FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-14350
MONEYGRAM PAYMENT SYSTEMS, INC.
-------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 84-1327808
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7401 West Mansfield Avenue, Lakewood, Colorado 80235
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 303-716-6800
NOT APPLICABLE
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(Former Name, Former Address and Former Fiscal Year, if Changed since
Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding
Title of each class As of August 1, 1997
- ---------------------------- ----------------------------
Common Stock, $.01 par value 16,625,000
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INDEX
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet at June 30, 1997
and December 31, 1996................................................3
Statement of Operations for the three months ended
June 30, 1997 and 1996...............................................4
Statement of Operations for the six months ended
June 30, 1997 and 1996...............................................5
Statement of Cash Flows for the
six months ended June 30, 1997 and 1996..............................6
Notes to Financial Statements........................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..................11
Item 6. Exhibits and Reports on Form 8-K.....................................12
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MONEYGRAM PAYMENT SYSTEMS, INC.
BALANCE SHEET
(in thousands, except per share amounts)
June December
30, 1997 31, 1996
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents ........................... $ 22,931 $ 17,996
Assets restricted to money transfer settlements ..... 24,700 11,287
Fee revenue receivable .............................. 3,845 587
Receivable from IPS ................................. 5,527 3,659
Prepaid and other current assets .................... 760 648
-------- --------
Total current assets ................................ 57,763 34,177
Fixed assets at cost, net of depreciation;
1997- $7,440; 1996 - $7,911 ......................... 10,330 9,127
Deferred tax asset ....................................... 50,006 52,250
Agent contract acquisition costs, net of amortization:
1997 - $7,213; 1996 - $4,903; ....................... 17,852 18,175
Other assets ............................................. 607 --
-------- --------
Total Assets ............................................. $136,558 $113,729
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Liabilities relating to outstanding money
transfers ........................................... 24,700 11,287
Accounts payable and accrued liabilities ............ 9,333 5,726
Commissions payable ................................. 7,605 7,286
-------- --------
Total current liabilities ........................... 41,638 24,299
-------- --------
Stockholders' Equity:
Common stock, $.01 par value, authorized
100,000,000 shares; issued and outstanding
16,625,000 shares ................................ 166 166
Capital surplus .................................... 85,089 85,089
Retained earnings .................................. 9,665 4,175
-------- --------
Total stockholders' equity ........................ 94,920 89,430
-------- --------
Total Liabilities and Stockholders' Equity ............... $136,558 $113,729
======== ========
3
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See accompanying notes.
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
June 30,
-------------
1997 1996
------- -------
Revenue:
Fee and other revenue net of refunds .............. $29,503 $29,686
Foreign exchange .................................. 8,125 7,731
------- -------
Total revenues .......................... 37,6283 7,417
------- -------
Expenses:
Agent commissions and amortization of
agent contract acquisition costs ........ 12,354 11,690
Processing ........................................ 6,440 5,873
Advertising and promotion ......................... 7,783 7,949
Selling and service ............................... 2,723 2,555
General and administrative ........................ 2,789 1,258
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Total expenses .......................... 32,089 29,325
------- -------
Income before income taxes ............................. 5,539 8,092
Income tax expense ..................................... 2,209 3,094
------- -------
Net income ............................................. $ 3,330 $ 4,998
======= =======
Net income per common share ............................ $ .20 $ .30
Weighted average shares and
equivalents outstanding ................................ 16,625 16,625
------- -------
See accompanying notes.
4
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MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Six Months Ended
June 30,
------------
1997 1996
------- -------
Revenue:
Fee and other revenue net of refunds .............. $55,828 $57,253
Foreign exchange .................................. 14,193 15,775
------- -------
Total revenues .......................... 70,021 73,028
------- -------
Expenses:
Agent commissions and amortization of
agent contract acquisition costs ........ 23,361 22,615
Processing ........................................ 12,465 12,284
Advertising and promotion ......................... 13,777 16,763
Selling and service ............................... 5,782 4,776
General and administrative ........................ 5,557 3,060
------- -------
Total expenses .......................... 60,942 59,498
------- -------
Income before income taxes ............................. 9,079 13,530
Income tax expense ..................................... 3,589 5,182
------- -------
Net income ............................................. $ 5,490 $ 8,348
======= =======
Net income per common share ............................ $ .33 $ .50
Weighted average shares and
equivalents outstanding ................................ 16,625 16,625
------- -------
See accompanying notes.
