if the Roof Asbestos becomes friable or creates a
condition where there is a presence of asbestos in either the Building or
the Premises, Landlord shall promptly act to remove or abate such asbestos
in a safe manner and take all steps necessary to prevent exposure of the
Premises to Roof Asbestos which may become friable, all in conformance with
applicable law. Notwithstanding the foregoing, Landlord's obligations under
this subsection (b) shall not be applicable if the presence of asbestos was
--------------
caused by Tenant's disturbance of the Roof Asbestos or Tenant's
introduction of asbestos onto the Project, in either of which case, Tenant
shall promptly abate, remediate and remove all such asbestos, at Tenant's
sole cost and expense. Tenant's failure to do so shall constitute a
material default under this Lease.
(c) In the event it is disclosed that the Building (except as qualified in
subsection (b) above), the Premises or such walls, ceilings, beams or ducts
--------------
contain or are exposed to asbestos, (to the extent that the level of
airborne asbestos fibers in the Premises do not exceed .01 asbestos
fibers/cc, such air samples to be analyzed by use of transmission electron
microscope which results shall be furnished to Tenant) Landlord shall, if
and at such time as Tenant may request in writing, and at Landlord's cost,
promptly remove or abate such asbestos in compliance with applicable law,
and shall take all steps reasonably necessary to prevent exposure of the
Premises, Tenant and Tenant's employees, invitees, agents and
representatives to asbestos during such removal. Notwithstanding Landlord's
obligations under this Subsection D, in the event it is disclosed that the
Building (except as qualified in subsection (b) above), the Premises or any
--------------
such walls, ceilings, beams or ducts contain or are exposed to friable
asbestos, and Landlord shall fail to take such actions to remove, remediate
or abate the same as may be required of Landlord under the provisions
hereof after written notice to Landlord and a reasonable opportunity to
commence and prosecute such action to completion, then Tenant may, cancel
24
<PAGE>
the Lease without penalty, liability or obligation of any kind and Landlord
shall refund to Tenant the unamortized cost of Tenant's fixtures and
leasehold improvements and pay for the reasonable costs and expenses
incurred by Tenant in relocating to any alternative premises selected by
Tenant in the Market Area.
E. Landlord's Rules and Regulations
--------------------------------
Tenant shall, and Tenant agrees to cause its agents, servants, employees,
invitees, and licensees to observe and comply fully and faithfully with the
rules and regulations attached hereto as Exhibit E or such rules and
---------
regulations which may hereafter be adopted by Landlord (the "Rules") for
the care, protection, cleanliness, and operation of the Premises, Building
and Project, and any modifications or additions to the Rules adopted by
Landlord, provided that, Landlord shall give written notice thereof to
Tenant and, Tenant's Permitted Use of the Project is not unreasonably
affected. Landlord shall not be responsible to Tenant, and Tenant shall not
be responsible to Landlord, for failure of any other tenant or occupant of
the Building or Project to observe or comply with any of the Rules.
SECTION IX. SERVICE AND UTILITIES
A. Standard Building Services and Reimbursement by Tenant
------------------------------------------------------
Subject to scheduled outages, which have been reasonably coordinated with
Tenant's facility manager, and to emergency outages, Landlord agrees to
furnish to the Building, 24 hours a day, 365 days a year (hereinafter
"Building Hours"), heat, ventilation and air conditioning (hereinafter
"HVAC"), required for the comfortable use and occupation of the Premises
for general office purposes and at a level which is usual and customary in
similar office buildings in the area where the Project is located, all of
which shall be subject to the Rules of the Building as well as any
governmental requirements or standards relating to, among other things,
energy conservation. Landlord shall cause water, electrical and elevator
(if applicable) service to be supplied and provided to the Premises at all
times. Landlord has provided Tenant with information regarding the
Building's electrical system, including capacity. Tenant agrees that it
will not install any equipment in the Premises which consumes electricity
in excess of the Building's electrical system capacity without obtaining
Landlord' prior written consent, which request and consent shall be subject
to the requirements and conditions of Section XII, and which consent shall
be further conditioned upon Tenant's agreement to provide, at Tenant's sole
cost and expense, all electrical wiring and other devices which may be
necessary to increase the capacity of the Building's electrical system.
Tenant acknowledges that it has received and had an opportunity to review
that certain letter report, dated April 8, 1996, prepared by ABS
Consulting, Inc. and addressed to
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ARES, Inc. (the "ABS Report"), which ABS Report summarizes the current HVAC
capacity in the Building. A copy of the ABS Report is attached hereto as
Exhibit H. Tenant understands and acknowledges that the existing HVAC
capacity may not be adequate to support a 365 day a year, 24 hour a day
call center operation under all environmental conditions, particularly on
hot days. In the event that Tenant wishes to provide increased HVAC
capacity for the Building, Landlord agrees to work with Tenant, in good
faith, to design and install an HVAC mutually satisfactory to each of the
parties which will be adequate to meet Tenant's reasonable HVAC needs, and
which will be installed in a manner which minimizes cost and impact upon
the core and shell of the Building as well as on Tenant's operations. The
cost of the design and installation of any additional HVAC equipment which
may ultimately be agreed upon by Landlord and Tenant shall be paid by
Tenant to the designer and to the installation contractor, or, at the
option of Landlord, directly to Landlord who will then be responsible for
payment to such designers and contractors. All such amounts shall be paid
in full by Tenant no later than thirty (30) days following Tenant's receipt
of an invoice therefor. All HVAC equipment installed pursuant to this
paragraph shall become a permanent fixture and part of the Building upon
installation, shall be the property of the Landlord, and shall remain with
the Building upon the expiration or earlier termination of this Lease.
Landlord agrees to contribute toward the cost of the HVAC equipment and
installation to the extent of such additional capacity as may be required
to make up any shortfall between the HVAC capacity in the Building as of
the date of this Lease and such additional capacity as would be customary
to install in a typical modern speculative office building of similar size
and characteristics as the Building, anticipating a five and one-half (5
1/2) day a week operation, with normal business hours and with tenants not
having any unusual or extraordinary HVAC needs, all as more fully described
in the ABS Report as a modern speculative office building. All HVAC
capacity desired by Tenant in excess of this baseline amount shall be at
Tenant's sole cost and expense. Landlord's contribution will be reimbursed
to Tenant following Tenant's payment of the full cost of the design and
installation charges. Landlord's contribution will be agreed upon by Tenant
and Landlord, on the basis of this paragraph, during the development of the
design of the additional HVAC capacity prior to the commencement of
installation.
Subject to the reductions set forth below, Tenant agrees to pay the full
cost of all electric utilities supplied to the Building, together with any
taxes thereon, and at rates not in excess of those charged by the
applicable electric utility provider, on an invoice basis, and the costs
thereof shall not be included in the calculation of Operating Costs. Until
such time as Tenant shall lease all of the net rentable square footage in
the Building as contemplated under Section III, Landlord shall pay the
electric utility provider directly, and Tenant shall reimburse Landlord for
all such expenses on an invoice basis. Once Tenant shall lease all of the
net rentable square footage in the Building, Tenant shall pay for
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all such electric utilities directly to the electric utility provider, and
shall provide Landlord with evidence of payment of such utility bills on a
timely basis. If Tenant shall not lease all of the net rentable square
footage of the Building as contemplated under Section III, then Tenant
shall be entitled to the following reductions in the amount billed by
Landlord for electric utilities during each month that the following
deductions shall apply:
(a) during each month that any space in the Building shall be occupied
by another tenant of Landlord, Tenant shall be entitled to a reduction
in its monthly electric bill to the extent of all electricity actually
consumed by such other tenant if such other tenant's premises is
separately metered, or, if not so separately metered, Tenant shall be
entitled to a reduction in Tenant's electricity bill for such month at
the effective rate of $1.25 per square foot per annum for such space;
and
(b) during each month that any space in the Building is vacant and not
leased by Tenant or any other tenant, Tenant shall be entitled to an
electricity bill reduction for such month at the effective rate of
$0.50 per square foot per annum for such space;
All reductions to Tenant's electricity bill provided in subsections (a) or
(b) above shall be pro-rated on the basis of three hundred sixty-five (365)
day years for the same number of days of the utility provider's billing
period for any period of time that such reductions are applicable.
B. Limitation on Landlord's Obligations
------------------------------------
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of, Landlord's failure to furnish
any of the foregoing when such failure is caused by accidents, breakage,
repairs, strikes, brownouts, blackouts, lockouts or other labor
disturbances or labor disputes of any character, or by any other cause,
similar or dissimilar, beyond the reasonable control of Landlord, unless as
the result of the gross negligence or willful misconduct of Landlord, its
employees, agents, or contractors, nor shall such failure under such
circumstances be construed as a constructive or actual eviction of Tenant.
Notwithstanding any of the foregoing, Landlord shall not be liable under
any circumstances, other than Landlord's gross negligence or willful
misconduct, for loss or injury to the property or business of Tenant,
however occurring, through or in connection with or incidental to
Landlord's furnishing or failure to furnish any of said service or
utilities if Tenant has assumed responsibility for providing such service
or utility. Regardless of the cause of such failure or interruption in
service, Landlord shall use reasonably diligent efforts to restore such
service to the Premises as promptly as practicable. Unless the failure or
interruption in service is caused by the negligence or misconduct of
Tenant, it employees, agents, contractors or invitees, or is
27
<PAGE>
otherwise caused by any other circumstances beyond Landlord's reasonable
control, if such service is not uninterruptedly restored within three (3)
business days, and if such failure shall materially and adversely affect
Tenant's business operations in the Premises, then Tenant shall be entitled
to an equitable abatement of Monthly Rental to the extent such interruption
so affects Tenant's business operations.
C. Excess Water Service
--------------------
Tenant shall not, without the written consent of Landlord, use any
apparatus or device in the Premises which consumes more water than is
usually furnished or supplied for the Permitted Use of the Premises, as
determined by Landlord. Tenant shall not consume water in excess of that
usually furnished or supplied for the Permitted Use of the Premises (as
determined by Landlord), without first procuring the written consent of
Landlord, which Landlord may refuse. The excess cost for such water shall
be established by installation of a meter and using a determination made by
a utility company or independent engineer hired by Landlord at Tenant's
expense and Tenant shall pay such excess costs as additional rent each
month with the Monthly Rental.
D. Security Services
-----------------
Certain security measures (both by electronic equipment and personnel) may
be provided by Landlord in connection with the Building and Common Areas.
However, Tenant hereby acknowledges that any such security is intended to
be solely for the benefit of the Landlord in protecting its property from
fire, theft, vandalism and similar perils and while certain incidental
benefits may accrue to the Tenant therefrom, any such security is not for
the purpose of protecting either the property of Tenant or the safety of
its officers, employees, servants or invitees. By providing such security,
Landlord assumes no obligation to Tenant and shall have no liability
arising therefrom. Landlord reserves the right to either commence, expand,
reduce or discontinue the providing of any such security at any time
without notice to Tenant.
SECTION X. MAINTENANCE AND REPAIRS
A. Landlord's Obligations
----------------------
Except for special or non-standard systems and equipment installed for
Tenant's exclusive use, Landlord shall, at Landlord's initial cost and
expense subject to reimbursement by Tenant of Tenant's Proportionate Share
of such cost and expense as an Operating Cost, keep in good condition and
repair the heating, ventilating and air conditioning and other mechanical
systems which service the Premises as well as other premises within the
Building; the foundations, exterior walls, structural condition of interior
bearing walls, and roof of the Premises and Building; and the parking lots,
walkways, driveways, landscaping, fences, signs and utility
28
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installations and other Common Areas of the Project. Landlord shall not be
in breach of its obligations under this Section unless Landlord fails to
commence, within three (3) days after written notice of a need for such
repairs or maintenance is given to Landlord by Tenant, and to thereafter
diligently prosecute to completion, any repairs or perform maintenance
which it is obligated to perform hereunder, and such failure materially and
adversely affects Tenant's business operations in the Premises. Landlord
shall not be required to make any repairs for damage caused by any
negligent or intentional act or omission of Tenant or any person claiming
through or under Tenant or any of Tenant's employees, suppliers, shippers,
customers or invitees, unless Tenant or another party agrees to pay
Landlord for Landlord's actual costs therefor, or unless Landlord elects to
file an insurance claim as provided in Section B below; otherwise, Tenant
shall, with the consent and under the direction of Landlord, repair such
damage at its sole cost and expense. Tenant hereby waives and releases any
right it may have to make repairs to the Premises, Building or Project at
Landlord's expense under any law, statute, ordinance, rules and regulations
now or hereafter in effect in any jurisdiction in which the Project is
located. Tenant understands that, due to the seven days a week, twenty-four
hours a day nature of Tenant's business, Landlord may find it necessary to
temporarily interrupt utility and other Building services in order for
Landlord to perform periodic or other necessary repair, maintenance and
replacement activities. Except in the case of emergency, Landlord will (i)
use all reasonable efforts to minimize any interference in Tenant's
business operations, (ii) in connection with scheduled maintenance or
repair when Landlord anticipates that electrical service will be
interrupted for a period of time less than one (1) hour, provide Tenant and
Tenant's facility manager previously identified to Landlord with not less
than two (2) hours prior notification, and (iii) in connection with
scheduled maintenance or repair when Landlord anticipates that electrical
service will be interrupted for a period of time of one (1) hour or longer,
provide Tenant and Tenant's facility manager previously identified to
Landlord with not less than ten (10) days prior notification, and at
Tenant's request and if reasonably able to do so, Landlord will perform
such scheduled maintenance and repair (anticipated to cause an electrical
interruption of greater than one (1) hour) during the midnight shift of
Tenant's employees or at such other time as may be reasonably requested by
Tenant.
B. Tenant's Obligations
--------------------
Tenant shall, at its sole cost and expense, maintain the Premises in good
and sanitary condition, and shall make all non-structural repairs and
replacements to preserve in good working order and condition all of the
fixtures, finishes, additions and other Tenant's Work items, from the point
of connection to the Building or to the Building's systems, but excluding
those items which are "Building Standard" and provided to Tenant as part of
the original Building improvements, which Landlord shall continue to
maintain as part of Landlord's obligations under Paragraph A above.
