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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
of Incorporation or Organization) Identification No.)
7401 W. Mansfield Avenue 80235
Lakewood, Colorado (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (303) 716-6800
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
Common Stock (par value $.01 per share) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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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. x Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
Common shares of the registrant outstanding at March 18, 1997 were
16,625,000. The aggregate market value, as of March 18, 1997, of such common
shares held by non-affiliates of the registrant was approximately $125 million.
(Aggregate market value estimated solely for the purposes of this report. This
shall not be construed as an admission for the purposes of determining affiliate
status.)
Documents Incorporated By Reference
Part III: Portions of the Registrant's Proxy Statement relating to the Annual
Meeting of Stockholders to be held on May 13, 1997.
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<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I Page
----
Background.................................................................. 1
Item 1. Business........................................................ 2
Item 2. Properties...................................................... 7
Item 3. Legal Proceedings............................................... 7
Item 4. Submission of Matters to a Vote of Security Holders............. 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. ........................................ 8
Item 6. Selected Financial Data......................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................... 11
Item 8. Financial Statements and Supplementary Data..................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. ....................................... 13
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 13
Item 11. Executive Compensation.......................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 14
Item 13. Certain Relationships and Related Transactions.................. 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K .................................................... 14
<PAGE>
BACKGROUND
MoneyGram Payment Systems, Inc. (the "Company" or "MoneyGram") was
incorporated as a subsidiary of Integrated Payment Systems Inc. ("IPS"), a
wholly owned subsidiary of First Data Corporation ("First Data"), in January
1996 to acquire certain assets and liabilities of IPS' consumer money wire
transfer service business marketed under the name "MoneyGram" ("the Business").
On June 12, 1995, First Data entered into a merger agreement with First
Financial Management Corporation ("FFM"), the parent company of Western Union
Financial Services, Inc. ("Western Union"). In order to obtain the approval of
the Federal Trade Commission ("FTC") of its merger with FFM, First Data entered
into a "Consent Decree" with the FTC which required First Data to divest the
sales and marketing functions associated with the consumer money wire transfer
of the Company or Western Union.
Following the signing of the Consent Decree, First Data decided to divest the
sales and marketing functions associated with the Business. Pursuant to that
decision and the Hold Separate Agreement, which First Data had entered into with
the FTC, First Data identified those operations and functions necessary to
operate the Business as a stand alone entity, reconfigured the shared customer
service center and commenced the separation of information and services related
to the Business within IPS's data center in anticipation of contributing certain
assets and liabilities to the Company and consummating a public offering ("IPO")
of the Company's Common Shares ("Common Shares"). The IPO occurred on December
11, 1996.
To effect the transition of the Business to the Company (the "Transition"),
First Data and the Company entered into the following agreements:
1. Contribution Agreement. Pursuant to this Agreement, IPS, and/or certain of
its affiliates, contributed to the Company (a) $12 million for general
corporate purposes, (b) certain software, copyrights and trademarks, (c)
the economic benefit of the agreements with the Business' agents, (d) the
customer service center operations, (e) the leasehold interest in the
Lakewood, Colorado premises, and (f) certain other personal property, all
related to the Business. In exchange, the Company issued and delivered to
IPS 16,624,900 Common Shares.
2. Operations Agreement. Under this 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
Company's Lakewood, Colorado customer service center, voice center
services and certain corporate support services. 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
until such time as the Company has obtained the licenses to own and
operate a consumer money wire transfer service in its own name. Under the
Operations Agreement, the Company is obligated to obtain all 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.
3. Software License Agreement. Pursuant to this Agreement, IPS has granted to
the Company a perpetual, irrevocable, worldwide, nonexclusive,
royalty-free license to use certain application software in the Business
or for any other purpose. Certain software used by MoneyGram agents who
enter transactions electronically, and application software used to
process all MoneyGram transactions, were contributed to the Company
pursuant to the Contribution Agreement.
4. Short-Term Working Capital Facility ("Facility"). Pursuant to the
Facility, the Company may borrow from time-to-time, on a revolving basis,
an amount up to $20 Million. The interest rate on all outstanding
borrowings under the Facility is the prime rate, as announced by Chase
Manhattan Bank, N.A., plus one percent, and the Facility will terminate on
June 13, 1997. The Company has not borrowed under the Facility.