5
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MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
--------------------
1997 1996
-------- -------
Cash flows from operating activities:
Net income ............................................ $ 5,490 $ 8,348
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense ............... 4,109 2,448
Changes in operating assets and liabilities:
Assets restricted to money transfer
settlements .................................... (13,413) 3,477
Accounts receivable ............................. (3,258) (165)
Receivable from IPS ............................. (1,868) --
Prepaid and other assets ........................ (145) (24)
Utilization of deferred tax asset ............... 2,244 --
Liabilities relating to outstanding money
transfers .............................. 13,413 (3,477)
Accounts payable and other liabilities .......... 3,926 (1,941)
-------- -------
Net cash provided by operating activities ............. 10,498 8,666
-------- -------
Cash flows from investing activities:
Purchase of equipment and signage ..................... (3,568) (1,781)
Agent contract acquisition costs ...................... (1,995) (8,003)
-------- -------
Net cash used for investing activities ................ (5,563) (9,784)
-------- -------
Cash flows from financing activities:
Net transfer from IPS ................................. -- 1,118
-------- -------
Net cash provided by financing activities ............. -- 1,118
-------- -------
Change in cash and cash equivalents ................... $ 4,935 $ --
Cash and cash equivalents at beginning of year ........ 17,996 --
-------- -------
Cash and cash equivalents at end of period ............ $ 22,931 --
======== =======
See accompanying notes.
6
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MoneyGram Payment Systems, Inc.
Notes to the Financial Statements
1. MoneyGram Payment Systems, Inc. (the "Company") was, until December 11,
1996, a wholly owned subsidiary of Integrated Payment Systems, Inc.
("IPS"). The 1996 financial statements have been prepared as if the
Company were a separate company as of January 1, 1996. The 1996 financial
statements present the financial position, results of operations and cash
flows attributable to the Company, which was separated as a product line
of IPS. Certain prior year amounts have been reclassified to conform to
the current year's presentation.
The financial information should be read in conjunction with the Company's
financial statements and notes included on its Annual Report on Form 10-K
for the year ended December 31, 1996. These unaudited financial statements
reflect all material and normal recurring adjustments that are, in the
opinion of management, necessary for a fair presentation of the results of
the interim period. The results of the interim period are not necessary
indicative of results to be expected for the full year.
2. In February 1997, the Company and Thomas Cook Group, Ltd. ("Thomas Cook")
announced the formation of a joint venture that is 51% owned by the
Company. This venture began operation in February and its results are
included in the accompanying financial statements.
3. Net income per common share amounts are computed using the
weighted-average number of common shares. Due to the average share price
during 1997, common share equivalents were not a factor.
4. On August 4, 1997, the Company announced it had reached a definitive
agreement with Mid America Bancorp, to acquire all of the capital stock of
Mid-America Money Order Company, for approximately $15 million cash. It is
expected that the transaction, which is subject to regulatory approvals,
will close in the fourth quarter of this year.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30,
1996
Revenues The Company's revenues were $37.6 million in the second quarter
of 1997 as compared with $37.4 million in 1996. This was the result of a
1% decline in fee revenue offset by a 5% increase in foreign exchange
revenue.
Fee and other revenue declined to $29.5 million from $29.7 million in the
second quarter of 1996, with foreign exchange revenue improving to $8.1
million from $7.7 million in 1996. Interest income on investable funds,
which is included in Fee and other revenue, increased $.3 million, to $.4
million in 1997, as a result of the Company's independent status.
Fee revenue declined as a result of promotional pricing in the Mexican and
Latin American markets. Overall transactional volumes improved 6% to 1.57
million from 1.48 million, with the growth coming from the US-to-Mexico,
Latin America, Caribbean and other international traffic corridors. This
increased traffic generated a 5% improvement in foreign exchange.
Expenses The Company's total operating expenses increased to $32.1 million
from $29.3 million in the second quarter of 1996 mainly as a result of the
increase in transactions and costs associated with the Company becoming a
separate entity.
Agent commissions increased 6% to $12.4 million in 1997 from $11.7 million
in 1996. This increase was due mainly to higher amortization expense
associated with agent signing bonuses and higher guaranteed commissions.
Processing costs increased 10% to $6.4 million in 1997 from $5.9 million
in 1996, mainly due to the higher level of transactions.
Advertising and promotion expense decreased 2% to $7.8 million in 1997
from $7.9 million in 1996.