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Without limiting the foregoing, Tenant's obligations shall extend to and
include the following items, and every part thereof: plumbing and plumbing
fixtures installed by Tenant within the Premises; special or supplementary
heating, ventilating and air conditioning systems installed for the
exclusive use of the Premises; non-standard electrical, lighting and other
utility systems, facilities and equipment located within the Premises and;
all trade fixtures, interior walls, interior surfaces of exterior walls,
ceilings, windows, doors, cabinets, draperies, window coverings, carpeting
and other floor coverings, plate glass and skylights located within the
Premises. Tenant shall not commit or permit any waste in or about the
Premises, the Building or the Project. Tenant shall, at its sole cost and
expense, make all repairs to the Premises, Building and Project, including
without limitation structural repairs, which are required, in the
reasonable opinion of Landlord, as a result of any misuse, neglect,
negligent or intentional act or omission committed or permitted by Tenant
or by any subtenant, agent, employee, supplier, shipper, customer, invitee
or servant of Tenant; provided, however, that if the loss is large enough
to justify the filing of an insurance claim by Landlord and Landlord elects
to so file such a claim (but without having any obligation to do so), then
Landlord will effect such repairs in accordance with the provisions of
Section XVIII (Damage and Destruction) below, and Tenant shall reimburse
Landlord for any costs not covered by insurance proceeds actually received
by Landlord.
C. Right to Make Repairs
---------------------
In the event that Tenant fails to maintain the Premises, Building and
Project in good and sanitary order, condition and repair as required by
this Lease, then, following three (3) business days' prior written
notification to Tenant (except in the case of an emergency, in which case
no prior notification shall be required), Landlord shall have the right,
but not the obligation, to enter the Premises and to do such acts and
expend such funds at the expense of Tenant as are required to place the
Premises, Building and Project in good, safe and sanitary order, condition
and repair. Any amount so expended by Landlord shall be paid by Tenant
promptly upon demand as additional rent.
In the event that Landlord fails to provide any of the services required
under Section IX hereof or fails to provide any of Landlord's repair or
maintenance obligations under Section X hereof (except as expressly limited
or provided in such Sections), Tenant may, if Landlord shall fail, within
five (5) days notice to Landlord, to commence any such service, repair or
maintenance obligation and thereafter diligently prosecute the same to
completion, perform or cause to be performed any such service, repair or
maintenance, using reasonable commercial efforts to obtain fair competitive
pricing, and bill the Landlord for the actual cost thereof, which bill
Landlord shall pay within thirty (30) days of receipt thereof. Tenant's
obligation to notify Landlord as set forth in the previous sentence shall
not be required under
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<PAGE>
circumstances where an imminent threat, or present damage, to persons or
property exists or is occurring; provided that under such emergency
circumstances, Tenant shall take only those actions reasonably necessary to
protect Tenant's property, prevent continuing damage or waste to the
Building and to Landlord's property, materials, services or utilities, and
prevent injury to persons, and Tenant shall notify Landlord as soon as
practicable thereafter.
D. Condition of Premises Upon Surrender
------------------------------------
Except for reasonable wear and tear and as otherwise provided in this
Lease, Tenant shall, upon the expiration or earlier termination of the
Term, surrender the Premises to Landlord broom clean and in the same
condition as on the date Tenant took possession, reasonable wear and tear
and casualty for which adequate insurance proceeds are received and
casualty damage for which insurance proceeds are not received but for which
casualty damage Tenant has no responsibility for, and condemnation,
excepted. All appurtenances, fixtures (but not trade fixtures),
improvements, additions and other property attached to or installed in the
Premises whether by Landlord or by or on behalf of Tenant, and whether at
Landlord's expense or Tenant's expense, shall be and remain the property of
Landlord unless Landlord specifically agrees otherwise in writing. Any
furnishings, trade fixtures and other personal property of Tenant located
in the Premises, whether the property of Tenant or leased by Tenant, and
any fixtures, improvements and other items agreed, in writing, by Landlord
to belong to the Tenant as provided in the preceding sentence, shall be and
remain the property of Tenant and shall be removed by Tenant at Tenant's
sole cost and expense at or before the expiration of the Term. Tenant shall
promptly repair any damage to the Premises or the Building resulting from
such removal. Any of Tenant's property not removed from the Premises prior
to or upon the Expiration Date shall, at Landlord's option, either become
the property of Landlord or may be removed by Landlord, in which case
Tenant shall pay to Landlord the cost of such removal within ten (10) days
after delivery of a bill therefor or Landlord, at its option, may deduct
such amount from the Security Deposit. Any damage to the Premises,
including any structural damage, resulting from Tenant's use of the
Premises or from the removal of Tenant's trade fixtures, fixtures,
furnishings, equipment, or any other property of Tenant shall be repaired
by or at Tenant's expense. Landlord and Tenant agree that the following
items of personal property shall constitute part of Tenant's trade fixtures
for purposes of this Lease: ACD (Automatic Call Distribution) telephone
equipment, supplemental HVAC units servicing the ACD and UPS equipment
rooms, the uninterruptable power supply system and associated generator
(but excluding additional wiring and other devices which may be installed
in the Building to increase Building capacity).
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<PAGE>
SECTION XI. ENTRY BY LANDLORD
Landlord, and Landlord's authorized agents and employees, reserves and shall
have the right to enter the Premises at any time and from time to time to
inspect the same to determine whether Tenant is complying with its obligations
hereunder; to supply any service to be provided by Landlord hereunder; to supply
janitorial service and any other routine service to be provided by Landlord to
Tenant hereunder; during normal Building Hours and upon reasonable advance
notice to Tenant, to exhibit the Premises to prospective purchasers and
mortgagees, or (during the last one hundred eighty (180) days of the Term) to
prospective tenants; to post notices of nonresponsibility; and to alter, improve
or repair the Premises and any portion of the Building and Project, without
abatement of rent, in which case Landlord may erect scaffolding and other
necessary structures that are reasonably required by the character of the work
to be performed by Landlord, provided that the business of Tenant shall not be
interfered with unreasonably. Except as otherwise specifically provided in this
Lease or in the case of (i) emergency, (ii) regular janitorial and routine
service, or (iii) circumstances governed by Section X.A. above requiring
electrical interruption, Landlord agrees to provide Tenant or Tenant's facility
manager previously identified to Landlord with reasonable advance notice of its
intention to enter the Premises for any purpose permitted hereunder, and to use
reasonable efforts to coordinate any major service and major repair projects in
such a manner as to minimize disruption of Tenant's business operations;
provided, however, that Landlord shall not be required to give Tenant any
greater notice of any inspections or entry requested by any governmental
representative or other third party entitled to such access than Landlord
receives and can reasonably provide to Tenant. In order to enter the Premises
for each of the aforesaid purposes, Landlord shall at all times have and retain
a key with which to unlock all of the doors in, upon and about the Premises,
excluding Tenant's vaults and safes. Further, Landlord shall have the right to
use any and all means which Landlord may deem proper to open such doors, and
shall have the right to enter the Premises at any time and without prior notice,
in the event of an emergency. To the extent Tenant is required to do so by any
third parties, Tenant may reasonably designate, in writing, certain areas within
the Premises as "security areas," and Landlord agrees that it shall not take
contractors or any prospective purchasers, tenants or mortgagees into any such
"security areas" without being accompanied by a representative of Tenant;
provided, however, that Landlord and its employees shall have full access to
such "security areas" at all times. Any entry to the Premises or portions
thereof obtained by Landlord by any of said means, or otherwise, shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises, or any portion thereof.
SECTION XII. ALTERATIONS, ADDITIONS AND TRADE FIXTURES
Except as provided in this Section, Tenant shall not make any alterations,
additions or improvements to the Premises, or any part thereof, whether
structural or nonstructural (hereafter "Alterations"), without Landlord's prior,
final written consent. In order to obtain Landlord's preliminary consent, which
preliminary consent shall not be unreasonably withheld, Tenant
32
<PAGE>
shall submit such information as Landlord may require, including, without
limitation, detailed plans and specifications for the Alterations.
Notwithstanding the foregoing, Landlord may withhold its consent to any proposed
Alterations which, in Landlord's reasonable judgement, may adversely affect the
value, structural integrity, or utility or mechanical systems of the Premises,
the Building or the Project. If Landlord gives its preliminary consent for the
Alterations, in order to obtain Landlord's final consent, which final consent
shall not be unreasonably withheld, Tenant shall then submit (i) all necessary
permits, licenses, bonds, and the construction contract, all in conformance with
the plans and specifications preliminarily approved by Landlord; (ii) evidence
of insurance coverages, including without limitation builder's risk insurance,
in such types and amounts and from such insurers as Landlord deems satisfactory;
and (iii) such other information and documentation as Landlord deems reasonably
necessary including, but not limited to, evidence of Tenant's financial ability
to pay for the Alterations. With respect to any preliminary or final plans
submitted to Landlord for its approval, Landlord agrees to process each and
every request for consent in a timely and diligent manner, and Landlord shall
use its best efforts to respond to Tenant's proposed plans within ten (10)
business days, but Landlord's consent shall not be deemed given unless evidenced
in writing. Notwithstanding the foregoing, Tenant shall be entitled, without
Landlord's consent, to construct and install non-structural Alterations which do
not involve or impact any utility or mechanical systems, which cost, in an
annual aggregate amount, less than $25,000.00, and any such additional
Alterations, without regard to cost, which are in the nature of non-structural
decorations only. For purposes of this Section XII, mechanical systems shall
include all systems of the Building, such as but not limited to, electrical,
plumbing (including sewer), heating and air conditioning, fire sprinklers and
alarms, security system, if any, energy management and other automated control
systems; non-structural decoration shall be limited to floor and wall coverings.
For any Alteration project Tenant shall, unless Tenant uses Landlord's then
designated architect, electrical, mechanical or structural engineers, reimburse
Landlord for the commercially reasonable cost of any technical consultation
required, in Landlord's sole judgement. Additionally, for any Alteration over
$10,000.00 in total or for alterations in any calendar year totaling more than
$25,000.00 in the aggregate, Tenant shall reimburse Landlord for fees charged by
the property management company under contract to manage the Building at the
time of commencement of any Alteration ("Property Manager"), to review, monitor
and inspect the Alteration work being performed by Tenant ("Construction
Monitoring Fee"). Said Construction Monitoring Fee shall be equal to two and
one-half percent (2 1/2%) of the cost of each construction project, inclusive of
architectural and engineering and other consulting fees. If Tenant uses
Landlord's then designated architect and/or engineers, any fee from said
designated architect and/or engineers shall be excluded from the calculation of
the Construction Monitoring Fee. Alternately, if Tenant shall contract with
Landlord's Property Manager to work either in the capacity of Construction
Manager or Construction Supervisor, as may be agreed between Tenant and said
Property Manager, then Landlord and Tenant agree that the Construction
33
<PAGE>
Monitoring Fee shall be equal to seven percent (7%) of the cost of each
Alteration project that the Property Manager is retained or engaged by the
Tenant to oversee.
The construction contract for the Alterations shall, at the minimum,
require the general contractor and all subcontractors to obey the Rules of
the Project and Landlord's usual and customary construction rules. All
Alterations shall be done in a good and workmanlike manner, using new
materials except for high quality refurbished partitions, workstations or
other components and materials and except for such items as doors and
frames which may be reused from within the Premises, and in compliance with
all applicable laws, regulations, building codes and permits, and other
requirements of any governmental authorities having jurisdiction therefor,
by qualified and licensed contractors or mechanics, as approved by
Landlord. All Alterations shall also be in conformance with any private
covenants governing the Project, and shall, if required, be preapproved by
any architectural control and/or design review boards or committees having
jurisdiction over the Academy Park Subdivision. In no event shall any
Alterations affect the structure of the Building or its exterior
appearance. All Alterations made by or for Tenant (other than Tenant's
trade fixtures), shall, unless Landlord expressly requires or agrees
otherwise in writing, immediately become the property of Landlord, without
compensation to Tenant, but Landlord shall have no obligation to repair,
maintain or insure those Alterations. Carpeting and other floor coverings,
as well as wall coverings, shall be considered improvements of the Premises
and not movable trade fixtures, regardless of how or where affixed, and
shall remain at the Premises. No Alterations shall be removed by Tenant
from the Premises either during or at the expiration or earlier termination
of the Term, and they shall be surrendered as a part of the Premises unless
Landlord has agreed or required otherwise in writing, in Landlord's
discretion, in which case the Alterations shall be removed by Tenant at
Tenant's sole cost and expense. Upon any such removal, Tenant shall repair
any damage caused to the Premises thereby, and shall return the Premises to
the condition they were in prior to installation of the Alterations so
removed.
Tenant shall indemnify, defend and keep Landlord free and harmless from and
against all liability, loss, damage, cost, attorneys' fees and any other
expense incurred on account of claims by any person performing work or
furnishing materials or supplies for Tenant or any person claiming under
Tenant. Landlord may require Tenant to provide Landlord, at Tenant's sole
cost and expense, a lien and completion bond in an amount equal to the
estimated cost of such improvements, to insure Landlord against any
liability for mechanic's liens and to insure completion of the work.
Landlord shall have the right at all times to post on the Premises any
notices permitted or required by law, or that Landlord shall deem proper,
for the protection of Landlord, the Premises, the Building and the Project,
and any other party having an interest therein, from mechanics' and
materialmen's liens. Tenant shall give to Landlord written notice of the
commencement of any construction in or on the Premises at least thirty (30)
business days prior thereto. Prior to the commencement of any such
construction, Landlord shall be furnished certificates of insurance, naming
Landlord as an additional insured, evidencing that each contractor
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<PAGE>
performing work has insurance acceptable to Landlord including but not
limited to general liability insurance of not less that $1,000,000 and
worker's compensation insurance in the statutorily required amount.
SECTION XIII. MECHANIC'S LIENS
Tenant shall keep the Premises, the Building and the Project free from any
liens arising out of any work performed, material furnished or obligation
incurred by or for Tenant or any person or entity claiming through or under
Tenant. In the event that Tenant shall not, within twenty (20) days
following notice of the imposition of any such lien, cause the same to be
released of record by payment or posting of a proper bond, Landlord shall
have, in addition to all other remedies provided herein and by law, the
right, but not the obligation, to cause such lien to be released by such
means as Landlord deems proper, including payment of the claim giving rise
to such lien. All such sums paid and all expenses incurred by Landlord in
connection therewith, together with interest thereon at the rate set forth
in Section XXI.A., shall be due and payable to Landlord by Tenant on
demand.