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5. The Service Mark Letter Agreement. Pursuant to the Service Mark Letter
Agreement, the Company, First Data and Western Union have agreed not to
sue each other in respect of the service marks "The Better Way to Wire
Money", "Wire Money in Minutes" and "Money in Minutes", and certain other
similar phrases, whether in English or another language, during the
two-year period commencing December 11, 1996. The Service Mark Letter
Agreement also provides that, at the option of the Company at any time
during such two-year period, Western Union, IPS and the Company will
execute a License Agreement and the Service Mark Letter Agreement will
then terminate.
If executed, the License Agreement provides that 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.
6. Human Resources Agreement. This Agreement, among First Data, IPS and the
Company, defines the duties, obligations and liabilities of First Data and
IPS and the Company with respect to the transition of employees from First
Data and IPS to the Company. Pursuant to the Human Resources Agreement,
First Data, IPS and the Company have each agreed, for a one-year period
from December 11, 1996, not to solicit or hire each other's employees.
7. Telecommunication Services Sharing Agreement. This Agreement, between
First Data and the Company, provides that First Data shall cooperate and
use reasonable efforts to facilitate the provision of telecommunication
services to the Company under First Data's agreements with its various
long-distance telecommunication service providers. This Agreement permits
the Company to choose among such long-distance providers and to benefit
from First Data's tariff rates. The Company, in exchange, has agreed to
use the telecommunication services provided by First Data's
telecommunication service providers exclusively for all of the Company's
person-to-person telephone calls.
ITEM 1. BUSINESS.
Overview
The Company is a leading non-bank provider of consumer money wire transfer
services, with a strong, well-recognized brand name. It offers customers the
ability to transfer funds quickly, reliably and conveniently through its
approximately 20,000 agent locations in 87 countries worldwide. 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 through many of its agent locations in the United States.
The number of agent locations has grown from 11,600 in 1991 to approximately
20,000 in March 1997. In 1995 and 1996, the Company processed 5.4 million and
5.8 million transactions, respectively, and transferred $1.6 billion and $1.5
billion principal amount of funds, respectively.
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
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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.
The Company believes international consumer money transfers will continue to
grow 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.
The MoneyGram Agent Network
The Company has an extensive global network of agents in the United States,
Mexico and in 85 other countries around the world. The Company's agent network
includes a variety of types of businesses, including supermarkets, check
cashers, convenience stores, travel agencies, collection agencies, bus stations
and credit unions.
A limited number of the Company's top agents generate a significant
percentage of the Company's transaction volume and revenues. In 1995 and 1996,
respectively, the Company's top 10 selling agents accounted for approximately
42% and 43% of the Company's transaction volume and 43% and 42% of the Company's
transaction fee revenues. Three of the top 10 MoneyGram agents in 1996, Banco
Nacional de Mexico S.N.C. ("Banamex"), Ace Cash Express ("Ace") and the Chicago
Currency Exchange, were each involved in transactions representing over 10% of
the Company's total revenues. The agreement with Banamex expires in April, 2002
and the agent contract with Ace expires in 2000. The Chicago Currency Exchange
consists of approximately 85 separate agent contracts with owners of Chicago
Currency Exchange locations which expire in 2000 or 2001.
ExpressPayment and Cash Advance
ExpressPayment, 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. 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
customers can make overdue payments directly to Creditors. To use
ExpressPayment, the Creditor directs the consumer to visit a MoneyGram location
and transmit the amount due. The consumer pays the principal amount owed and
typically, 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, or in some cases, an electronic file transmission is issued to the
Creditor.
The Cash Advance product is an ancillary service offered by the Company
which 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 introduced a phone card product in the fourth quarter of 1996.
Customers 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 also
can be made with a phone card. 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. The Company has entered into a distribution agreement
with MCI Telecommunications Corporation, which will provide the
telecommunications services product support and customer service for the new
phone card product.
3
<PAGE>
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
funds. The following morning the Company, through an automated clearing house
transfer, debits the selling agents' bank accounts for the dollar value of all
of the MoneyGram agents' transactions processed on the previous day and the
corresponding transaction fees.