Selling and services expense increased by 7% to $2.7 million in 1997 from
$2.5 million in 1996. This was due to an increase in the number of
marketing, sales and services employees hired to expand and support the
Company as a separate entity.
General and administrative expenses increased to $2.8 million in 1997 from
$1.3 million in 1996. This was due to costs associated with being a
separate entity and higher depreciation expense.
8
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Six Months Ended June 30, 1997 Compared with Six Months Ended June 30,
1996
Revenues The Revenues for the six months ended June 30, 1997 were $70.0
million as compared with $73.0 million in 1996. This was the result of a
2% decline in fee revenue and a 10% decline in foreign exchange revenue.
Fee and other revenue declined to $55.8 million from $57.2 million in the
six months ended June 30, 1996. Interest income on investable funds
increased $.6 million, to $.7 million in 1997, offset by a decline in
consumer fees mainly as a result of a 4% decrease in transactions. Overall
transactions declined .1 million as a result of lower demand in the first
quarter of 1997. The foreign exchange revenue declined to $14.2 million
from $15.8 million in 1996 as a result of the lower level of first quarter
transactions.
Expenses The total operating expenses increased 2% to $60.9 million in
1997 from $59.5 million in 1996, driven primarily by higher amortization
expense of agent signing bonuses and higher guaranteed commissions.
Agent Commissions increased 3% to $23.3 in 1997 from $22.6 million in
1996. The increase was due to higher amortization expense associated with
agent signing bonuses and higher guaranteed commissions. These increases
were partially offset by lower commissions due to the decline in fee
revenue.
Processing costs increased 1% to $12.5 million in 1997 from $12.3 million
in 1996. Lower costs associated with reduced transaction volumes were more
than offset by increased operating costs associated with rent and software
licenses.
Advertising and promotion expense were three million dollars lower, $13.8
million in 1997 versus $16.8 million in 1996, as a result of lower
expenditures in the first quarter of 1997.
Selling and service expense increased one million dollars, to $5.8 million
in 1997 from $4.8 million in 1996, as a result of the development of a
separate sales and marketing force.
General administrative costs increased $2.5 million, to $5.5 million in
1997 from $3.0 million in 1996. This was due to costs associated with the
separate company status and higher depreciation expense.
9
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Liquidity and Capital Resources
Total Cash and cash equivalents, which are comprised mainly of short term
investments, increased $4.9 million in the first half of 1997. In 1996 all
positive cash balances were transferred to IPS and all cash requirements
were provided in a transfer from IPS, thus all changes in cash and cash
equilivants were equal to zero.
The 1997 cash requirements include $2.3 million for the payment of taxes;
in 1996 all taxes were paid to IPS.
Cash flow from operations was $10.5 million in the first half of 1997 as
compared with $8.7 million in 1996. The 1997 results reflect reduced net
income, offset by increased depreciation and amortization, utilization of
the deferred tax asset and the culmination of the joint venture with
Thomas Cook.
Cash used for investing activities was $5.6 million in 1997 as compared
with $9.8 million in 1996 as a result of unusually high payments in 1996
to agents for assigning their contracts to the Company and extending the
terms of those contracts.
10
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Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders of the Company held on May 13, 1997,
Messrs. John M. Fowler and William D. Guth were elected to serve as directors
for terms ending in 2000. In addition to the foregoing, Messrs. James F.
Calvano, Robbin L. Ayers, Brian J. Fitzpatrick and Sanford Miller will continue
as directors of the Company.
The votes cast for Messrs. Fowler and Guth were as follows: For Withheld
--- --------
Mr. Fowler 13,745,478 256,025
Mr. Guth 13,745,878 255,625
In addition, the Board proposal to approve the appointment of Ernst & Young, LLP
as the Company's independent auditors for the 1997 fiscal year was ratified as
follows:
For Against Abstain Broker Non-Vote
--- ------- ------- ---------------
13,996,288 5,175 100 0
11
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Executive Retention Plan, dated May 13, 1997, as amended to date.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MoneyGram Payment Systems, Inc.
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(Registrant)
Dated: August 13, 1997 BY: /s/ James F. Calvano
--------------------------------------
James F. Calvano
Chairman of the Board and
Chief Executive Officer
Dated: August 13, 1997 BY: /s/ John M. Fowler
--------------------------------------
John M. Fowler
Executive Vice President and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
13
MONEYGRAM PAYMENT SYSTEMS, INC.