SECTION XIV. INSURANCE
A. Tenant
------
During the Term hereof, Tenant shall keep in full force and effect the
following insurance and shall provide appropriate insurance certificates
evidencing such coverage to Landlord prior to the Lease Commencement Date
and annually thereafter before the expiration of each policy:
(1) Commercial general liability insurance for the benefit of Tenant and
Landlord as an additional insured, with a limit of not less than Five
Million Dollars ($5,000,000.00) combined single limit per occurrence,
against claims for personal injury liability including, without
limitation, bodily injury, death or property damage liability and
covering (i) the business(es) operated by Tenant and by any subtenant
of Tenant on the Premises, (ii) operations of independent contractors
engaged by Tenant for services or construction on or about the
Premises, and (iii) contractual liability; and
(2) Fire, extended coverage, vandalism and malicious mischief insurance,
insuring the personal property, furniture, furnishings and fixtures
belonging to Tenant located on the Premises for not less than one
hundred percent (100%) of the actual replacement value thereof.
Each insurance policy obtained by Tenant pursuant to this Lease shall
contain a clause that the insurer will provide Landlord with at least
thirty (30) days prior written notice of any material change, non-renewal
or cancellation of the policy, shall be in a form satisfactory to Landlord
and shall be taken out with an insurance company authorized to do
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<PAGE>
business in the State in which the Project is located and rated not less
than Best's Financial Class X and Best's Policy Holder Rating "A". In
addition, any insurance policy obtained by Tenant shall be written as a
primary policy, and shall not be contributing with or in excess of any
coverage which Landlord may carry, naming Landlord and Landlord's property
management company as additional insureds. The liability limits of the
above described insurance policies shall in no matter limit the liability
of Tenant under the terms of Section XV. below. If Tenant shall carry any
of its insurance under a blanket policy, such policy shall provide specific
coverages for the Landlord and the Premises, as required herein, and shall
be in form satisfactory to Landlord. Tenant reserves the right to self-
insure against the risks which would be covered by fire insurance described
in Section XIV.A.(2); provided that Tenant shall provide Landlord with
prior written notice of Tenant's election to so self-insure, and provided
further that the right to self-insure shall be limited to Integrated
Payment Systems Inc. and a Qualified Assignee (defined below) only.
Not more frequently than every two (2) years, Landlord may, by notice to
Tenant, require an increase in the above-described limits of coverage if,
in the reasonable opinion of Landlord, the amount of liability insurance
specified in this Section is not adequate to maintain the level of
insurance protection at least equal to the protection afforded on the date
the Term commences. If Tenant fails to maintain and secure the insurance
coverage required under this Section XIV., then Landlord shall have, in
addition to all other remedies provided herein and by law, the right, but
not the obligation, to procure and maintain such insurance, the cost of
which shall be due and payable to Landlord by Tenant within ten (10)
business days after written demand.
If, on account of the failure of Tenant to comply with the provisions of
this Section, Landlord is deemed a co-insurer by its insurance carrier,
then any loss or damage which Landlord shall sustain by reason thereof
shall be borne by Tenant and shall be paid by Tenant as additional rent
within ten (10) business days after receipt of a bill therefor and evidence
of such loss.
B. Landlord
--------
During the Term hereof, Landlord shall keep in full force and effect the
following insurance:
(1) Fire, extended coverage and vandalism and malicious mischief insurance
insuring the Building and Project of which the Premises are a part, in
an amount not less than 80% (or such greater percentage as may be
required by law) of the full replacement cost thereof; and
(2) Commercial general liability insurance for the benefit of Landlord,
with a limit of not less than Five Million Dollars ($5,000,000.00)
combined single limit per occurrence, against claims for personal
injury liability
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including, without limitation, bodily injury, death or property damage
liability;
(3) Business interruption or loss of income insurance in an amount
sufficient to provide Landlord with the Monthly Rent due hereunder for
a period of not less than twelve (12) months if the Premises are
destroyed by a risk insured against by a policy of all risk insurance,
which business interruption or loss of income policy may contain a
thirty (30) day exclusion or deductible and such other coverages,
terms and conditions as Landlord, in its sole discretion, deem
advisable.
(4) Such other insurance as Landlord deems necessary in its sole and
absolute discretion.
All insurance policies shall be issued in the names of Landlord and
Landlord's lender, and any other party reasonably designated by Landlord as
an additional insured, as their interests appear. The insurance policies
shall provide that any proceeds shall be made payable to Landlord, or to
the holders of mortgages or deeds of trust encumbering Landlord's interest
in the Premises, Building, and Project, or to any other party reasonably
designated by Landlord as an additional insured, as their interests shall
appear. All insurance premiums for Landlord's insurance shall be included
in Operating Costs. If any such insurance is carried under blanket
policies, Landlord shall make an equitable apportionment of the cost
thereof to be included in the Common Operating Expense.
SECTION XV. INDEMNITY
A. Tenant
------
Subject to the provisions of subsection C below, Tenant agrees to
indemnify, defend and hold Landlord and its officers, directors, partners
and employees entirely harmless from and against all liabilities, losses,
demands, actions, expenses or claims, including reasonable attorneys' fees
and court costs, but excluding consequential damages except as caused by
Tenant's holding over in violation of Section XXIII below, for injury to or
death of any person or for damages to any property, including lost rental,
or for violation of law arising out of or in any manner connected with (i)
the use, occupancy or enjoyment of the Premises, Building and Project by
Tenant or Tenant's agents, employees, or contractors (the "Tenant's
Agents") or any work, activity or other things allowed or suffered by
Tenant or Tenant's Agents to be done in or about the Premises, Building and
Project (ii) any breach or default in the performance of any obligation of
Tenant under this Lease and (iii) any negligent or otherwise tortious act
or failure to act by Tenant or Tenant's Agents on or about the Premises,
Building or Project. The foregoing indemnity shall not apply to the extent
that any such liability, loss, demand, action, expense or claim is caused
or incurred as a result of the negligence or willful misconduct of
Landlord, its agents
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or employees.
B. Landlord
--------
Subject to the provisions of subsection C below, Landlord agrees to
indemnify, defend and hold Tenant and its officers, directors, partners and
employees entirely harmless from and against all liabilities, losses,
demands, actions, expenses or claims, including attorneys' fees and court
costs but excluding consequential damages, for injury to or death of any
person or for damage to any property to the extent such are caused by the
negligence or willful misconduct of Landlord, its agents, employees, or
contractors on or about the Premises, Building, or Project. The existence
of Landlord's obligation to indemnify Tenant as provided in this Section
XV.B. shall not be deemed to permit or entitle Tenant to claim or assert
any right to any abatement of rent or to claim or assert any constructive
or actual eviction.
C. Limitation on Recovery for Property Damage
------------------------------------------
Notwithstanding the provisions of subsections A and B above, neither
Landlord nor Tenant shall be liable to the other for any damage to the
property of the other caused by fire, casualty or the actions of Landlord,
Tenant or their employees, agents and contractors except to the extent such
property damage is (a) not covered by the damaged party's insurance
required to be maintained under the terms of this Lease (or if such
insurance is not in effect as required, or if Tenant elects to self-insure
to the extent permitted under this Lease, the amount of such damage which
would not have been covered had the insurance policy been in effect as
otherwise required); (b) caused by the intentional actions of Landlord or
Tenant; or (c) caused by Tenant's installation or removal of alterations or
trade fixtures as provided in the Lease. In connection with the foregoing
waiver of claims, Landlord and Tenant hereby waive any rights of
subrogation arising under their respective property insurance policies.
Each of the parties shall notify their respective insurance carries that
the foregoing waiver of subrogation is contained in this Lease, and shall
require the insurance carrier to include an appropriate waiver of
subrogation provision in the policies.
D. Limitation on Landlord's Liability; Release of Trustees, Director, Officer
--------------------------------------------------------------------------
and Partners of Landlord
------------------------
Tenant agrees that in the event Tenant obtains a judgment or decree against
Landlord arising out of the subject matter of this Lease which requires the
payment of money by Landlord, and notwithstanding any other provision of
this Lease to the contrary, Tenant's sole recourse for the satisfaction
thereof shall be to (a) proceed against Landlord's interest in the Building
or Project, or any proceeds therefrom, or (b) offset the amount due under
such judgment or decree against the sums due to Landlord hereunder and no
other property or assets of Landlord, its successors or assigns, shall be
subject to the levy, execution or other enforcement procedure for the
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satisfaction of any such judgment or decree. Tenant further hereby waives
any and all right to assert any claim against or obtain any damages from,
for any reason whatsoever, the trustees, directors, officers and partners
of Landlord including all injuries, damages or losses to Tenant's property,
real and personal, whether known, unknown, foreseen, unforeseen, patent or
latent, which Tenant may have against Landlord or its trustees, directors,
officers or partners. Tenant understands and acknowledges the significance
and consequence of such specific waiver. Landlord waives any and all right
to assert any claim against or to obtain damages from, for any reason
whatsoever, the trustees, directors, officers and partners of Tenant,
including all injuries, damages or losses to Landlord's property, real and
personal, whether known, unknown, foreseen, unforeseen, patent or latent,
which Landlord may have against Tenant or its trustees, directors, officers
or partners.
SECTION XVI. ASSIGNMENT AND SUBLETTING BY TENANT
A. Except as specifically permitted herein, Tenant shall not directly or
indirectly, voluntarily or by operation of law, sell, assign, encumber,
pledge or otherwise transfer or hypothecate all or any part of the Premises
or Tenant's leasehold estate hereunder (collectively an "Assignment"), or
permit the Premises to be occupied by anyone other than Tenant or sublet
the Premises or any portion thereof (collectively a "Sublease") without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, being obtained in each instance, subject to the terms and
conditions contained in this Section. Notwithstanding the foregoing, and
provided that Tenant is not then otherwise in default under this Lease, the
named Tenant hereunder shall have the absolute one time only right to
assign this Lease, in whole but not in part, and shall thereafter be
relieved of any obligations under this Lease accruing thereafter, to either
(i) any assignee entity having a net worth of not less than $50,000,000.00,
as demonstrated to the reasonable satisfaction of Landlord using generally
accepted accounting principles, or (ii) any entity having a class of equity
securities registered pursuant to Section 12(b) of the Securities Act of
1934 (the "Exchange Act") or a class of equity securities registered
pursuant to Section 12(g) of the Exchange Act, provided that the Aggregate
Market Value (defined below) of equity securities of such entity is
$250,000,000 or more. Any entity satisfying either of the conditions set
forth in the preceding sentence is referred to in this Lease as a
"Qualified Assignee." As used in this paragraph, the term "Aggregate Market
Value" means the value of the proposed assignee's outstanding equity
securities calculated by using the price at which such equity security was
last sold (or, if there has been no such sale, the average of the bid and
asked prices of such securities) as of a date designated by Tenant within
sixty (60) days prior to the effective date of the proposed assignment of
this Lease.
B. If Tenant desires at any time to enter into an Assignment or Sublease of
the Premises or any portion thereof, Tenant shall
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request in writing Landlord's consent to the Assignment or Sublease and
provide all of the following:
(1) The name of the proposed assignee, subtenant or occupant;
(2) The nature of the proposed assignee's, subtenant's or occupant's
business to be carried on in the Premises;
(3) A copy of the proposed Assignment or Sublease; and
(4) Such financial information concerning the proposed assignee, subtenant
or occupant and other reasonable information regarding the transaction
which Landlord shall have requested following its receipt of Tenant's
request for consent.
C. At any time within ten (10) business days after Landlord's receipt of the
Tenant's notice and all of the information specified above, Landlord may by
written notice to Tenant elect either to (a) consent to the proposed
Assignment or Sublease by written notice to Tenant (no such consent to be
inferred by Landlord's silence), (b) refuse to consent to the proposed
Assignment or Sublease (such refusal to be deemed given by Landlord's
silence), (c) terminate this Lease in full with respect to an Assignment or
terminate in whole or in part with respect to a Sublease and enter into a
lease directly with the proposed assignee or sublessee, or (d) terminate
this Lease in full with respect to an Assignment or terminate in whole or
in part with respect to a Sublease and recapture from Tenant the portion of
the Premises affected by the proposed Assignment or Sublease; provided,
however, that the termination and recapture rights in subparts (c) and (d)
of this sentence shall not apply with respect to any proposed Assignment to
a Qualified Assignee or with respect to any proposed sublease to a
Qualified Sublessee. If Landlord elects to terminate this Lease in whole or
in part or recapture the affected portion of the Premises, Tenant may, by
written notice given to Landlord within ten (10) days following Tenant's
receipt of Landlord's notice, withdraw its proposal to sublease or assign,
in which case this Lease shall continue unaffected. If Tenant does not so
withdraw its proposal to sublease or assign, Tenant shall thereafter be
relieved of any and all further obligations, including the obligation to
pay rent, with respect to such space, and this Lease shall terminate as to
such space, effective as of the date of such recapture, and Tenant's
Proportionate Share and rental obligations hereunder shall be adjusted
accordingly; provided, however, that such termination shall not relieve
Tenant of any outstanding obligations which may have accrued up to the date
of such recapture. With respect to subsections (a) and (b) above, Landlord
and Tenant agree (by way of example and without limitation) that it shall
be reasonable for Landlord to withhold its consent if any of the following
situations exist or may exist:
(1) The proposed transferee's use of the Premises
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conflicts with the Permitted Use under this Lease or is a type of use
that is not desirable or compatible with other uses of the Building or
Project;
(2) In Landlord's reasonable business judgment, the proposed assignee,
sublessee or occupant lacks sufficient business reputation or
experience to operate a successful business of the type and quality
permitted under this Lease;
(3) Tenant is in default pursuant to this Lease or an event has occurred
which, with the passage of time and/or the giving of notice, would
constitute an event of default hereunder;
(4) With respect to an Assignment only, the proposed assignee's financial
condition is materially less favorable than Tenant's financial
condition as of the date of this Lease;
(5) With respect to a Sublease only, the proposed sublessee's financial
condition is, in the reasonable judgement of Landlord, inadequate to
discharge each of the obligations of Tenant under this Lease;
provided, however, that Landlord agrees not to withhold its consent
under this subparagraph (5) if (a) the proposed sublessee meets the
same minimum financial requirements of a Qualified Assignee under
paragraph A. above; or (b) if the proposed Sublessee is Moneygram, or
its successor (each herein a "Qualified Sublessee").
D. If Landlord consents to the Sublease or Assignment within said ten (10) day
period, Tenant may enter into such Assignment or Sublease of the Premises
or portion thereof, but only upon the terms and conditions set forth in the
notice furnished by Tenant to Landlord pursuant to Subsection B. above;
provided, however, that in connection with such Assignment or Sublease, as
a condition to Landlord's consent, Tenant shall pay to Landlord fifty
percent (50%) of the excess, if any, of (i) in the case of an Assignment,
the rental and other payment obligations of the proposed assignee under the
terms of the proposed Assignment over the rental and other payment
obligations of Tenant under the terms of this Lease, or (ii) in the case of
a Sublease, the amount proposed to be paid by the sublessee over the
proportionate amount of rental and other payment obligations required to be
paid by Tenant to Landlord under the terms of this Lease as applicable to
the portion of the Premises so subleased.