Receiving MoneyGram agents are authorized to pay out the transferred funds
to the recipient customer through confirmation of a reference number for 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 receive the funds from any MoneyGram agent within most of the Company's
agent network regardless of the sender's location. In most instances, the
receive agents are reimbursed for this payment by depositing a pre-signed money
transfer check into their bank account. The Company pays selling agents and
receiving agents their commissions at the end of each month; a percentage of the
consumer fee for a send transaction and a flat fee for a receive transaction.
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.
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 principal amount of the transaction.
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, including discounted price
promotions, intended to increase its market share and broaden the brand
recognition of the MoneyGram service in its target markets.
The MoneyGram agent network is supported by a nationwide sales and account
development team which recruits and trains the Company's agents. This team
provides a variety of services to MoneyGram agents including training,
automation, assistance with cooperative advertising and provision of signage.
Operations
The Company's operations are located at its Lakewood, Colorado facility. The
Lakewood facility houses the Company's primary customer service center which is
staffed 24 hours a day, 365 days a year. The Company processes an average of
21,000 voice calls per day and has operators fluent in fourteen languages and at
least 50% of the operators are bilingual.
4
<PAGE>
International Transactions
Mexico
The Company's primary receive agent in Mexico is Banamex. The agreement with
Banamex only allows the Company to process or pay United States 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. The agreement with Banamex is
effective through April 17, 2002 and provides for an automatic five year renewal
unless either party notifies the other of its intent to cancel 90 days prior to
the end of the term. Currently, Banamex processes or pays money transfers in
Mexico only on behalf of the Business. Western Union has agreed with the Company
that prior to the earlier of the termination of the Banamex Agreement or April
17, 2002, Western Union shall not use Banamex to process, directly or
indirectly, United States to Mexico consumer money wire transfer service
transactions on behalf of Western Union.
The Americas 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 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. The Company's
agent network in Latin America is increasing, with new MoneyGram agents in
Uruguay, the Cayman Islands, Dominica and the Bahamas.
In Europe, the Company has recently added MoneyGram agents in the U.K.,
Spain, Germany, Switzerland, Belgium, Norway and Ireland.
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.
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. 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.
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 other locations and states.
The Company faces additional competition from the U.S. Postal Service which has
announced plans to offer two new money transfer products to Mexico. Niche
competitors who serve specific migratory corridors also compete with the
Company, including several Mexican banks which have recently begun to offer
consumer money wire transfer services from the United States to Mexico. 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 bank and non-bank providers of other
types of payment products and services, including money orders, automated teller
machines and similar retail electronic networks that could allow consumers to
transfer funds to others.
5
<PAGE>
Proprietary Rights and Trademarks
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. In the United States, the trademark
examiner, on appeal, refused to register "MoneyGram" on the grounds that it is
generic. 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, on behalf of MoneyGram, 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, on
behalf of MoneyGram, 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. For
additional information, see "Background".
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. 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 and impose various reporting requirements.
IPS currently holds all of the licenses necessary to conduct the operations
of the Business. The Company has begun to apply for its licenses and as of March
18, 1997 it had received 15 of the required 47 licenses. While there is no
guarantee that the Company will obtain the aforementioned licenses, it is
anticipated that it will obtain them by December 31, 1997. Failure to obtain a
license in a particular state could preclude the Company from conducting the
Business in that state.
Federal Regulation
The Company and its agents are subject to the Bank Secrecy Act ("BSA") and
the Money Laundering Control Act ("MLCA"), which were adopted to combat "money
laundering". The BSA requires money transmitters to maintain
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<PAGE>
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.
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.
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.
Employees
The Company has approximately 500 employees, including approximately 100 in
sales, marketing and customer service, approximately 325 in customer service
center operations, and approximately 75 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.
ITEM 2. PROPERTIES.
The Company leases executive office and customer service center space at
7401 West Mansfield Avenue in Lakewood, Colorado and executive office space at
Park 80 West in Saddle Brook, New Jersey. The former is pursuant to a lease
which expires in April 2002 and the latter is pursuant to a lease which expires
in April 2003.
ITEM 3. LEGAL PROCEEDINGS.