EXECUTIVE RETENTION PLAN
ARTICLE I
BACKGROUND AND PURPOSE
1.1 Purpose. The purpose of the MoneyGram Payment Systems, Inc.
("MoneyGram" or the "Company") Executive Retention Plan (the "Plan") is to
facilitate the exercise of its executives' best judgment and improve the
recruitment and retention of executives by MoneyGram.
1.2 Effective Date. The effective date of this Plan shall be May 13,
1997.
1.3 Plan Name. This Plan shall be known as the MoneyGram Executive
Retention Plan and shall include the following provisions.
ARTICLE II
DEFINITIONS
As used herein, the following terms shall have the meanings set
forth in this Article II, unless a different meaning is plainly required by the
context.
2.1 Board. The term "Board" means the Board of Directors of
MoneyGram.
2.2 Cause. The term "Cause" shall mean the willful and continued
failure to substantially perform the duties with the Company (other than a
failure resulting from the Employee's Disability), the willful engaging in
conduct which is demonstrably injurious to the Company or any Subsidiary,
monetarily or otherwise, commission of a felony, or a significant violation of
any statutory or common law duty of loyalty to the Company.
2.3 Change in Control. The term "Change in Control" shall mean
(a) 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 Securities Exchange
Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 40% or more of
either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Common Stock") or (ii)
the combined
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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 (c) of this Section 2.3;
(b) individuals who, as of the date hereof 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;
(c) 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
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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, 40% or more of the Outstanding
Common Stock or the Outstanding Voting Securities, as
the case may be) will beneficially own, directly or
indirectly, 40% 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
(d) consummation by the Company of a plan of complete
liquidation or dissolution of the Company.
2.4 Company. The term "Company" refers to MoneyGram or any successor
thereto.
2.5 Employee. The term "Employee" means (i) a person employed by the
Company as the Chief Executive Officer ("CEO") and listed on Exhibit "A," (ii)
any person listed in Exhibit "A" to this Plan who reports directly to the CEO or
any person who subsequent to the date hereof reports directly to the CEO or
(iii) any other person designated by the CEO and listed on Exhibit "A." When an
Employee is listed on Exhibit "A," Employee and Company shall execute an
Acceptance Agreement in the form of Exhibit "B" hereto. No person shall be
considered an Employee by reason of service to the Company solely as a member of
the Board of Directors or during a period of service as a consultant.
2.6 Good Reason. An Employee shall have "good reason" to terminate
employment with the Company when on or within twelve (12) months after the
effective date of the Change in Control: (a) the Employee's duties,
responsibilities or authority are materially reduced or diminished without the
Employee's consent, (b) the Employee's compensation or benefits are reduced by
an amount greater than five (5) percent from the compensation and
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benefits which exist for the Employee on the effective date of the Change in
Control, (c) the Company reduces the potential earnings of the Employee under
any performance-based bonus or incentive plan of the Company in effect
immediately prior to the effective date of a Change in Control which is
disproportionate as compared to other executives employed by the Company or any
newly-created organization of which the Company may become a part, or (d) the
Company requires the Employee's principal place of employment to be greater than
50 miles from Employee's principal place of employment on the date of the Change
in Control.
2.7 Involuntary Termination. The term "Involuntary Termination"
refers to termination of employment by determination of the Company as opposed
to termination of employment by determination of the Employee.
2.8 Salary. The term "Salary" means an Employee's regular, fixed
rate of salary or wages for the twelve (12) month period immediately preceding
the date Employee becomes eligible for a Benefit Allowance, plus all bonuses
(annualized in the event that Employee is employed by the Company for less than
twelve (12) months during such period). For purposes of determining Salary, an
Employee's bonus shall be an amount equal to the greater of (i) his or her bonus
for the Company's fiscal year preceding the date the Employee becomes eligible
for a Benefit Allowance or (ii) the target bonus for the Employee as included in
the list maintained by the human resources department for the Company's fiscal
year in which the Employee becomes eligible for a Benefit Allowance.
2.9 Benefit Allowance. The term "Benefit Allowance" means the
benefit payable under this Plan, calculated in accordance with Article IV
hereof. Notwithstanding anything in the Plan, Exhibit "A," or in the Acceptance
Agreement, in the event the Benefit Allowance payable to an Employee constitutes
an excess parachute payment as that term is defined by Section 280G of the
Internal Revenue Code of 1986, the Benefit Allowance payable to such Employee
shall be reduced to the maximum amount that would result in such Benefit
Allowance no longer being an excess parachute payment.