E. Except for an Assignment to a Qualified Assignee, no consent by Landlord to
any assignment or Sublease by Tenant shall relieve Tenant of any obligation
to be performed by Tenant under this Lease, whether arising before or after
the Assignment or Sublease, and Tenant shall remain fully liable therefor.
The consent by Landlord to any Assignment or Sublease shall not relieve
Tenant of the obligation to obtain
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Landlord's express written consent to any other Assignment or Sublease. Any
Assignment or Sublease that is not in compliance with this Section shall be
void and, at the option of Landlord, shall constitute a material default by
Tenant under this Lease. The acceptance of rent or payment of any other
monetary obligation by Landlord from a proposed assignee or sublessee shall
not constitute the consent by Landlord to such Assignment or Sublease.
Tenant shall promptly provide to Landlord a copy of the fully executed
Sublease or Assignment.
F. Any sale or other transfer, including transfer by consolidation, merger or
reorganization, of twenty-five percent (25%) or more of the voting stock or
membership interests of Tenant, if Tenant is a corporation or limited
liability company or, or any sale or other transfer of twenty-five percent
(25%) or more of the partnership interest in Tenant, if Tenant is a
partnership, shall be an Assignment for purposes of this Section; provided
that, under such circumstances, Landlord shall have no right to recapture
the Premises or terminate this Lease. The foregoing provision shall not
apply to any merger or consolidation of Tenant with or into any other
subsidiary of First Data Corporation, which merger or consolidation shall
not be considered an Assignment of this Lease, provided that the resulting
successor of Tenant under this Lease has a minimum net worth of at least as
much as the Tenant named herein had at the time just prior to such
consolidation or merger, and provided such successor, pursuant to written
instrument, expressly assumes and agrees to perform and be bound by all of
the Tenant's obligations and responsibilities under this Lease.
Notwithstanding any provision in this Section to the contrary, Tenant shall
have the right, without the necessity of obtaining Landlord's prior written
consent or offering the affected portion of the Premises to Landlord for
recapture, to enter in any Sublease for portions of the Premises with any
subsidiary or affiliate controlled by and in which Tenant or First Data
Corporation holds a majority ownership interest (a "Subsidiary Sublessee");
provided that Tenant shall, within fifteen (15) days following the
execution of any such Sublease, provide Landlord with a copy of the
Sublease and shall thereafter promptly provide such additional information
concerning the Subsidiary Sublessee as Landlord may reasonably request. So
long as no default shall occur under this Lease, Tenant shall be entitled
to collect and retain any rentals collected from the Subsidiary Sublessee
which may be in excess of the rental payable hereunder. No Sublease to a
Subsidiary Sublessee shall relieve Tenant of its obligations to Landlord
under this Lease.
G. Each assignee or other transferee, other than Landlord, shall assume, as
provided in this Subsection, all obligations of Tenant under this Lease and
shall be and remain liable jointly and severally with Tenant for the
payment of Monthly Rental and all other monetary obligations hereunder, and
for the performance of all the terms, covenants, conditions and agreements
herein contained on Tenant's part to be performed for the remainder of the
Term. No Assignment or Sublease
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shall be binding on Landlord unless the assignee, sublessee or Tenant shall
deliver to Landlord a counterpart of the Assignment or Sublease . In
connection with an Assignment, Tenant or the assignee shall deliver an
instrument (acceptable in form and substance to Landlord and in recordable
form), whereby the assignee assumes all of the terms, covenants, conditions
and agreements of Tenant under the Lease arising after the effective date
of the Assignment. However the failure or refusal of the assignee to
execute such instrument of assumption shall not release or discharge the
assignee from its liability as set forth above. In connection with a
Sublease, Tenant or the sublessee shall deliver to Landlord an instrument
(acceptable in form and substance to Landlord) agreeing that sublessee
shall be bound by all of the terms and conditions of the Lease, other than
those pertaining to rent, applicable to the subleased space and that
sublessee shall, at Landlord's sole option, attorn to Landlord as lessor
under the Sublessee if this Lease is terminated for any reason and Landlord
chooses to keep the Sublease in effect.
H. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et. seq. (the
"Bankruptcy Code"), any and all monies or other consideration payable or
otherwise to be delivered in connection with such assignment shall be paid
or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of
Tenant within the meaning of the Bankruptcy Code. Any and all monies or
other considerations constituting Landlord's property under the preceding
sentence not paid or delivered to Landlord shall be held in trust for the
benefit of Landlord and be promptly paid or delivered to Landlord.
I. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease on
and after the date of such assignment. Any such assignee shall upon demand
execute and deliver to Landlord an instrument confirming such assumption.
J. Tenant shall pay Landlord's reasonable expenses and reasonable attorneys'
fees incurred in processing an Assignment or Sublease for each such
proposed transfer to cover the legal review and administrative expenses of
Landlord, whether or not Landlord shall grant its consent to such proposed
transfers.
SECTION XVII. TRANSFER OF LANDLORD'S INTEREST
In the event Landlord shall sell or otherwise convey its title to the Building,
then, after the effective date of such sale or conveyance, and provided that
Landlord's successor shall have assumed, in writing, all of Landlord's
obligations arising hereunder after the effective date of such sale or
conveyance, Landlord shall have no further liability under this Lease to Tenant
except as to matters of liability which have accrued and remain unsatisfied as
of the date of sale or conveyance, and Tenant shall
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seek performance solely from Landlord's purchaser or successor in title. In
connection with such sale or transfer, Landlord may assign its interest under
this Lease without the necessity of consent by Tenant, but Landlord shall notify
Tenant in writing of any such assignment of this Lease and/or sale of the
Project or Building and, until Tenant has received such notice, Tenant shall be
entitled to pay all Rent to the address at which Tenant has theretofore paid
Rent. In such event, Tenant agrees to be bound to any successor Landlord.
SECTION XVIII. DAMAGE AND DESTRUCTION
A. Minor Insured Damage
--------------------
In the event the Premises or the Building, or any portion thereof, is
damaged or destroyed by any casualty, then Landlord shall rebuild, repair
and restore the damaged portion thereof, provided that (1) the amount of
insurance proceeds available to Landlord equals or exceeds the cost of such
rebuilding, restoration and repair, (2) such rebuilding, restoration and
repair can be completed within one hundred eighty (180) days after the work
commences in the opinion of a registered architect or engineer appointed by
Landlord, (3) the damage or destruction has occurred more than twelve (12)
months before the expiration of the Term, and (4) such rebuilding,
restoration, or repair is then permitted, under applicable governmental
laws, rules and regulations, to be done in such a manner as to return the
damaged portion thereof to substantially its condition immediately prior to
the damage or destruction, including, without limitation, the same net
rentable floor area. To the extent that insurance proceeds must be paid to
a mortgagee or beneficiary under, or must be applied to reduce any
indebtedness secured by, a mortgage or deed of trust encumbering the
Premises, Building or Project, such proceeds, for the purposes of this
Subsection shall be deemed not available to Landlord unless such mortgagee
or beneficiary permits Landlord to use such proceeds for the rebuilding,
restoration, and repair of the damaged portion thereof. Notwithstanding the
foregoing, Landlord shall have no obligation to repair any damage to, or to
replace any of, Tenant's personal property, furnishings, trade fixtures,
equipment or other such property or effects of Tenant.
B. Major or Uninsured Damage
-------------------------
In the event the Premises or the Building, or any portion thereof, is
damaged or destroyed by any casualty and Landlord is not obligated, under
Subsection A. above, to rebuild, repair or restore the damaged portion
thereof, then Landlord shall within sixty (60) days after such damage or
destruction, notify Tenant of its election, at its option, to either (1)
rebuild, restore and repair the damaged portions thereof, in which case
Landlord's notice shall specify the time period within which Landlord
estimates such repairs or restoration can be completed; or (2) terminate
this Lease effective as of the date the damage or destruction occurred. If
Landlord does not give Tenant written notice within sixty (60) days after
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the damage or destruction occurs of its election to rebuild or restore and
repair the damaged portions thereof, Landlord shall be deemed to have
elected to terminate this Lease. Notwithstanding the foregoing, if Landlord
does not elect to terminate this Lease, Tenant may, unless the actions or
omissions of Tenant, its employees or agents are the cause of the damage,
terminate this Lease if either (i) Landlord notifies Tenant that such
repair or restoration cannot be completed within one hundred and eighty
(180) days after the work is commenced, (ii) the damage or destruction
occurs within the last twelve (12) months of the Term, or (iii) neither
party elects to terminate this Lease but Landlord fails to substantially
complete all repairs within one hundred eighty (180) days after commencing
the same. If Tenant has the right to terminate the Lease in accordance with
the above provisions, Tenant may so elect by written notice to Landlord
which must be given within fifteen (15) days after Tenant's receipt of
Landlord's notice of its election to rebuild. Upon Landlord's receipt of
such notice, the termination shall be effective as of the date the
destruction occurred.
C. Abatement of Rent
-----------------
There shall be an abatement of rent by reason of damage to or destruction
of the Premises or the Building, or any portion thereof, to the extent that
(i) Landlord is obligated or otherwise elects to rebuild the Premises in
accordance with Subsections A or B above, and (ii) the floor area of the
Premises cannot be reasonably used by Tenant for conduct of its business
for a period exceeding three (3) consecutive business days, in which event
Tenant shall be entitled to an equitable abatement of the Monthly Rental to
the extent that Tenant is prevented from conducting its business operations
from the affected portion of the Premises, commencing on the date that the
damage to or destruction of the Premises or Building has occurred, and
except that, if Landlord or Tenant elects to terminate this Lease as
provided in Subsection B. above, no obligation shall accrue under this
Lease after such termination. Notwithstanding the provisions of this
Section, if any such damage is due to the fault or neglect of Tenant, any
person claiming through or under Tenant, or any of their employees,
suppliers, shippers, servants, customers or invitees, then there shall be
no abatement of rent by reason of such damage, unless and until Landlord is
reimbursed for such abatement pursuant to any rental insurance policy that
Landlord may, in its sole discretion, elect to carry or which Tenant may
carry for the benefit of Landlord. Tenant's right to terminate this Lease
in the event of any damage or destruction to the Premises or Building, is
governed by the terms of this Section and therefore Tenant hereby expressly
waives the provisions of any and all laws, whether now or hereafter in
force, and whether created by ordinance, statute, judicial decision,
administrative rules or regulations, or otherwise, that would cause this
Lease to be terminated, or give Tenant a right to terminate this Lease,
upon any damage to or destruction of the Premises or Building that occurs.
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SECTION XIX. CONDEMNATION
A. Total or Partial Taking
-----------------------
If all or substantially all of the Premises or the parking area (unless,
with respect to parking areas, Landlord provides reasonable alternative
parking) is permanently condemned or taken in any manner for public or
quasi-public use, including but not limited to, a conveyance or assignment
in lieu of the condemnation or taking, this Lease shall automatically
terminate as of the earlier of the date on which actual physical possession
is taken by the condemnor or the date of dispossession of Tenant as a
result of such condemnation or other taking. If less than all or
substantially all of the Premises is so condemned or taken, this Lease
shall automatically terminate only as to the portion of the Premises so
taken as of the earlier of the date on which actual physical possession is
taken by the condemnor or the date of dispossession of Tenant as a result
of such condemnation or taking. If such portion of the Building is
condemned or otherwise taken so as to require, in the opinion of Landlord,
a substantial alteration or reconstruction of the remaining portions
thereof, this Lease may be terminated by Landlord, as of the date on which
actual physical possession is taken by the condemnor or dispossession of
Tenant as a result of such condemnation or taking, by written notice to
Tenant within sixty (60) days following notice to Landlord of the date on
which such physical possession is taken or dispossession will occur. Tenant
may terminate this Lease if a condemnation or other governmental taking
materially and substantially deprives Tenant of its primary business use of
the Premises, such termination to be effective as of the later of the date
that title vests in the condemning authority or the date that Tenant ceases
its business use of the Premises.
B. Award
-----
Landlord shall be entitled to the entire award in any condemnation
proceeding or other proceeding for taking the Premises, Building or Project
for public or quasi-public use, including, without limitation, any award
made for the value of the leasehold estate created by this Lease. No award
for any partial or total taking shall be apportioned, and Tenant hereby
assigns to Landlord any award that may be made in such proceeding for
condemnation or other taking, together with any and all rights of Tenant
now or hereafter arising in or to the same or any part thereof. Although
all damages in the event of any condemnation shall belong to Landlord
whether such damages are awarded as compensation for diminution in value of
the leasehold or to the Landlord's fee, Tenant shall have the right to
claim and recover from the condemnor, but not from Landlord, such
compensation as may be separately awarded or recoverable by Tenant in
Tenant's own right on account of the interruption of or damage to Tenant's
business by reason of the condemnation and for or on account of any cost or
loss to which Tenant might incur in removing Tenant's merchandise,
furniture and other personal property, fixtures, and equipment from the
Premises.
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C. Abatement in Rent
-----------------
In the event of a partial condemnation or other taking that does not result
in a termination of this Lease as to the entire Premises pursuant to this
Section, the rent and all other charges under this Lease shall abate in
proportion to the portion of the Premises taken by such condemnation or
other taking. If this Lease is terminated, in whole or in part, pursuant to
any of the provisions of this Section, all rentals and other charges
payable by Tenant to Landlord hereunder and attributable to the Premises
taken shall be paid up to the date upon which actual physical possession
shall be taken by the condemnor. Landlord shall be entitled to retain all
of the Security Deposit until such time as this Lease is terminated as to
all of the Premises.
D. Temporary Taking
----------------
If all or any portion of the Premises is temporarily condemned or otherwise
taken for public or quasi-public use for a limited period of time, this
Lease shall remain in full force and effect and Tenant shall continue to
perform all terms, conditions and covenants of this Lease; provided,
however, the rent and all other charges payable by Tenant to Landlord
hereunder shall abate during such limited period in proportion to the
portion of the Premises that is rendered untenable and unusable as a result
of such condemnation or other taking. Landlord shall be entitled to receive
the entire award made in connection with any such temporary condemnation or
other taking. Tenant shall have the right to claim and recover from the
condemnor, but not from Landlord, such compensation as may be separately
awarded or recoverable by Tenant in Tenant's own right on account of
damages to Tenant's business by reason of the condemnation and for or on
account of any cost or loss to which Tenant might be put in removing
Tenant's merchandise, furniture and other personal property, fixtures, and
equipment or for the interruption of or damage to Tenant's business.