The Company is currently not engaged in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Prior to the Company's IPO, IPS, then the Company's sole shareholder, took
action, on written consent dated October 30, 1996, to elect the Company's
current directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Shares are listed on the New York Stock Exchange, Inc. ("NYSE").
The following table sets forth, for the indicated calendar periods, the reported
high and low prices of the Common Shares on the NYSE Composite Tape. The Common
Shares have been listed on the NYSE since December 11, 1996.
1996 High Low
Fourth quarter (December 11 through December 31) 14-1/2 13-1/4
1997
First quarter (through March 18) 14 7-5/8
At March 18, 1997, there were 25 holders of record of the Common Shares.
No dividends were paid on the Common Shares in 1996 or 1997 and the Company is
prohibited by the Facility from paying dividends on its Common Shares except to
the extent such cash dividends would not exceed ten percent of the Company's net
income arising after September 30, 1996.
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ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL AND OPERATING DATA
(UNAUDITED)
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 document. The financial and operating information
for the years ended December 31, 1992 and 1993 are derived from unaudited
financial statements not included in this document.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands, except per share data and percentages)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Fee and other .......................... $108,578 $ 94,242 $ 71,015 $ 48,815 $ 30,519
Foreign exchange ....................... 29,141 42,826 20,373 3,070 1,280
-------- -------- -------- -------- --------
Total revenues ....................... 137,719 137,068 91,388 51,885 31,799
Expenses:
Agent commissions and amortization
of agent contract acquisition costs .. 44,255 34,801(1) 28,742 22,112 17,957
Processing ............................. 24,941 25,542 15,334 12,361 11,022
Advertising and promotion .............. 29,113 33,822 19,523 13,708 7,847
Selling, service and general
and administrative ................... 15,734(2) 13,247(2) 8,378 6,900 5,243
-------- -------- -------- -------- --------
Total expenses ....................... 114,043 107,412 71,977 55,081 42,069
Income (loss) before income taxes ....... 23,676 29,656 19,411 (3,196) (10,270)
Net income (loss) ....................... $ 14,631 $ 18,294 $ 12,176 $ (2,077) $ (6,778)
Pro forma net income (loss) per
common share (3) ....................... $ .88 $ 1.10 $ .73 $ (.12) $ (.41)
Balance Sheet Data (at end of period:)
Assets restricted to settlement of
MoneyGram transactions ................. $ 11,287 $ 26,010 $ 20,927 $ 12,827 $ 11,573
Fixed assets at cost, net of depreciation 9,127 6,000 3,084 1,275 1,123
Costs of acquiring agent contracts,
net of amortization .................... 18,175 7,979 3,401 1,956 2,864
Total assets ............................ 113,729 41,618 28,583 16,502 16,009
Total liabilities ....................... 24,299 40,449 35,411 17,358 14,996
Stockholders' equity (deficit) .......... 89,430 1,169 (6,828) (856) 1,013
Operating Data:
Number of MoneyGram agent
locations (at end of period) ........... 18.5 17.2 16.0 14.1 13.1
Number of transactions .................. 5,781 5,393 3,285 2,040 1,114
</TABLE>
- --------
(1) Net of a $2.5 million commission rebate from Banamex received by the Company
during the first quarter of 1995.
(2) 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 $500,000 in 1996.
(3) Gives effect to the Company's issuance to IPS of 16,624,900 Common Shares
prior to the IPO.