ARTICLE III
ELIGIBILITY FOR ALLOWANCE
3.1 Eligibility for Benefit Allowance. Except as provided below, the
executive employees listed in the eligibility list attached hereto as Exhibit
"A" shall be eligible for a Benefit Allowance from the Plan, after execution of
an appropriate release and covenant not to compete, under the following
circumstances:
(a) the Employee experiences an Involuntary Termination
other than for Cause on or within twelve (12) months
after the effective date of a Change in Control; or
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(b) the Employee terminates his/her employment with the
Company for Good Reason on or within twelve (12) months
after the effective date of a Change in Control.
3.2 Ineligibility for Benefit Allowance. An Employee shall be
ineligible for a Benefit Allowance from the Plan if:
(a) the Employee terminates his/her employment with the
Company without Good Reason;
(b) the Employee experiences an Involuntary Termination for
Cause;
(c) the Employee has an employment contract or other
arrangement with the Company which provides for
severance or similar benefits, unless the Employee
relinquishes, in a mutually agreeable writing, any
rights to severance or similar benefits under an
employment contract or other arrangement in exchange for
the Benefit Allowance under this Plan; and/or
(d) the Employee does not execute an appropriate release and
covenant not to sue and covenant not to compete in
connection with his/her termination of employment.
3.3 Release and Covenant Not To Compete. Notwithstanding anything in
this Plan to the contrary, no Benefit Allowance shall be due or paid under this
Plan to any Employee unless he or she executes a covenant not to sue and release
and a covenant not to compete, both in form and substance satisfactory to the
Company, in its sole discretion. The written release shall waive any and all
claims against the Company and all related parties including, but not limited
to, claims arising out of the Employee's employment by the Company, his or her
termination of employment and claims relating to the Benefit Allowance under
this Plan. The covenant not to compete shall provide that the Employee cannot be
employed by or consult with or on behalf of Western Union or any other money
transfer provider that competes with the Company or (unless permitted by the
Company) any division or unit of a company that provides products or services
that directly compete with those offered by the Company, for the period during
which the Employee's Benefit Allowance is payable by the Company.
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<PAGE>
ARTICLE IV
AMOUNT OF SEVERANCE ALLOWANCE
4.1 Amount of Benefit Allowance. An Employee who satisfies the
provisions of Article III hereof shall (a) receive a Benefit Allowance equal to
the amount indicated on Exhibit "A" and (b) be provided with medical, health,
life, and/or disability insurance benefits. Such insurance benefits shall (i) be
no worse than those provided to Employee by Company any time within the twelve
(12) months preceding the date the Employee becomes eligible for a Benefit
Allowance and (ii) shall terminate on the earlier of the first day of the month
following (A) Employee's final Benefit Allowance payment, or (B) the date that
Employee becomes a full-time employee of another employer. Employee must notify
Company, in writing, within five (5) business days of his or her beginning
employment with another employer.
4.2 Timing. The Benefit Allowance under this Plan shall be paid in
accordance with the Company's normal payroll policy over the following periods
of time:
Chief Executive Officer 24 months
Persons Who Report Directly
to the Chief Executive Officer
listed on Exhibit "A" 24 months
Other Persons Designated by the
Chief Executive Officer
listed on Exhibit "A" 12 months
4.3 Effect on Other Benefits. There shall not be drawn from the
provision of benefits under this Plan any implication of the continued right to
accrual of retirement plan benefits, nor shall the Employee accrue vacation
days, paid holidays, paid sick leave or any other fringe or regular benefits
normally associated with employment by the Company for any part of the period
during which benefits are payable under this Plan, unless otherwise specifically
provided in writing by the Company. The fact that any such benefits are
specifically provided in writing by the Company shall not be construed to confer
any right to an additional Benefit Allowance under this Plan. If the Employee is
paid all or part of a Benefit Allowance under this Plan, the Employee shall not
be entitled to any benefits under the Company's Severance Pay Plan for Senior
Management.