E. Transfer of Landlord's Interest to Condemnor
--------------------------------------------
Landlord may, without any obligation or liability to Tenant, agree to sell
and/or convey to the condemnor the Premises, the Building, the Project or
any portion thereof, sought by the condemnor, free from this Lease and the
rights of Tenant hereunder, without first requiring that any action or
proceeding be instituted or, if instituted, pursued to a judgment. In such
event, this Lease shall be deemed terminated effective on the date of such
transfer.
F. Private Power of Condemnation
-----------------------------
Landlord agrees that, during the Term of this Lease, it will not
voluntarily submit the Property to the jurisdiction of any redevelopment
corporation or other quasi-governmental or private entity having
condemnation powers, without first obtaining the written consent of Tenant.
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SECTION XX. DEFAULT
A. Tenant's Default
----------------
The occurrence of any of the following events shall constitute a default
hereunder by Tenant:
(1) If Tenant fails to pay any rent or other charges required to be paid
by Tenant under this Lease and such failure continues for a grace
period of five (5) days after such payment is due and payable;
provided, however, that with respect to the payment of Monthly Rental
and Tenant's Estimated Operating Costs only, Tenant shall be entitled
to two (2) extensions of the grace period per calendar year of up to
an additional ten (10) days each before a monetary default in the
payment of Monthly Rent or Tenant's Estimated Operating Costs shall
occur; and provided further that except in the case of Monthly Rental
payable under Section IV.A. of this Lease and Tenant's Estimated
Operating Costs payable under Section V.B., and notwithstanding any
other provision of this Lease to the contrary, no other additional
rent or other charges shall be deemed due and payable by Tenant until
thirty (30) days after Tenant's receipt (as determined under Section
XXXI) of an invoice or statement therefor;
(2) If Tenant involuntarily transfers Tenant's interest in this Lease, or
voluntarily attempts to or actually transfers its interest in this
Lease in any manner not expressly permitted hereunder;
(3) If Tenant files a voluntary petition for relief, or if an involuntary
petition against Tenant, is filed in a proceeding under the United
States Bankruptcy Code or other federal or state insolvency laws and
is not withdrawn or dismissed within forty-five (45) days thereafter;
or if under the provisions of any law providing for reorganization or
winding up of corporations, any court of competent jurisdiction
assumes jurisdiction, custody or control of Tenant or any substantial
part of the Premises or any of Tenant's personal property located at
the Premises and such jurisdiction, custody or control remains in
force unrelinquished, unstayed or unterminated for a period of forty-
five (45) days;
(4) If in any proceeding or action in which Tenant is a party, a trustee,
a receiver, agent or custodian is appointed to take charge of the
Premises or any of Tenant's personal property located at the Premises
(or has the authority to do so) for the purpose of enforcing a lien
against the Premises or Tenant's personal property;
(5) If Tenant shall make any general assignment for the benefit of
creditors or convene a meeting of its creditors or any class thereof
for the purpose of effecting a moratorium upon or composition of its
debts,
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or any class thereof;
(6) If Tenant fails to discharge any lien placed upon the Premises, the
Building or the Project, as a result of Tenant's action or inaction,
within twenty (20) days after Tenant obtains (from any source) notice
of the imposition of such lien;
(7) If Tenant is a partnership or consists of more than one (1) person or
entity, if any partner of the partnership or other person or entity is
involved in any of the acts or events described in subsections (1)
through (8) above;
(8) If Tenant fails to promptly and fully perform any other covenant,
condition or agreement contained in this Lease (other than as provided
in subsections (1) through (8) above) and such failure continues for
thirty (30) days after written notice thereof from Landlord to Tenant,
or if such failure cannot be completely cured within such thirty (30)
day period, then if Tenant fails to commence such cure within such
thirty (30) day period and thereafter diligently and continuously
proceeds to completely cure such failure; but provided, however, that
Tenant shall only be afforded one such thirty (30) day cure
opportunity per calendar year for any breach of the same Lease
covenant, condition or agreement.
B. Remedies
--------
Upon the occurrence of a default by Tenant that is not cured by Tenant
within any applicable grace period specified above, Landlord shall have the
following rights and remedies in addition to all other rights and remedies
available to Landlord at law or in equity, which shall be cumulative and
non-exclusive:
(1) The right to declare this Lease and the term of this Lease terminated;
to re-enter the Premises and the improvements located thereon,
pursuant to process of law; to eject all parties in possession thereof
therefrom; to repossess and enjoy the Premises together with all said
improvements; and to recover from Tenant all of the following:
(a) The worth at the time of award of the unpaid rent which had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that could
have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
rent for the balance of the Term after the time of award exceeds
the amount of rental loss that could be reasonably avoided; and
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(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not
limited to, any attorneys' fees, broker's commissions or finder's
fees (not only in connection with the reletting of the Premises,
but also that portion of any leasing commission paid by Landlord
in connection with this Lease which is applicable to that portion
of the Lease Term which is unexpired as of the date on which this
Lease is terminated); any costs for repairs, clean-up,
refurbishing, removal (including the repair of any damage caused
by such removal) and storage (or disposal) of Tenant's personal
property, equipment, fixtures, and anything else that Tenant is
required (under this Lease) to remove but does not remove; any
costs for alterations, additions and renovations; and any other
costs and expenses, including reasonable attorney's fees and
costs incurred by Landlord in regaining possession of and
reletting (or attempting to relet) the Premises.
(2) The right to continue this Lease in effect and to enforce all of
Landlord's rights and remedies under this Lease, including the right
to recover rent and any other additional monetary charges as they
become due, for as long as Landlord does not terminate Tenant's right
to possession. Acts of maintenance or preservation, efforts to relet
the Premises or the appointment of a receiver upon Landlord's
initiative to protect its interest under this Lease shall not
constitute a termination of Tenant's right to possession.
(3) The right: to re-enter the Premises; to eject therefrom all parties in
possession thereof; at any time and from time to time, but without
obligation to do so, to relet the Premises and the improvements
located therein or any part or parts thereof for the account of
Tenant, or otherwise, and to receive and collect the rents therefor,
and apply the same (i) first to the payment of the following costs and
expenses which Landlord may have paid, assumed or incurred: (a) costs
in recovering possession of the Premises and said improvements,
including attorneys' fees, and costs; (b) expenses for placing the
Premises and said improvements in good order and condition, for
decorating and preparing the Premises for reletting; (c) costs in
making any alterations, repairs, changes or additions to the Premises
that may be necessary or convenient; (d) all other costs and expenses,
including leasing and subleasing commissions, and charges paid,
assumed or incurred by Landlord in or upon reletting the Premises and
said improvements, or in fulfillment of the covenants of Tenant under
this Lease; and (ii) then to the payment of Monthly Rental, Tenant's
Proportionate Share of Operating Costs, and other monetary obligations
due and unpaid hereunder. Any such
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reletting may be for the remainder of the term of this Lease or for a
longer or shorter period in Landlord's sole and absolute discretion.
Landlord may execute any lease or sublease made pursuant to the terms
of this subsection either in its own name or in the name of Tenant as
its agent, as Landlord may see fit. The tenant(s) or subtenant(s)
thereunder shall be under no obligation whatsoever with regard to the
application by Landlord of any rent collected by Landlord from such
tenant or subtenant to any and all sums due and owing or which may
become due and owing under the provisions of this Lease, nor shall
Tenant have any right or authority whatever to collect any rent
whatever from such tenant(s) or subtenant(s). If Tenant has been
credited with any rent received by such reletting and such rent shall
not be promptly paid to Landlord by the tenant(s) or subtenant(s), or
if such rentals received from reletting during any month are less than
those to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. For all purposes set forth in this
subsection, Landlord is hereby irrevocably appointed as agent for
Tenant. No taking possession of the Premises by Landlord shall be
construed as Landlord's acceptance of a surrender of the Premises by
Tenant or an election of Landlord's part to terminate this Lease
unless written notice of such intention is given to Tenant.
Notwithstanding any such leasing or subletting without termination of
this Lease, Landlord may at any time thereafter elect to terminate
this Lease for Tenant's previous breach.
(4) The right to have a receiver appointed for Tenant, upon application by
Landlord, to take possession of the Premises and to apply any rental
collected from the Premises and exercise all other rights and remedies
granted to Landlord pursuant to this Section.
SECTION XXI. LATE PAYMENTS/DEFAULT INTEREST AND LATE CHARGES
A. Default Interest
----------------
Any amount due from Tenant to Landlord which is not paid when due shall
bear interest at the lesser of (i) the rate of fifteen percent (15%) per
annum, or (ii) the maximum rate permitted by law, from the date such
payment initially becomes due until paid. Such rate shall remain in effect
after the occurrence of any breach or default hereunder by Tenant to and
until payment of the entire amount due, including all accrued interest
thereon; provided, however, Tenant shall not be required to pay default
interest provided that Tenant cures such nonpayment prior to the expiration
of the grace period applicable to such payment as provided in Subsection
XX.A.(1) above. Payment of default interest shall not excuse or cure any
default by Tenant pursuant to this Lease.
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B. Late Charges
------------
Tenant hereby acknowledges that in addition to lost interest, the late
payment by Tenant to Landlord of rent or any other sums due hereunder will
cause Landlord to incur other costs not contemplated in this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain. Such other costs include, but are not limited to processing,
administrative and accounting costs. Accordingly, if any installment of
Monthly Rent or Tenant's Estimate Operating Costs shall not be received by
Landlord prior to the expiration of the grace period applicable to such
payment as provided in Subsection XX.A.(1) above, Tenant shall pay to
Landlord as additional rent hereunder a one-time late charge equal to five
percent (5%) of such overdue amount. In the event that any other additional
rent or other sum due from Tenant is not received by Landlord on or before
the due date applicable to such payment, Tenant shall pay to Landlord as
additional rent hereunder a one-time late charge equal to ten percent (10%)
of such overdue amount. The parties hereby agree that (i) such late charge
represents a fair and reasonable estimate of the costs Landlord will incur
in processing such past-due payment by Tenant, (ii) such late charge shall
be paid to Landlord as liquidated damages for each delinquent payment, and
(iii) the payment of the late charge is to compensate Landlord for the
additional administrative expense incurred by Landlord in handling and
processing delinquent payments.
C. No Waiver
---------
Neither assessment nor acceptance of partial payments, interest or late
charges by Landlord shall constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of
its other rights and remedies under this Lease. Nothing contained in this
Section shall be deemed to condone, authorize, sanction or grant to Tenant
an option for the late payment of rent, additional rent or other sums due
hereunder, and Tenant shall be deemed in default with regard to any such
payments should the same not be made by the date on which they are due,
after giving effect to any applicable notice and grace periods.
SECTION XXIII. HOLDING OVER
Tenant shall notify Landlord of its desire to hold over following the expiration
of the Term by providing not less than thirty (30) days prior written notice.
Notwithstanding any provision of this Lease to the contrary, no holding over
shall be permitted without Landlord's written consent (such consent not to be
inferred by Landlord's silence), and Landlord shall have the right, at
Landlord's option and sole discretion, to withhold its consent to any such
holdover by Tenant. In the event that Landlord shall, in the exercise of its
sole and absolute discretion, without having any obligation to do so and without
having its consent inferred from any inaction on Landlord's part, grant its
consent to any holding over by Tenant, any such holding over shall be only for
the entire Premises, and shall require Tenant to pay, for the first three (3)
months of any such holdover, one hundred twenty-five
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percent (125%) of the Monthly Rental herein specified for the last month in the
Term (prorated on a monthly basis), unless Landlord shall specify a lesser
amount for rent in its sole discretion, together with an amount estimated by
Landlord for the monthly Operating Costs payable under this Lease. Beginning
with the fourth (4th) month of any such holdover, Tenant shall pay two hundred
percent (200%) of the Monthly Rental herein specified for the last month in the
Term (prorated on a monthly basis), unless Landlord shall specify a lesser
amount for rent in its sole discretion, together with an amount estimated by
Landlord for the monthly Operating Costs payable under this Lease. If Tenant
holds over with Landlord's consent, such occupancy shall be deemed a month to
month tenancy and such tenancy shall otherwise be on the terms and conditions
herein specified in this Lease as far as applicable. Notwithstanding the
foregoing provisions or the acceptance by Landlord of any payment by Tenant, any
holding over without Landlord's consent shall constitute a default by Tenant and
shall entitle Landlord to pursue all remedies provided in this Lease and Tenant
shall be liable for any and all direct or consequential damages or losses of
Landlord resulting from Tenant's holding over without Landlord's consent.
SECTION XXIV. ATTORNEYS' FEES
In the event litigation is commenced by either Landlord or Tenant hereunder, the
party finally prevailing in any such litigation shall be entitled, in addition
to any other relief it may be awarded, to reimbursement for its reasonable
attorneys fees and court costs. Notwithstanding the foregoing, in the event
Landlord is made a party to any litigation between Tenant and any third party,
then Tenant shall reimburse Landlord for all costs and attorneys' fees incurred
by or imposed upon Landlord in connection with such litigation unless Landlord
is ultimately held to be liable.
SECTION XXV. MORTGAGEE PROTECTION
A. Subordination; Nondisturbance
-----------------------------
This Lease, and all of the rights of Tenant hereunder, are and shall be, at
the option of Landlord or the mortgagee, beneficiary or master or ground
lessor under the following instruments, either subordinate or superior to
any mortgage or deed of trust (including a consolidated mortgage or deed of
trust) constituting a lien on the Premises, Building or Project, or on any
part thereof or Landlord's interest therein and to any ground or master
lease if Landlord's title to the Premises or any part thereof is or shall
become a leasehold interest, whether such mortgage, deed of trust, ground
or master lease is placed on the Premises, Building or Project before or
after the date of this Lease; provided however that notwithstanding any
such subordination, Tenant's rights under this Lease shall remain in effect
for the full Term as long as Tenant is not in default hereunder. To further
assure the foregoing subordination or superiority, Tenant shall, upon
Landlord's request, together with the request of any mortgagee
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under a mortgage or beneficiary under a deed of trust or ground or master
lessor, execute any reasonable and customary instrument or instruments
intended to subordinate this Lease (subject to Tenant's non-disturbance
rights), or at the option of Landlord, to make it superior to any mortgage,
deed of trust, or ground or master lease.