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QUARTERLY SUMMARY
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.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------------------
1996 1995
--------------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
------- ------- ------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Fee and other.............. $27,567 $29,686 $26,901 $24,424 $18,899 $28,420 $25,615 $21,308
Foreign exchange .......... 8,044 7,731 7,046 6,320 13,928 10,480 8,737 9,681
------- ------- ------- ------- ------- ------- ------- -------
Total revenues .......... 35,611 37,417 33,947 30,744 32,827 38,900 34,352 30,989
Expenses:
Agent commissions and
amortization of agent
contract acquisition
costs .................. 10,925 11,690 11,250 10,390 5,770(1) 10,475 9,342 9,214
Processing ................ 6,822 5,906 5,970 6,243 5,289 6,338 5,873 8,042
Advertising and
promotion (2) .......... 8,814 7,949 5,584 6,766 7,737 8,265 8,013 9,807
Selling and service ....... 2,221(3) 2,555(3) 2,869(3) 2,937 1,510 1,742 1,993 2,280(3)
General and
administrative ......... 1,391 1,225 1,231 1,305 1,294 1,391 1,455 1,582
------- ------- ------- ------- ------- ------- ------- -------
Total expenses .......... 30,173 29,325 26,904 27,641 21,600 28,211 26,676 30,925
------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes .................. 5,438 8,092 7,043 3,103 11,227 10,689 7,676 64
Income tax expense ........ 2,083 3,099 2,676 1,187 4,302 4,095 2,941 24
------- ------- ------- ------- ------- ------- ------- -------
Net income .................. $ 3,355 $ 4,993 $ 4,367 $ 1,916 $ 6,925 $ 6,594 $ 4,735 $ 40
======= ======= ======= ======= ======= ======= ======= =======
Net income per common
share (4) ................ $ .20 $ .30 $ .26 $ .12 $ .42 $ .39 $ .29 $ --
Number of transactions ...... 1,505 1,481 1,400 1,395 1,232 1,316 1,276 1,569
</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 for 1996 would have been approximately
$2.0 million less for the first quarter, $.5 million more for the second
quarter and $1.4 million more for the third quarter and $.1 million more for
the fourth quarter.
(3) 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, $150,000 in the second quarter of 1996 and $50,000 in the third
quarter of 1996.
(4) Gives effect to the Company's issuance to IPS of 16,624,900 Common Shares
prior to the IPO.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
Revenues. The Company's revenues were $137.7 million in 1996 as compared
with $137.1 million in 1995. This was the result of a 15% increase in fee
revenues, partially offset by a decline in foreign exchange revenues.
Fee Revenues increased to $108.6 million from $94.2 million in 1995. This
revenue growth was due to a 7% increase in transactions, to approximately 5.8
million transactions in 1996 from approximately 5.4 million transactions in 1995
and an 8% increase in the average fee per transaction that was attributable to a
lower level of price promotion during 1996. These growth factors were partially
offset by a lower average principal amount per transaction.
Foreign exchange revenues, substantially all of which arise from U.S. to
Mexico transactions, decreased 32% to $29.1 million in 1996 compared with $42.8
million for 1995. The foreign exchange revenue during 1995 was unusually high
primarily due to the volatility of the Mexican peso during this period. The
Mexican government has taken steps to stabilize the economy and alleviate the
political unrest and as a result, the peso was less volatile in late 1995 and
during 1996. In addition, the average principal per transaction declined,
resulting in less foreign exchange revenue.
Expenses. The Company's total operating expenses increased 6% to $114.0
million in 1996 compared with $107.4 million during 1995 mainly as a result of
increased transactions and fee revenue.
Agent commissions increased 27% to $44.3 million in 1996 from $34.8 million
in 1995. This increase was mainly due to the higher level of fee revenue (15%)
and agent rebates associated with the 1995 price promotions.
Although transaction volume increased, total processing expenses decreased
2% to $24.9 million in 1996 from $25.5 million in 1995, primarily due to
operational efficiencies and reduced telecommunications expense.
Advertising and promotion expenses decreased 14% to $29.1 million during
1996 from $33.8 million in 1995. This was due to a decrease from the unusually
high advertising and discretional promotional expenses incurred in 1995.
Selling and service expenses increased by 41% to $10.6 million in 1996 from
$7.5 million in 1995. This is attributable to an increase in the number of sales
and service employees hired to further expand and support the agent network as a
separate entity. During the first nine months of 1996, the Company incurred
approximately $500,000 in salaries, commissions and out-of-pocket expenses
related to obtaining consents from agents to permit the assignment of their
contracts to the Company.
General and administrative expenses decreased by 10% to $5.2 million in 1996
from $5.7 million in 1995 as a result of certain costs being attributable
directly to the IPO.
Operating Income. Operating income decreased by 20% to $23.7 million in 1996
from $29.7 million in 1995 primarily as a result of the decline in foreign
exchange revenue mentioned above.