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ARTICLE V
GENERAL PROVISIONS
5.1 Plan Administration. The Company shall be the Plan's Named
Fiduciary and Administrator and shall have complete discretion with respect to
the administration, operation and interpretation of the Plan. The Company may
consult with an attorney, accountant, actuary or other experts and rely upon
their opinions as it deems necessary and proper. Any decisions, actions or
interpretations to be made under the Plan by the Company shall be made in its
sole discretion and need not be uniformly applied to similarly situated
individuals. The determination or action of the Company with respect to any
questions arising out of or in connection with the administration, operation and
interpretation of the Plan shall be conclusive and binding upon all persons
having an interest in the Plan.
5.2 Funding of the Plan. All amounts required to be paid under the
Plan shall be provided out of the general assets of the Company. The Company
may, in its sole discretion, establish any funding or accounting mechanism
permitted by law. No terminated Employee shall have any right to, or interest
in, any assets of the Company which may be applied by the Company to make
payments under the Plan.
5.3 Right to Amend. The Company reserves the right to modify, alter,
amend, or terminate the Plan at any time and to any extent that it may deem
advisable. Each such change shall be set forth in a written instrument which
shall be approved by the Board.
5.4 Benefit Claims Procedures. In the event a claim by a terminated
Employee relating to the amount of any distribution or its method of payment is
denied, such person will be given written notice by the Company of such denial,
which notice will set forth the reason for the denial. The terminated Employee
may, within 60 days after receiving the notice, request a review of such denial
by filing a notice in writing with the Company. The Company, in its discretion,
may request a meeting with the terminated Employee to clarify any matters it
deems pertinent. The Company will render a written decision within 60 days after
receipt of such request stating the reasons for its decision. If the Company is
unable to respond within 60 days, an additional 60 days may be taken by the
Company to respond. The terminated Employee will be notified if this additional
time is necessary by the end of the initial 60-day period. All interpretations,
determinations and decisions by the Company in respect of any claim hereunder
shall be final, conclusive and binding upon all persons claiming an interest in
the Plan.
5.5 Non-alienation of Benefit Allowance. None of the payments,
benefits or rights of any Employee shall be subject to any claims of any
creditor and, in particular, to the fullest extent permitted by law, all such
payments, benefits and rights shall be free from attachment, garnishment,
trustees' process or any other legal or equitable process available to any
creditor of such Employee. No Employee shall have the right to alienate,
commute, pledge,
-7-
<PAGE>
encumber or assign any of the benefits or payouts which the Employee may expect
or receive, contingently or other-wise, under the Plan.
5.6 No Right to Employment. Nothing herein shall be deemed to give
any Employee the right to be retained in the service of the Company or to
interfere with the rights of the Company to discharge any Employee at any time
and for any reason and to treat him without regard to the effect which such
treatment might have upon him under the Plan.
5.7 Payment Due Persons Under Disability. If the Company determines
that any person to whom a payment is due hereunder is unable to care for his
affairs by reasons of physical or mental incapacity, the Company shall have the
power to direct that any benefit payment due or becoming due to such person,
unless claim shall have been made therefore by a duly appointed legal
representative, be paid to his/her spouse, mother, father, child or children, or
other blood relative, or to a person with whom he/she resides, without any
responsibility of the Company to see to the application of such payment, and any
such payment so made shall be a complete discharge of the liabilities of the
Plan therefore.
5.8 Records, Reporting and Disclosure. The Company shall keep all
records necessary for the proper operation of the Plan. Such records shall be
made available to each Employee for examination during regular business hours
except that an Employee shall examine only such records as pertain exclusively
to such examining Employee and to the Plan text. The Company shall prepare and
shall file, as required by law or regulation, all reports, forms, documents and
other items required by , the Internal Revenue Code, and every other relevant
statute, each as amended, and all regulations thereunder, including without
limitation, all forms relating to withholding of income or wage taxes, Social
Security taxes, and other amounts which may be similarly reportable.
5.9 Lost Payees. A Benefit Allowance shall be deemed forfeited if
the Company is unable to locate the terminated Employee to whom a Benefit
Allowance is due after using reasonable efforts to locate such Employee. The
Benefit Allowance shall be reinstated if application is made by the terminated
Employee while this Plan is in operation but in no event more than one year
after the Benefit Allowance first became due and payable.
5.10 Appendices. Subject to the provisions of Section 5.3, from time
to time, the Company may elect to append provisions of limited duration to this
Plan to govern what the Company determines to be special circumstances. Each
such appendix, during the period stipulated therein, shall be deemed a part of
this Plan. The rights of such Employee, as stated in such appendix, shall
supersede the rights provided under this Plan; however, the benefits provided
under such appendix shall not be less than the benefits which exist under this
Plan, and there shall be no duplication of benefits.