B. Attornment
----------
Notwithstanding and in addition to the provisions of Subsection A. above,
Tenant agrees (1) to attorn to any mortgagee of a mortgage or beneficiary
of a deed of trust encumbering the Premises and to any party acquiring
title to the Premises by judicial foreclosure, trustee's sale, or deed in
lieu of foreclosure, and to any ground or master lessor, as the successor
to Landlord hereunder, provided that such successor of Landlord agrees to
be bound by the terms of this Lease, (2) to execute any reasonable and
customary attornment agreement evidencing such attornment requested by a
mortgagee, beneficiary, ground or master lessor, or party making a loan
secured by the Premises, Building or Project or so acquiring title to the
Premises, and (3) that this Lease shall remain in force notwithstanding any
such judicial foreclosure, trustee's sale, deed in lieu of foreclosure, or
merger of titles. Notwithstanding the foregoing, neither a mortgagee of a
mortgage or beneficiary of a deed of trust encumbering the Premises, any
party acquiring title to the Premises by judicial foreclosure, trustee
sale, or deed in lieu of foreclosure, or any ground lessor or master
lessor, as the successor to Landlord hereunder, shall be liable or
responsible for any breach of a covenant contained in this Lease that
occurred before such party acquired its interest in the Premises or for any
continuing breach thereof until after the successor Landlord has received
the notice and right to cure as provided herein, and no such party shall be
liable or responsible for any security deposits held by Landlord hereunder
which have not been transferred or actually received by such party, and
such party shall not be bound by any payment of rent or additional rent for
more than two (2) months in advance.
SECTION XXVI. ESTOPPEL CERTIFICATE/FINANCIAL STATEMENTS
A. Estoppel Certificate
--------------------
Tenant, at any time and from time to time upon not less than ten (10)
business days prior written notice from Landlord, agrees to execute and
deliver to Landlord a statement in the form provided by Landlord (a)
certifying, to the extent true, that this Lease is unmodified and in full
force and effect, or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect
and the date to which the rent and other charges are paid in advance, if
any; (b) acknowledging that there are not, to Tenant's knowledge, any
uncured defaults on the part of Landlord hereunder, or specifying such
defaults if they are claimed evidencing the status of this Lease; (c)
acknowledging
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the amount of the Security Deposit held by Landlord; and (d) containing
such other information regarding this Lease or Tenant as Landlord
reasonably requests. Tenant's failure to deliver an estoppel certificate
within such time shall be conclusive upon Tenant that (i) this Lease is in
full force and effect without modification except as may be represented by
Landlord, (ii) to Tenant's knowledge there are no uncured defaults in
Landlord's performance, (iii) no rent has been paid in advance except as
set forth in this Lease, and (iv) such other information regarding this
Lease and Tenant set forth therein by Landlord is true and complete.
B. Furnishing of Financial Statements
----------------------------------
Landlord has reviewed the financial statements, if any, requested of the
Tenant and has relied upon the truth and accuracy thereof with Tenant's
knowledge and representations of the truth and accuracy of such statements
and that said statements accurately and fairly depict the financial
condition of Tenant. Said financial statements are an inducing factor and
consideration for the entering into of this Lease by Landlord with this
particular Tenant. Tenant shall, at any time and from time to time while
(i) any Event of Default shall be continuing, (ii) Tenant vacates or
otherwise occupies less than fifty percent (50%) of the Building, or (iii)
upon the request of any prospective purchaser or mortgagee, and upon not
less than ten (10) days prior written notice from Landlord, furnish
Landlord with (a) Tenant's most recent audited financial statements,
including a balance sheet and income statement, or a document in which
Tenant states that its books are not independently audited, and (b)
unaudited financial statements, including a balance sheet and income
statement, dated within ninety (90) days of the request from Landlord, and
certified by the chief financial officer of Tenant to be true and accurate
in all material respects.
The foregoing notwithstanding, so long as the Tenant named herein shall be
the Tenant under this Lease and so long as Tenant shall not be in default
under this Lease, Tenant shall not be required to provide the financial
statements described in the preceding sentence; provided, however, that
Tenant agrees, upon not less than ten (10) days prior written notice from
Landlord, to provide summary level financial information, certified to the
best of Tenant's knowledge, to any prospective purchaser or lender for the
Project or Building. As consideration for the financial reporting waiver
contained in this paragraph, Tenant has represented and warranted by a
letter dated April 12, 1996, signed by a corporate officer of Tenant, that
to the best of Tenant's knowledge, as of the effective date of this Lease,
the following minimum financial standards of Tenant are true and correct as
stated in such letter:
(a) Tenant's assets;
(b) Tenant's equity;
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(c) Tenant's annual revenues; or
(d) Tenant's annual net income.
Tenant further agrees that it shall notify Landlord in writing if at any
time during the Term or Extended Term of this Lease any of such minimum
financial standards of Tenant as stated in such letter shall no longer be
true. Each of the foregoing financial criteria shall be periodically tested
and determined by Tenant using generally accepted accounting principles,
consistently applied.
SECTION XXVII. PARKING
Landlord agrees to maintain or cause to be maintained an automobile parking area
in substantially the locations depicted on the Site Plan attached hereto as
Exhibit A, and to maintain and operate, or cause to be maintained and operated,
said automobile parking area during the Term of this Lease for the benefit and
use of the customers, service suppliers, other invitees and employees of Tenant
and all of the other tenants in the Project. Landlord reserves the right to
designate a reasonable number of visitor parking areas and spaces for the
exclusive use of visitor, and the right to designate parking spaces for the
exclusive use of other tenants in the Project as required pursuant to the terms
of their respective leases, subject, however, to the provisions of Section I.Q.
of this Lease. Whenever the words "automobile" or "parking area" are used in
this Lease, it is intended that the same shall include, whether in a surface
parking area or a parking structure, the automobile parking stalls, driveways,
loading docks, truck areas, service drives, entrances and exits and sidewalks,
landscaped areas, pedestrian passageways in conjunction therewith and other
areas designed for parking. Landlord shall also have the right to establish
such reasonable rules and regulations as may be deemed desirable, at Landlord's
sole discretion, for the proper and efficient operation and maintenance of said
automobile parking area. Subject to the provisions of Section I.Q., such rules
and regulations may include, without limitation, (i) restrictions in the hours
during which the automobile parking area shall be open for use, (ii) the
establishment of charges for parking therein (on either a reserved or unreserved
basis, at Landlord's sole discretion) by tenants of the Building and Project as
well as by their employees, customers and service suppliers, and (iii) the use
of parking gates, cards, permits and other control devices to regulate the use
of the parking areas.
The rights of Tenant and its employees, customers, service suppliers and
invitees to use the automobile parking area shall at all times be subject to (a)
Landlord's right to establish rules and regulations applicable to such use and
to exclude any person therefrom who is not authorized to use same or who
violates such rules and regulations; (b) the rights of Landlord and other
tenants in the Building and Project to use the same in common with Tenant and
its employees, customers, service suppliers and invitees, (c) the availability
of parking spaces in said automobile parking area, and (d) Landlord's right to
change the location and configuration of the parking areas and any assigned
reserved parking spaces as shall be determined at Landlord's reasonable
discretion, subject,
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however, and consistent with the provisions of Section I.Q.. Tenant agrees to
limit its use of the Automobile Parking Area to the number and type of parking
spaces specified in the subsection entitled "Tenant Parking Spaces" in Section
I.
Notwithstanding the foregoing, nothing contained herein shall be deemed to
impose liability upon Landlord for personal injury or theft, for damage to any
motor vehicle, or for loss of property from within any motor vehicle, which is
suffered by Tenant or any of its employees, customers, service suppliers or
other invitees in connection with their use of said automobile parking area.
SECTION XXVIII. SIGNS; NAME OF BUILDING
Tenant shall not have the right to place, construct, or maintain on or about the
Premises, Building or Project, or in any interior portions of the Premises or
Building that may be visible from the exterior of the Building or Common Areas,
any signs, names, insignia, trademark, advertising placard, descriptive material
or any other similar item ("Sign") without Landlord's prior written consent,
which consent may be withheld in Landlord's sole discretion. Tenant shall
demonstrate, to the reasonable satisfaction of Landlord, that any proposed Sign
is in compliance with and has been preapproved by any governmental authority,
and by and architectural control and any design review board or committee,
having jurisdiction over Sign erected or placed on the Project, and is otherwise
in conformance with all applicable building codes and zoning requirements. In
the event Landlord consents to Tenant placing a Sign on or about the Premises,
Building or Project, any such Sign shall be subject to Landlord's approval of
the color, size, style and location of such Sign, and shall conform to any
current or future Sign criteria established by Landlord for the Building or
Project. If Landlord enacts a Sign criteria or revises an existing Sign
criteria, after Tenant has erected a Sign to which Landlord has granted its
consent, if Landlord so elects, Tenant agrees, at Landlord's expense but subject
to Landlord's prior approval of the cost thereof, to make the necessary changes
to its Sign in order to conform the Sign to Landlord's current Sign criteria, as
enacted or revised, provided that such changes shall be limited to the color,
size, style and location of Tenant's Sign and that Tenant shall not be required
to change the content of its Sign. In the event Landlord consents to Tenant's
placement of a Sign on the Building, Tenant shall, at its sole cost, (i)
maintain such sign in first class condition during the Term and (ii) and remove
such Sign from the Building at the end of the Term and restore the Building to
the same condition as before the installation of the Sign, ordinary wear and
tear excepted, including removing any discoloration of the Building caused by
the presence of such sign. Notwithstanding the foregoing, Landlord hereby
consents to and approves of all of Tenant's signs present at or on the Building
and Project as of the date of this Lease.
Landlord reserves the right at any time it deems necessary or appropriate to (a)
place Signs reasonably related to the Project at any reasonable location on the
Building and Project as it deems necessary and (b) change the name, address or
designation of the Building and Project.
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SECTION XXIX. QUIET ENJOYMENT
Upon payment by Tenant of the charges herein provided, and upon the observance
and performance of all the covenants, terms and conditions on Tenant's part to
be observed and performed, Tenant shall peaceably and quietly hold and enjoy the
Premises for the Term without hindrance or interruption by Landlord or any other
person or persons lawfully or equitably claiming by, through or under Landlord,
subject, nevertheless, to the terms and conditions of this Lease and any
mortgage and/or deed of trust to which this Lease is subordinate.
SECTION XXX. BROKERS AND AGENTS
Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except the Broker
identified in Section I., whose compensation shall be Landlord's responsibility.
Tenant shall indemnify and hold Landlord harmless from any cost, expense or
liability (including costs of suit and reasonable attorneys' fees) for any
compensation, commission or fees claimed by any other real estate broker or
agent in connection with this Lease or its negotiation by reason of any act of
Tenant. Further, except with respect to the Broker, whose compensation shall be
Landlord's responsibility, Tenant and Landlord each agree to indemnify and hold
each other harmless from and against any cost, expense or liability (including
costs of suit and reasonable attorneys fees) for claims for compensation,
commission or fees asserted by any real estate broker or agent representing or
claiming to represent the indemnifying party in connection with any renewal,
extension, modification or other matter relating to this Lease or its
negotiation.
SECTION XXXI. NOTICES
Any notice, demand, approval, consent, bill, statement or other communication
("Notice") required or desired to be given under this Lease shall be in writing
addressed to Tenant at Tenant's Address for Notice or to Landlord at Landlord's
Address for Notice, above and shall be personally served or given by pre-paid
Certified U.S. Mail, return receipt requested, or "overnight" delivery service
with written receipt. In the case of personal delivery, any Notice shall be
deemed to have been given when delivered; in the case of service by certified
mail, any Notice shall be deemed delivered on the date of receipt or refusal or
non-delivery indicated on the return receipt; and in the case of overnight
delivery service, any Notice shall be deemed given when delivered as evidenced
by a receipt. If more than one Tenant is named under this Lease, service of any
Notice upon any one of said Tenants shall be deemed as service upon all of such
Tenants. The parties hereto and their respective heirs, successors, legal
representatives, and assigns may from time to time change their respective
addresses for Notice by giving at least fifteen (15) days' written notice to the
other party, delivered in compliance with this Section.
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SECTION XXXII. NOTICE AND CURE TO LANDLORD AND MORTGAGEE
On any act or omission by Landlord which gives, or which Tenant claims or
intends to claim gives, Tenant the right to recover damages from Landlord or the
right to terminate this Lease by reason of a constructive or actual eviction
from all or part of the Premises, or otherwise, Tenant shall not sue for damages
or attempt to terminate this Lease until it has given written notice of the act
or omission to Landlord and to the holder(s) of the indebtedness or other
obligations secured by any mortgage or deed of trust affecting the Premises as
identified to Tenant by Landlord, and such act or omission has not been
substantially remedied within thirty (30) days following the giving of the
notice, or within such additional time as may reasonably be required if such
remedy cannot be accomplished within said thirty (30) days provided that such
remedy is commenced within said thirty (30) days and is diligently prosecuted to
completion thereafter. During such cure period, Landlord and the lienholder(s),
or either of them, their agents or employees, may enter upon the Premises and do
therein whatever is necessary to remedy the act or omission, using, however,
reasonable efforts not to interfere with Tenant's normal business operations.
During the period after the giving of notice and during the remedying of the act
or omission, the Monthly Rental payable by Tenant shall be equitably abated or
apportioned to the extent that the Premises, or any portion thereof, are
rendered substantially untenantable as a direct result of Landlord's breach of
its obligations hereunder. Nothing in this Section shall limit Tenant's rights
under Section X.C., "Right To Make Repairs."
SECTION XXXIII. RIGHTS OF FIRST OFFER AND FIRST REFUSAL
A. Right of First Offer
--------------------
If, at any time during the Term of this Lease, as the same may be extended
pursuant to the Extension Option, Landlord shall elect to list the Building
for sale, not as part of the Project as a whole or with any other buildings
in the Project, but as a stand alone building with such parking, access and
other exterior amenities as may be necessary or appropriate (collectively,
the "Building Parcel"), Tenant shall have, and Landlord hereby grants to
Tenant, a right of first offer to purchase the Building Parcel (the "Right
of First Offer"), on the terms and conditions set forth in this Subsection
A. Prior to offering the Building Parcel for sale to the general public,
Landlord shall notify Tenant in writing of its desire to sell the Building
Parcel. Tenant shall have thirty (30) days following the effective date of
such notice from Landlord within which to present an offer to purchase the
Building Parcel from Landlord ("Tenant's Offer"). During such thirty (30)
day period, Landlord will provide such information concerning the Building
Parcel as Tenant might reasonably request in order to assist Tenant in
developing Tenant's Offer. Landlord agrees that it will consider and deal
with Tenant's Offer in good faith, and will enter into such negotiations as
Landlord, in the exercise of its sound business judgement deems appropriate
or advisable; provided,
59
<PAGE>
however, that nothing herein contained shall require Landlord to accept
Tenant's Offer or to enter into negotiations with Tenant if Tenant's Offer
is otherwise unacceptable to Landlord. At such time as Landlord shall
notify Tenant in writing that Landlord has rejected Tenant's Offer, then
Landlord shall be free to list the Building Parcel for sale to third
parties. Tenant's Right of First Offer shall not be exercisable at any time
that Tenant is in default under any of its material obligations under this
Lease. If Landlord shall elect to sell the Project as a whole or to sell
the Building as part of a package which includes another building in the
Project, then this Right of First Offer shall not apply.