11
<PAGE>
Year Ended December 31, 1995 Compared with 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.
This was partially offset by a decrease of 19% in the average fee revenues
earned per transaction. The decrease in the average fee per transaction in 1995
compared with 1994 was primarily due to the 21 additional weeks of price
promotions in 1995. The growth in the number of transactions is attributable to
the Company's advertising campaigns, its discount price and other promotions, as
well as greater availability of the MoneyGram service resulting from an 8%
growth, from 16,000 to 17,200, in the number of MoneyGram agent locations. The
decrease in average fee revenues per transaction was due to increased usage by
customers who took advantage of the promotional discount prices by transmitting
lower principal amounts.
The Company's foreign exchange revenue, substantially all of which arises
from U.S. to Mexico transactions, increased 110% from $20.4 million to $42.8
million. This growth in foreign exchange revenues from Mexican transactions was
a result of a 71% increase in the number of such transactions, coupled with a
25% increase in the average foreign exchange revenue earned per transaction,
resulting from the increased volatility in the value of the Mexican peso versus
the U.S. dollar. The foreign exchange revenues realized by the Company in 1995
were substantially larger than in prior years, primarily due to the significant
volatility in 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.
Expenses. The Company's total operating expenses increased 49% to $107.4
million in 1995 from $72.0 million in 1994. Higher average fee revenues and the
increased volume of transactions processed resulted in higher commissions to
agents and higher processing costs, while the Company's marketing and price
promotions contributed to significantly increased advertising and promotion
expenses.
Agent commissions increased 21% to $34.8 million from $28.7 million, as a
result of the 33% increase in fee revenue partially offset by rebates from the
agents in association with the 1995 price promotions.
Processing expense increased 67% to $25.5 million in 1995, principally as a
result of the growth in transaction volume.
Advertising and promotion expense increased to $33.8 million in 1995 from
$19.5 million in 1994 as a result of 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 agents
discretionary, promotion-related cash payments of approximately $1.2 million.
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, increased sales commissions associated with the
increase in 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 salaries, commission and other
out-of-pocket expenses related to obtaining consents from MoneyGram agents to
permit the assignment of their contracts to IPS.
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.
Operating Income. Operating income increased 53% to $29.7 million in 1995
from $19.4 million in 1994.
12
<PAGE>
Liquidity and Capital Resources
Total cash and cash equivalents, which is comprised of short term
investments, was $18.0 million at December 31, 1996. In prior years all
available cash was transferred to IPS as a Return of Capital.
Cash flow from operations was $17.1 million in 1996 as compared with $21.4
million in 1995 and $23.3 million in 1994. The decline in 1996 from 1995 was
mainly due to a $3.7 million receivable from IPS. The receivable includes items
that previously were settled through the Return of Capital.
Cash used for investing activities was $20.2 million in 1996 as compared
with $11.1 million in 1995 and $5.1 million in 1994. The increase of $9.1
million over 1995 was primarily the result of payments to existing agents for
extending the term of their contracts by an average of five years.
In 1996, IPS contributed $12 million dollars as per the Contribution
Agreement, as defined in Note 1 to the financial statements, and assumed certain
obligations of the Company, both of which generated positive cash flows of $21.1
million. The Company has relied primarily on cash flows from operating
activities to support its capital investment program. Management expects that
future recurring capital needs will be largely met by funds generated from
operating activities.
The IPS Facility commitment, as defined in Note 1 to the financial
statements, of $20 million has not been used to date and the Company does not
intend to utilize it before the termination date. Management expects to
negotiate a credit facility with a third party prior to the expiration of the
IPS Facility.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Financial Statements, together with the report thereon of Ernst &
Young LLP, dated March 14, 1997, on pages 16 through 28 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See the Proxy Statement for the Company's 1997 Annual Meeting of
Stockholders, which information is incorporated herein by reference.
13
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
See the Proxy Statement for the Company's 1997 Annual Meeting of
Stockholders, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the Proxy Statement for the Company's 1997 Annual Meeting of
Stockholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the Proxy Statement for the Company's 1997 Annual Meeting of
Stockholders, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Index to Financial Statements:
The Financial Statements and the notes thereto, together with the
report thereon of Ernst & Young LLP, dated March 14, 1997, appear on
pages 16 through 28 of this Report. Financial statement schedules not
included in this Report have been omitted because they are not
applicable or the required information is shown on the Financial
Statements or notes thereto.