5.11 Expenses. All expenses of administering the Plan shall be paid
by the Company.
-8-
<PAGE>
5.12 Gender. Whenever used herein, unless the context otherwise
indicates, words in the masculine form shall be deemed to refer to females as
well as males.
5.13 Successors and Assigns. This Plan shall be binding upon the
Company, its successors, and assigns including, but not limited to, any person
or entity which may acquire forty percent (40%) or more of the stock, assets or
earning power of the Company as well as any organization of which the Company
may become a part in the event of any merger, consolidation, transfer or
acquisition.
5.14 Titles and Headings. The titles of articles and headings of
paragraphs in this Plan are for convenience of reference only and in case of any
conflict, the text of the Plan, rather than such titles and headings, shall
control.
5.15 Governing Law. This Plan shall be construed and enforced
according to the internal laws of the State of New Jersey, to the extent not
preempted by federal law. In the event that any provision of this Plan shall be
held illegal or invalid for any reason, such determination shall not affect the
remaining provisions of the Plan, but the Plan shall be construed and enforced
as if said illegal or invalid provision had never been included.
IN WITNESS WHEREOF, and as evidence of its adoption of this Plan,
the Company has caused the same to be executed by its duly authorized officers
and its corporate seal to be affixed hereto as of May 13, 1997.
Attest: MONEYGRAM PAYMENT SYSTEMS, INC.
/s/ Andrea Kenyon By: /s/ James F. Calvano
- ---------------------------- ----------------------------------
Secretary Chairman of the Board of Directors
-9-
<PAGE>
Exhibit A
MONEYGRAM PAYMENT SYSTEMS, INC.
EXECUTIVE RETENTION PLAN
ELIGIBILITY LIST
POSITION BENEFIT ALLOWANCE
- -------- -----------------
Chief Executive Officer An amount equal to three (3) times the
Employee's Salary
Persons Who Currently Report An amount equal to two (2) times the
Directly to the CEO and all other Employee's Salary
Persons who subsequent to the date
hereof report directly to the CEO
Other Persons Designated by the CEO An amount equal to one (1) times the
Employee's Salary
Notwithstanding anything in the Plan, Exhibit "A," or in the
Acceptance Agreement, in the event the Benefit Allowance payable to an Employee
constitutes an excess parachute payment as that term is defined by section 280G
of the Internal Revenue Code of 1986, the Benefit Allowance payable to such
Employee shall be reduced to the maximum amount that would result in such
Benefit Allowance no longer being an excess parachute payment.
<PAGE>
Exhibit B
FORM OF ACCEPTANCE AGREEMENT
This Acceptance Agreement dated ____________, 199_, between
MoneyGram Payment Systems, Inc. ("MoneyGram") and ____________________
("Employee").
WHEREAS, Employee is the {insert title - indicate if direct report
to CEO} of MoneyGram and MoneyGram considers Employee a valued employee, and
WHEREAS, Employee has been designated an Employee as defined in
Section 2.5 of the MoneyGram Executive Retention Plan, a copy of which is
attached hereto (the "Plan").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. All terms used herein and not otherwise defined herein shall have
the meanings attached to such terms in the Plan.
2. MoneyGram, by its signature below hereby acknowledges and agrees
that Employee is entitled to participate in the Plan and, if Employee is
eligible for Benefit Allowance under Article III of the Plan, Employee shall be
entitled to a Benefit Allowance of ____ () times the Employee's Salary.
3. Notwithstanding anything in the Plan, Exhibit "A," or in the
Acceptance Agreement, in the event the Benefit Allowance payable to an Employee
constitutes an excess parachute payment as that term is defined by Section 280G
of the Internal Revenue Code of 1986, the Benefit Allowance payable to such
Employee shall be reduced to the maximum amount that would result in such
Benefit Allowance no longer being an excess parachute payment.
4. All terms of this Agreement shall be subject to all of the terms
and conditions of the Plan.
5. Employee accepts his or her rights and benefits under the Plan.
IN WITNESS THEREOF, the parties have executed this Agreement as of
the day and year aforesaid.
MONEYGRAM PAYMENT SYSTEMS, INC.