B. Right of First Refusal
----------------------
If, at any time during the Term of this Lease, as the same may be extended
pursuant to the Extension Option, Landlord shall receive a bona fide offer
to purchase the Building Parcel from any unrelated third party on terms and
conditions which Landlord wishes to accept (the "Offer"), Landlord agrees
that Tenant shall have, and Landlord hereby grants to Tenant, a right of
first refusal with respect to such Offer ("Right of First Refusal"),
exercisable on the terms and conditions set forth in this Subsection.
Landlord shall provide written notice to Tenant that Landlord has received
an Offer which it wishes to accept, and shall set forth the basic business
terms of such Offer ("Offer Notice"). Under no circumstances shall Landlord
be required to provide Tenant with a copy of the actual Offer received by
Landlord or to identify the name of the potential purchaser to Tenant.
Tenant shall have seven (7) business days from the effective date of the
Offer Notice to notify Landlord in writing that Tenant wishes to purchase
the Building Parcel on the terms and conditions set forth in the Offer
Notice ("Acceptance Notice"). If Tenant shall provide its Acceptance Notice
to Landlord in a timely manner, then Landlord and Tenant agree to work
together in good faith to prepare and enter into a contract for the
purchase and sale of the Building Parcel incorporating the Offer terms and
conditions. If Tenant shall fail to exercise its Right of First Refusal by
providing its Acceptance Notice in a timely manner, then Tenant's Right of
First Refusal shall lapse and be of no further force or effect, and
Landlord shall thereafter be free to sell the Building Parcel to such third
party offeror. Tenant's Right of First Refusal shall not be exercisable at
any time that Tenant is in default under any of its material obligations
under this Lease. If the Offer is for the purchase of the Project as a
whole or for the purchase of the Building as part of a package which
includes another building in the Project, then this Right of First Refusal
shall not apply.
SECTION XXXIV. GENERAL
A. Section Headings
----------------
The section headings used in this Lease are for the purposes of convenience
only. They shall not be construed to limit or
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to extend the meaning of any part of this Lease.
B. Incorporation of Prior Agreements; Amendments
---------------------------------------------
This Lease contains all agreements of Landlord and Tenant with respect to
any matter mentioned, or dealt with, herein. No prior agreement or
understanding pertaining to any such matter, including the Original Lease,
shall be binding upon Landlord or Tenant, all such prior agreements having
been restated in their entirety in and merged into this instrument. Any
amendments to or modifications of this Lease shall be null and void and
ineffective unless in writing, signed by both of the parties hereto, and
neither Landlord nor Tenant shall be liable for any oral or implied
agreements.
Tenant hereby agrees that Landlord has not made, and Tenant may not rely
on, any representations or warranties, expressed or implied, with regard to
the Project, the Building, the Premises or otherwise, except as stated in
this Lease. In particular, Landlord has not authorized any agent or broker
to make a representation or warranty inconsistent with the terms of this
Lease and Tenant may not rely on any such inconsistent representation or
warranty.
C. Waiver
------
Any waiver by Landlord or by Tenant of any breach of any term, covenant, or
condition contained in this Lease shall not be deemed to be a waiver of
such term, covenant, or condition or of any subsequent breach of the same
or of any other term, covenant, or condition contained in this Lease.
Landlord's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Landlord's consent to, or approval of,
any subsequent act by Tenant. The acceptance of rent or other sums payable
hereunder by Landlord shall not be a waiver of any preceding breach by
Tenant of any provision hereof, other than failure of Tenant to pay the
particular rent or other sum so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent,
or sum equivalent to rent.
D. Short Form or Memorandum of Lease
---------------------------------
Tenant agrees, at the request of Landlord, to execute, deliver, and
acknowledge a short form or memorandum of this Lease satisfactory to
counsel for Landlord, and Landlord may, in its sole discretion, record such
short form or memorandum in the county where the Premises are located.
Tenant shall not record this Lease, or a short form of this Lease, without
Landlord's prior written consent, and any such recordation shall, at the
option of Landlord, constitute a default of Tenant hereunder.
E. Time of Essence
---------------
Time is of the essence in the performance of each provision of this Lease.
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F. Examination of Lease
--------------------
This instrument shall not be effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
G. Severability
------------
If any term or provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision
to persons or circumstances other than those as to which it is held invalid
or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
H. Surrender of Lease Not Merger
-----------------------------
Neither the voluntary or other surrender of the Lease by Tenant nor the
mutual cancellation thereof shall cause a merger of the titles of Landlord
and Tenant, but such surrender or cancellation shall, at the option of
Landlord, either terminate all or any existing subleases or operate as an
assignment to Landlord of any such subleases.
I. Corporate Authority
-------------------
If Tenant is a corporation, each individual executing this Lease on behalf
of Tenant represents and warrants to Landlord (1) that s/he is duly
authorized to execute and deliver this Lease on behalf of Tenant in
accordance with a duly executed and authorized certificate of authorization
of Tenant issued in accordance with the By-laws and other governing
documents and corporate resolutions of Tenant and its Board of Directors,
and (2) that this Lease is binding upon and enforceable by Landlord against
Tenant in accordance with its terms. Each individual executing this Lease
on behalf of Landlord represents and warrants to Tenant (1) that s/he is
duly authorized to execute and deliver this Lease on behalf of Landlord and
to convey to Tenant the leasehold estate created by this Lease.
J. Governing Law
-------------
This Lease and the rights and obligations of the parties hereto shall be
interpreted, construed and enforced in accordance with the local laws of
the State in which the Project is located.
K. Force Majeure
-------------
If the performance by Landlord or Tenant of any provision of this Lease is
delayed or prevented by any act of God, strike, lockout, shortage of
material or labor, restriction by any governmental authority, civil riot,
flood, and any other cause not within the control of Landlord or Tenant,
then the period for performance of the provision shall be automatically
extended for the same time the Landlord or Tenant is so
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<PAGE>
delayed or hindered; provided, however, that the foregoing provision shall
not excuse the late payment of Rent or any other sums due by either party
under this Lease. In no event shall Landlord be liable or responsible to
Tenant for any loss or damage to any personal property or injury to any
person occasioned (i) by theft, fire, act of God, public enemy, riot,
strike, insurrection, war or requisition which is outside the reasonable
control of landlord, or (ii) by reason of any court order or injunction of
any governmental body or authority not expressly consented to by Landlord;
provided, however, that any condemnation, or conveyances or assignments in
lieu of condemnation as contemplated under Section XIX, shall not be deemed
to be "with Landlord's consent."
L. Use of Language
---------------
Words of gender used in this Lease include any other gender, and words in
the singular include the plural, unless the context otherwise requires.
M. Successors
----------
The terms, conditions and covenants contained in the Lease inure to the
benefit of and are binding on, the parties hereto and their respective
successors in interest, assigns and legal representatives, except as
otherwise herein expressly provided. All rights, privileges, immunities and
duties of Landlord under this Lease, including without limitation, notices
required or permitted to be delivered by Landlord to Tenant hereunder, may,
at Landlord's option, be exercised or performed by Landlord's agent or
attorney.
N. No Reduction of Rental
----------------------
Except as otherwise expressly and unequivocally provided in this Lease,
Tenant shall not for any reason withhold or reduce the amounts payable by
Tenant under this Lease, it being understood that the obligations of
Landlord hereunder are independent of Tenant's obligations. If Landlord is
required by governmental authority to reduce energy consumption or impose a
parking or similar charge with respect to the Premises, Building or
Project, to restrict the hours of operation of, limit access to, or reduce
parking spaces available at the Building, or take other limiting actions,
then Tenant is not entitled to abatement or reduction of rent or to
terminate this Lease.
O. No Partnership
--------------
Notwithstanding any provision of this Lease or otherwise, Landlord is not,
and under no circumstances shall it be considered to be, a partner of
Tenant, or engaged in a joint venture with Tenant.
P. Exhibits
--------
All exhibits attached hereto are made a part hereof and are incorporated
herein by a reference. A complete list of said exhibits is set forth in the
Table of Contents.
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<PAGE>
Q. Survival
--------
The obligations of the indemnifying party under each and every
indemnification and hold harmless provision contained in this Lease shall
survive the expiration or earlier termination of this Lease to and until
the last to occur of (a) the last date permitted by law for the bringing of
any claim or action with respect to which indemnification may be claimed by
the indemnified party against the indemnifying party under such provision,
or (b) the date on which any claim or action for which indemnification may
be claimed under such provision is fully and finally resolved and, if
applicable, any compromise thereof or judgement or award thereon is paid in
full by the indemnifying party and the indemnified party is reimbursed by
the indemnifying party for any amounts paid by the indemnified party in
compromise thereof or upon a judgement or award thereon and in defense of
such action or claim, including reasonable attorneys' fees incurred.
Payment shall not be a condition precedent to recovery upon any
indemnification provision contained herein. Tenant's audit rights under
Section V.D. shall survive the expiration or termination of this Lease, and
Tenant's rights, if any to condemnation awards or insurance proceeds shall
survive the termination or cancellation of this Lease by reason of casualty
or condemnation.
R. Rights Personal To Integrated Payment Systems Inc.
--------------------------------------------------
Notwithstanding anything in this Lease to the contrary, it is acknowledged
and agreed by Tenant that certain rights granted to Tenant pursuant to the
terms of this Lease are intended to be personal to Integrated Payment
Systems Inc. only, and shall not transfer to any Assignee or Sublessee.
Those rights which shall not devolve, transfer or accrue to, and which may
not be exercised by, any Sublessee or any Assignee, are as follows:
1. Renewal Option (Section III.D.);
2. Right of First Offer (Section XXXIII.A.);
3. Right of First Refusal (Section XXXIII.B.); and
4. Assignment To Qualified Assignee (Section XVI.A.) and Subletting
to Qualified Sublessee (Section XVI.C.5); and
5. Waiver of Financial Reporting Requirements (Section XXVI.B.).
S. Reasonableness
--------------
Except where a different standard has been specifically provided, no
consent or approval required or requested of either Landlord or Tenant
hereunder shall be unreasonably withheld, conditioned or delayed.
SECTION XXXIV. EXECUTION
This Lease may be executed in several duplicate counterparts, each
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<PAGE>
of which shall be deemed an original of this Lease for all purposes.
"TENANT" "LANDLORD"
Integrated Payment Systems, Inc., The Mutual Life Insurance
a Delaware corporation Company of New York, a
New York corporation
By: /s/ William E. Anuszewski By: /s/ Thomas M. McCahill
----------------------------- ------------------------
Name: William E. Anuszewski Thomas M. McCahill
----------------------- Executive Vice President
Title: VP-IPS Financial Serv. ARES Realty, Inc.
---------------------- Authorized Signatory
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EXHIBIT 10.11
REVOLVING CREDIT AGREEMENT
Dated as of __________ __, 1996
MONEYGRAM PAYMENT SYSTEMS, INC., a Delaware corporation (the "Borrower"),
and FIRST DATA CORPORATION, a Delaware corporation (the "Lender"), agree as
follows:
ARTICLE I
AMOUNTS AND TERMS OF THE ADVANCES
Section 1.01. The Advances. The Lender agrees, on the terms and
conditions hereinafter set forth, to make advances (the "Advances") to the
Borrower from time to time during the period from the date hereof until January
15, 1997 (such date, or the earlier date of termination of the Commitment (as
defined below) pursuant to Section 5.01, being the "Termination Date") in an
aggregate amount not to exceed at any time outstanding $20,000,000 (the
"Commitment"). Each Advance shall be in an amount not less than $500,000 or an
integral multiple of $100,000 in excess thereof, except that an Advance may be
in an amount equal to the entire unused Commitment. Within the limits of the
Commitment, the Borrower may borrow, prepay pursuant to Section 1.04 and
reborrow under this Section 1.01.
SECTION 1.02. Making the Advances. Each Advance shall be made on notice,
given not later than 11:00 A.M. (Denver time) on the fourth Business Day prior
to the date of the proposed Advance, by the Borrower to the Lender, specifying
the date and amount thereof. Not later than 12:00 P.M. (Denver time) on the
date of such Advance and upon fulfillment of the applicable conditions set forth
in Article II, the Lender will make such Advance available to the Borrower in
U.S. dollars at the Lender's address referred to in Section 6.02 in same day
funds. Each notice from the Borrower to the Lender requesting an Advance shall
be irrevocable and binding on the Borrower.
SECTION 1.03. Interest and Repayment. The Borrower shall repay, and shall
pay interest on, the aggregate unpaid principal amount of all Advances in
accordance with a promissory note of the Borrower, in substantially the form of
Exhibit A hereto (the "Note"), evidencing the indebtedness resulting from such
Advances and delivered to the Lender pursuant to Article II.
SECTION 1.04. Optional Prepayments. The Borrower may, upon at least four
Business Days' notice to the Lender stating
<PAGE>
the proposed date and principal amount of the prepayment, and if such notice is
given the Borrower shall, prepay the outstanding principal amounts of the
Advances in whole or in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that each partial
prepayment shall be in a principal amount not less than $100,000.
SECTION 1.05. Mandatory Prepayments. Within three (3) Business Days after
receipt by the Borrower or any subsidiary of the Borrower of any cash proceeds
from the issuance of indebtedness for borrowed money, the Borrower shall make or
cause to be made a mandatory prepayment in an amount equal to the lesser of (i)
such cash proceeds (net of any financing charges associated therewith) and (ii)
the outstanding Commitment in effect at that time. Upon the Lender's receipt of
any mandatory prepayment made pursuant to this Section 1.05, the outstanding
Commitment shall be automatically reduced by the amount of such mandatory
prepayment.
SECTION 1.06. Payments and Computations. The Borrower shall make each
payment hereunder and under the Note not later than 11:00 A.M. (Denver time) on
the day when due in U.S. dollars to the Lender at its address referred to in
Section 6.02 in same day funds. All computations of interest shall be made by
the Lender on the basis of a year of 366 days, as the case may be, in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable. Each
determination by the Lender of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.