(a) (2) Financial Statement Schedules:
None
(a) (3) Exhibits:
The following exhibits are filed as part of this Annual Report or,
where indicated, were heretofore filed and are hereby incorporated by
reference.
2.1 Contribution Agreement, dated as of December 10, 1996, among the
Company, IPS and First Data.
3.1 Certificate of Incorporation of the Company, as amended to date
(incorporated herein by reference to Exhibit 3.1 of the Company's
Registration Statement No. 333-228).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement No. 333-228).
10.1 Operations Agreement, dated as of December 10, 1996, among the Company,
IPS and First Data Technologies, Inc.
10.2 Software License Agreement, dated as of December 10, 1996, between the
Company and IPS.
14
<PAGE>
10.3 Service Mark Letter Agreement, dated as of December 10, 1996, among
Western Union Financial Services, Inc., First Data and the Company
which includes the Service Mark License Agreement among such parties as
an exhibit thereto.
10.4 Human Resources Agreement, dated as of December 10, 1996, among the
Company, IPS and First Data.
10.5 Telecommunications Services Sharing Agreement, dated as of December 10,
1996, between the Company and First Data.
10.6 Agreement among American Express Travel Related Services Company, Inc.,
Banamex and California Commerce Bank, as amended (subject to a request
for confidential treatment pursuant to Rule 406 of the Securities Act)
(incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement No.
333-228).
10.7 1996 Stock Option Plan of the Company.
10.8 1996 Broad-Based Stock Option Plan.
10.9 Lease Agreement between the Company and the Mutual Life Insurance
Company of New York in respect of certain facilities located in
Lakewood, Colorado (incorporated by reference to Exhibit 10.10 the
Company's Registration Statement No. 333-228).
10.10 Short-Term Working Capital Facility, dated as of December 10, 1996,
between First Data and the Company.
10.11 Letter Agreement between the Company and Western Union regarding
Banamex (incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement No. 333-228).
23.1 Consent of Independent Auditors
(b)(1) Reports on Form 8-K:
None
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
MoneyGram Payment Systems, Inc.
We have audited the accompanying balance sheets of MoneyGram Payment
Systems, Inc. (the "Company") as of December 31, 1996 and 1995, and the related
statements of operations, changes in stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
March 14, 1997
16
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------
ASSETS 1996 1995
------------------------------------ ---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................................. $ 17,996 $ --
Assets restricted to settlement of MoneyGram transactions .... ........ 11,287 26,010
Fee revenue receivable ................................................ 587 1,165
Receivable from IPS ................................................... 3,659 --
Prepaid and other current assets ...................................... 648 271
-------- -------
Total current assets .................................................. 34,177 27,446
Fixed assets at cost, net of depreciation; 1996 - $7,911; 1995 - $3,953 ... 9,127 6,000
Deferred tax asset (Note 4) ............................................... 52,250 193
Costs of acquiring agent contracts, net of amortization:
1996 - $4,903; 1995 - $1,952 .......................................... 18,175 7,979
-------- -------
Total assets .............................................................. $113,729 $41,618
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Liabilities relating to unsettled MoneyGram transactions ............ $11,287 $26,010
Accounts payable and accrued liabilities .............................. 5,726 7,743
Commissions payable ................................................... 7,286 6,696
-------- -------
Total current liabilities ............................................. 24,299 40,449
-------- -------
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 11,459
Retained earnings/(Accumulated deficit) ............................... 4,175 (10,456)
-------- -------
Total stockholders' equity ............................................ 89,430 1,169
Total liabilities and stockholders' equity ............................ $113,729 $41,618
======== =======
</TABLE>
See accompanying notes.