--------------------------------------------
By:
--------------------------------------------
Employee
<PAGE>
AMENDMENT
TO
EXECUTIVE RETENTION PLAN
The Executive Retention Plan ("Plan") dated May 13, 1997 is amended as
follows:
1. A new section is added after Section 5.15 as set forth below:
"5.16 Arbitration. Any and all controversies, claims or
disputes arising out of or in any way relating to the Plan shall be
resolved by final and binding arbitration in Bergen County, New
Jersey (or at request of Employee, Jefferson County, Colorado)
before a single abitrator licensed to practice law and in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA"). The arbitration shall be commenced by
filing a demand for arbitration with the AAA within sixty (60) days
after the occurrence of the facts giving rise to any such
controversy, claim or dispute. The arbitrator shall decide all
issues relating to arbitrability. The arbitrator shall award the
prevailing party costs and expenses, including attorney's fees,
associated with any such arbitration. If the arbitrator determines
that (i) the Company has breached it agreement with the Employee
under the Plan, and (ii) the Company was unjustified in failing to
make the payments required under the Plan to the Employee, the
Company shall pay the Employee, as liquidated damages and not as a
penalty, an additional amount equal to ten percent (10%) of the
amount involved in the arbitration with respect to the Plan."
2. Except as above amended, the Plan remains in full force and effect.
Approved: July 8, 1997
<PAGE>
AMENDMENT
TO
EXECUTIVE RETENTION PLAN
The Executive Retention Plan ("Plan") dated May 13, 1997 is amended as
follows:
1. Delete second sentence of Section 2.9 and insert the following:
If any payment or benefit received or be received by the Employee in
connection with a change in control of the Company or termination of the
Employee's employment (whether payable pursuant to the terms of this Plan,
a stock option plan or any other plan or arrangement with the Company, any
person whose actions result in a change in control of the Company, or any
person affiliateed with the Company or such person (together with the
severance payment, the "total payments") will be subject to the excise tax
imposed by Section 4999 of the Code, the Company will pay to the Employee,
within 30 days of any payments giving rise to excise tax, an additional
amount (the "gross-up payment") such that the net amount retained by the
Employee, after deduction of any excise tax on the total payments and any
federal and state and local income and employment tax and excise tax on
the gross-up payment provided for by this section, will equal the total
payments.
For purposes of determining the amount of the gross-up payment, the
Employee will be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year that the
payment is to be made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Employee's
residence on the date of termination or the date that excise tax is
withheld by the Company, net of the maximum reduction in federal income
taxes that could be obtained by deducting such state and local taxes.
For purposes of determining whether any of the total payments would
not be deductible by the Company and would be subject to the excise tax,
and the amount of such excise tax, (1) total payments will be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code,
and all parachute payments in excess of the base amount within the meaning
of Section 280G(b)(3) will be treated as subject to the excise tax unless,
in the opinion of tax counsel selected by the Company's independent
auditors prior to the change in control and acceptable to the Employee,
such total payments (in whole or in part) are not parachute payments, or
such parachute payments in excess of the base amount (in whole or in part)
are otherwise not subject to the excise tax, and (2) the value of any
non-cash benefits or any deferred payment will be determined by the
Company's independent auditors in accordance with Sections 280G(d)(3) and
(4) of the Code.
<PAGE>
If the excise tax is subsequently determined to be less than the
amount originally taken into account hereunder, the Employee will repay to
the Company, when such reduction in excise tax is finally determined, the
portion of the gross-up payment attributable to such reduction plus
interest on the repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. If the excise tax is determined to exceed the amount originally
taken into account hereunder (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
gross-up payment), the Company will make an additional gross-up payment in
respect of such excess (plus any interest payable with respect to such
excess) when such excess in finally determined.
2. Except as above amended, the Plan remains in full force and effect.
Approved: July 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MoneyGram
Payment Systems, Inc.'s Form 10-Q for the period June 30, 1997 and is qualified
entirely by reference to such Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 22,931
<SECURITIES> 0
<RECEIVABLES> 9,372
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,763
<PP&E> 10,330
<DEPRECIATION> 7,440
<TOTAL-ASSETS> 136,558
<CURRENT-LIABILITIES> 41,638
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 94,754
<TOTAL-LIABILITY-AND-EQUITY> 136,558
<SALES> 0
<TOTAL-REVENUES> 70,021
<CGS> 0
<TOTAL-COSTS> 60,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,079
<INCOME-TAX> 3,589
<INCOME-CONTINUING> 5,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,490
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