SECTION 1.07. Payment on Non-Business Days. Whenever any payment
hereunder or under the Note shall be stated to be due on a day other than a day
of the year on which banks are not required or authorized to close in Denver
(any such other day being a "Business Day"), such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01. Conditions Precedent to Initial Advance. The obligation of
the Lender to make its initial Advance is subject to the condition precedent
that the Lender shall have
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<PAGE>
received on or before the day of such Advance the following, each dated such
day, in form and substance satisfactory to the Lender:
(a) This Agreement.
(b) The Note.
(c) Certified copies of the resolutions of the Board of Directors of the
Borrower approving this Agreement and the Note, and of all documents evidencing
other necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Note.
(d) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (i) the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the Note and the other documents
to be delivered by it hereunder, (ii) copies attached thereto of the Certificate
of Incorporation of the Borrower and the By-Laws of the Borrower.
SECTION 2.02. Conditions Precedent to All Advances. The obligation of the
Lender to make each Advance (including the initial Advance) shall be subject to
the further conditions precedent that on the date of such Advance (a) the
following statements shall be true (and each giving of the applicable notice
requesting such Advance and the acceptance by the Borrower of the proceeds of
such Advance shall constitute a representation and warranty by the Borrower that
on the date of such Advance such statements are true):
(i) The representations and warranties contained in Section 3.01 of
this Agreement are correct on and as of the date of such Advance, before
and after giving effect to such Advance and to the application of the
proceeds therefrom, as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would result from
such Advance or from the application of the proceeds therefrom, which
constitutes an Event of Default (as defined in Section 5.01) or would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both;
and (b) the Lender shall have received such other approvals, opinions or
documents as the Lender may reasonably request.
-3-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's Certificate of Incorporation or By-Laws or (ii) law or any
contractual restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement
and the Note.
(d) This Agreement and the Note are legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01. Affirmative Covenants. So long as the Note shall remain
unpaid or the Lender shall have any Commitment hereunder, the Borrower will,
unless the Lender shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent contested in
good faith.
(b) Reporting Requirements. Furnish to the Lender:
-4-
<PAGE>
(i) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its security holders, and copies
of all reports and registration statements which the Borrower or any
subsidiary files with the Securities and Exchange Commission or any
national securities exchange; and
(ii) as soon as possible and in any event within five days after the
occurrence of each Event of Default and each event which, with the giving
of notice or lapse of time, or both, would constitute an Event of Default,
continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Event of
Default or event and the action which the Borrower has taken and proposes
to take with respect thereto.
SECTION 4.02. Negative Covenants. So long as the Note shall remain
unpaid or the Lender shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Lender, which consent will not be
unreasonably withheld:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its subsidiaries to assign, any right to receive
income, in each case to secure or provide for the payment of any Debt (as
defined below in this subsection (a)) of any person or entity, other than (i)
purchase money liens or purchase money security interests upon or in any
property acquired or held by the Borrower or any subsidiary in the ordinary
course of business to secure the purchase price of such property or to secure
indebtedness incurred solely for the purpose of financing the acquisition of
such property, or (ii) liens or security interests existing on such property at
the time of its acquisition (other than any such lien or security interest
created in contemplation of such acquisition).
"Debt" means (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (v) obligations under direct or indirect guaranties in respect of,
and obligations under direct
-5-
<PAGE>
or indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (iv) above.
(b) Dividends, Etc. Declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of capital stock of the Borrower, or
purchase, redeem or otherwise acquire for value (or permit any of its
subsidiaries to do so) any shares of any class of capital stock of the Borrower
or any warrants, rights or options to acquire any such shares, now or hereafter
outstanding, except that the Borrower may (i) declare and may any dividend
payment or other distribution payable in common stock of the Borrower, (ii)
purchase, redeem or otherwise acquire shares of its common stock or warrants,
rights or options to acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock and (iii)
declare or pay quarterly cash dividends to its stockholders to the extent that
the aggregate amount of all such cash dividends would not exceed ten percent
(10.0%) of net income of the Borrower arising after September 30, 1996 and
computed on a cumulative consolidated basis, provided that, immediately after
giving effect to such proposed action, no Event of Default or event which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default would exist.
(c) Sales of Assets. Sell, assign, transfer, lease, convey or
otherwise dispose of any property (other than in the ordinary course of the
Borrower's business), whether now owned or hereafter acquired, to the extent
that such property is material to the Borrower's business or operations.
(d) Mergers, Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity (whether in one transaction or a series of
transactions), except for acquisitions of assets from any person(s) or
entity(ies) which do not exceed in the aggregate $5,000,000 at any time.
(e) Investments. Directly or indirectly make or own any Investment
except:
(i) Investments existing on the date hereof; and
-6-
<PAGE>
(ii) Investments which do not exceed $5,000,000 in the aggregate at
any time.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of stock, partnership interest, notes,
debentures or other securities, or of a beneficial interest in stock,
partnership interest, notes, debentures or other securities, issued by any other
Person, and (ii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees, bonuses paid to agents and similar items made
or incurred in the ordinary course of business) or capital contribution by that
Person to any other Person.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
(f) Transactions with Affiliates. Other than any transaction or
agreement with First Data Corporation or any of its Affiliates, directly or
indirectly enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder or holders of any of the capital stock
of the Borrower, or with any Affiliate of the Borrower, on terms that are less
favorable to the Borrower than those that could be obtained in an arm's length
transaction at the time from Persons who are not such a holder or Affiliate.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person is
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act) of greater than twenty percent (20%) or more of any class of voting
securities (or other voting interests) of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.
(g) Other Indebtedness. Not prepay or repay any principal payable in
respect of any indebtedness for borrowed money incurred by Borrower unless such
payment is a regularly scheduled payment under such indebtedness, in which case
the Borrower agrees that it shall, concurrently with any such
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<PAGE>
payment, reduce the Commitment hereunder by an amount equal to such payment, and
prepay Advances, if necessary, in an amount sufficient to ensure that the
outstanding Advances hereunder do not exceed the Commitment (after taking into
account such reduction).
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of, or interest on,
the Note when the same becomes due and payable or
(b) Any representation or warranty made by the Borrower (or any of
its officers) under or in connection with this Agreement shall prove to have
been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in this Agreement for a period of twenty (20) days after
written notice thereof shall have been given to the Borrower by the Lender; or
(d) The Borrower shall fail to pay any principal of or premium or
interest on any Debt (as defined in Section 4.02(a)) which is outstanding in a
principal amount of at least $2,000,000 in the aggregate (but excluding Debt
evidenced by the Note) of the Borrower or such subsidiary (as the case may be),
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof;
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<PAGE>
(e) the Borrower or any of its subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but no
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Borrower or any
of its subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$2,000,000 shall be rendered against the Borrower or any of its subsidiaries and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; then, in any such event,
the Lender may, by notice to the Borrower, (i) declare its obligation to make
Advances to be terminated, whereupon the same shall forthwith terminate, and
(ii) declare the Note, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower or any of its subsidiaries under the Federal Bankruptcy Code, (A) the
obligation of the Lender to make Advances shall automatically be terminated and
(B) the Note, all such interest and all such amounts shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Note, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 6.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier or electronic
communication) and mailed, telecopied, transmitted or delivered, if to the
Borrower, at its address at 7401 West Mansfield Avenue, Lakewood, Colorado
80235, Attention: General Counsel; and if to the Lender, at its address at 2121
N. 117th Ave., NP 30, Omaha, Nebraska 68164, Attention: General Counsel,
facsimile no. (402) 498-4123; or, as to each party, at such other address as
shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when mailed, telecopied or transmitted,
be effective when deposited in the mails, telecopied or confirmed by electronic
receipt, respectively, except that notices to the Lender pursuant to the
provisions of Article I shall not be effective until received by the Lender.
SECTION 6.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under the
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 6.04. Indemnities. The Borrower agrees to defend, protect,
indemnify and hold harmless the Lender and each of its Affiliates and each of
its and its Affiliates' directors, officers and employees (collectively, the
"Idemnitees") from and against any and all liabilities, obligations, losses
(other than loss of profits), damages, penalties, fees, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (excluding any taxes and including, without limitation, the
reasonable fees and disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding, whether or not
such
-10-
<PAGE>
Indemnitees shall be designated a party thereto), which any of them may incur
and reasonably pay arising out of or relating to this Agreement or the Note or
any of the transactions contemplated hereby or thereby or the direct or indirect
application or proposed application of the proceeds of any Advance, provided,
however, the Borrower shall have no obligation to an Indemnitee hereunder with
respect to any matter caused solely by or resulting solely from the willful
misconduct or gross negligence of such Indemnitee. The Borrower, upon demand by
the Lender, shall reimburse each Indemnitee for any reasonable legal or other
expenses incurred in connection with investigating or defending any of the
foregoing except if the same is directly due to the willful misconduct or gross
negligence of such Indemnitee. If the undertaking to indemnify, pay and hold
harmless set forth in this Section 6.04 may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all liabilities, obligations, losses, damages,
penalties, fees, actions, judgments, suits, claims, costs, expenses or
disbursements incurred by any Indemnitee.
SECTION 6.05. Costs, Expenses and Taxes. The Borrower agrees to pay
on demand all costs and expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the Note and the other
documents to be delivered hereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of rights under
this Section 6.05. In addition, the Borrower shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the execution
and delivery of this Agreement, the Note and the other documents to be delivered
hereunder, and agrees to save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes.
SECTION 6.06. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender, which consent will not be unreasonably withheld.
The Lender may at any time, without the consent of the Borrower, assign all or
any portion of its rights under this Agreement and the Note. Any assignee or
transferee of the Note agrees by acceptance thereof to be bound by all the terms
and provisions of this Agreement and the Note.
-11-
<PAGE>
SECTION 6.07. Governing Law. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New
York.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER: MONEYGRAM PAYMENT SYSTEMS, INC.
By: _________________________________
Title:
LENDER: FIRST DATA CORPORATION
By: _________________________________
Vice President
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<PAGE>
EXHIBIT 15.1
, 1996
The Board of Directors of
MoneyGram Payment Systems, Inc.
We are aware of the inclusion in Amendment No. 3 to the Registration
Statement (Form S-1 No. 333-228) and related Prospectus of MoneyGram Payments
System, Inc. of our report dated August 6, 1996 relating to the unaudited
interim financial statements of MoneyGram Payments Systems, Inc. for the six-
month period ended June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
Denver, Colorado
- -------------------------------------------------------------------------------
The foregoing acknowledgement is in the form that will be signed upon the
completion of the transactions and restatement of capital accounts described
in Note 1 to the audited financial statements as of and for the year ended
December 31, 1995 under the caption "Formation of the Company."
ERNST & YOUNG LLP
Denver, Colorado
October 4, 1996
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 2, 1996 (except as to Note 1, as to which
the date is ) in Amendment No. 3 to the Registration Statement
(Form S-1 No. 333-228) and related Prospectus of MoneyGram Payment Systems,
Inc.
ERNST & YOUNG LLP
- -------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion
of the transactions and restatement of capital accounts described in Note 1 to
the audited financial statements as of and for the year ended December 31,
1995 under the caption "Formation of the Company."
ERNST & YOUNG LLP
Denver, Colorado
October 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the balance sheets and statements of operations included in Amendment No. 3 to
the Registration Statement (Form S-1 No. 333-228), and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 1,165 1,330
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 27,446 24,158
<PP&E> 9,953 12,055
<DEPRECIATION> 3,953 5,334
<TOTAL-ASSETS> 41,618 45,704
<CURRENT-LIABILITIES> 40,449 35,069
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 1,169 10,635
<TOTAL-LIABILITY-AND-EQUITY> 41,618 45,074
<SALES> 0 0
<TOTAL-REVENUES> 137,068 73,028
<CGS> 0 0
<TOTAL-COSTS> 107,412 59,498
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 29,666 13,530
<INCOME-TAX> 11,362 5,182
<INCOME-CONTINUING> 18,294 8,348
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,294 8,348
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.2
CONSENT
The undersigned, Brian J. Fitzpatrick, hereby consents, pursuant to Rule 438
under the Securities Act of 1933, as amended, to being named in the
Registration Statement on Form S-1 (the "Registration Statement") of MoneyGram
Payment Systems, Inc. (the "Registrant") as a person anticipated to become a
director of the Registrant prior to the offering registered thereby, and to
the filing of this Consent as an exhibit to the Registration Statement.
/s/ Brian J. Fitzpatrick
-------------------------------------
October 4, 1996
<PAGE>
EXHIBIT 99.3
CONSENT
The undersigned, William Guth, hereby consents, pursuant to Rule 438 under
the Securities Act of 1933, as amended, to being named in the Registration
Statement on Form S-1 (the "Registration Statement") of MoneyGram Payment
Systems, Inc. (the "Registrant") as a person anticipated to become a director
of the Registrant prior to the offering registered thereby, and to the filing
of this Consent as an exhibit to the Registration Statement.
/s/ William Guth
-------------------------------------
October 4, 1996
<PAGE>
EXHIBIT 99.4
CONSENT
The undersigned, Sanford Miller, hereby consents, pursuant to Rule 438 under
the Securities Act of 1933, as amended, to being named in the Registration
Statement on Form S-1 (the "Registration Statement") of MoneyGram Payment
Systems, Inc. (the "Registrant") as a person anticipated to become a director
of the Registrant prior to the offering registered thereby, and to the filing
of this Consent as an exhibit to the Registration Statement.
/s/ Sanford Miller
-------------------------------------
October 4, 1996
<PAGE>
EXHIBIT 99.5
CONSENT
The undersigned, James F. Calvano, hereby consents, pursuant to Rule 438
under the Securities Act of 1933, as amended, to being named in the
Registration Statement on Form S-1 (the "Registration Statement") of MoneyGram
Payment Systems, Inc. (the "Registrant") as a person anticipated to become a
director and chief executive officer of the Registrant prior to the offering
registered thereby, and to the filing of this Consent as an exhibit to the
Registration Statement.
/s/ James F. Calvano
-------------------------------------
October 4, 1996
<PAGE>
EXHIBIT 99.6
CONSENT
The undersigned, John M. Fowler, hereby consents, pursuant to Rule 438 under
the Securities Act of 1933, as amended, to being named in the Registration
Statement on Form S-1 (the "Registration Statement") of MoneyGram Payment
Systems, Inc. (the "Registrant") as a person anticipated to become a director,
Executive Vice President and Chief Financial Officer of the Registrant prior
to the offering registered thereby, and to the filing of this Consent as an
exhibit to the Registration Statement.
/s/ John M. Fowler
-------------------------------------
October 4, 1996