17
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
-----------------------------
1996 1995 1994
---- ---- ----
Revenues:
Fee revenue, net of refunds .............. $108,578 $ 94,242 $71,015
Foreign exchange ......................... 29,141 42,826 20,373
-------- -------- -------
Total revenues ....................... 137,719 137,068 91,388
-------- -------- -------
Expenses:
Agent commissions and amortization of
agent contract acquisition costs...... 44,255 34,801 28,742
Processing ............................... 24,941 25,542 15,334
Advertising and promotion ................ 29,113 33,822 19,523
Selling and service ...................... 10,582 7,525 3,700
General and administrative ............... 5,152 5,722 4,678
-------- -------- -------
Total expenses........................ 114,043 107,412 71,977
-------- -------- -------
Income before income taxes ................... 23,676 29,656 19,411
Income tax expense............................ 9,045 11,362 7,235
-------- -------- -------
Net income ................................... $ 14,631 $ 18,294 $12,176
======== ======== =======
Net income per common share .................. $ .88 $ 1.10 $ .73
======== ======== =======
Weighted average shares and equivalents
outstanding ............................... 16,630 16,625 16,625
See accompanying notes.
18
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
------------------------------
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income .................................... $ 14,631 $ 18,294 $ 12,176
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense ......... 6,910 3,762 1,889
Other noncash charges ......................... 192 (22) 25
Changes in operating assets and liabilities:
Assets restricted to settlement of
MoneyGram transactions .................... 14,723 (5,083) (8,100)
Accounts receivable ....................... 578 (255) (773)
Receivable from IPS ....................... (3,659) -- --
Prepaid and other assets .................. (377) (181) 21
Liabilities relating to unsettled
MoneyGram transactions ................ (14,723) 5,083 8,100
Accounts payable and other liabilities .... (1,177) (189) 9,953
-------- -------- --------
Net cash provided by operating activities ..... 17,098 21,409 23,291
-------- -------- --------
Cash flows from investing activities:
Purchase of equipment and signage ............. (7,095) (4,638) (2,739)
Costs of acquiring agent contracts ............ (13,137) (6,474) (2,404)
-------- -------- --------
Net Cash used for investing activities ........ (20,232) (11,112) (5,143)
-------- -------- --------
Cash flows from financing activities:
Net transfer from (to) IPS .................... 21,130 (10,297) (18,148)
-------- -------- --------
Net cash provided(used) by financing activities 21,130 (10,297) (18,148)
-------- -------- --------
Cash and cash equivalents ..................... $ 17,996 $ -- $ --
======== ======== ========
No cash was paid for taxes or interest expense in 1996, 1995 and 1994.
See accompanying notes.
19
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Retained
Earnings/ Total
Common Capital (Accumulated Stockholders'
Stock Surplus Deficit) Equity/(Deficit)
----- ------- ------- ----------------
<S> <C> <C> <C> <C>
Balance December 31, 1993 ............ $ 166 $ 39,904 $(40,926) $ (856)
Net income ....................... -- -- 12,176 12,176
Return of capital to IPS ......... -- (18,148) -- (18,148)
------- -------- -------- --------
Balance December 31, 1994 ............ 166 21,756 (28,750) (6,828)
Net income ....................... -- -- 18,294 18,294
Return of capital to IPS ......... -- (10,297) -- (10,297)
------- -------- -------- --------
Balance December 31, 1995 ............ 166 11,459 (10,456) 1,169
Net income ....................... -- -- 14,631 14,631
Capital contribution from IPS .... -- 21,130 -- 21,130
Deferred tax asset ............... -- 52,500 -- 52,500
------- -------- -------- --------
Balance December 31, 1996 ............ $ 166 $ 85,089 $ 4,175 $ 89,430
======= ======== ======== ========
</TABLE>
See accompanying notes.
20
<PAGE>
MONEYGRAM PAYMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Background and Basis of Presentation
Background
MoneyGram Payment Systems, Inc. (the "Company" or "MoneyGram") is a non-bank
provider of consumer money wire transfer service. MoneyGram targets its services
to individuals without traditional banking relationships.
The Company was until December 11, 1996 (the date of the MoneyGram IPO, "the
IPO Date"), a wholly owned subsidiary of Integrated Payment Systems Inc.
("IPS"), which is a wholly owned subsidiary of First Data Corporation ("First
Data").
Pursuant to a management agreement (the "TRS Management Agreement") among
First Data, IPS and American Express Travel Related Services Company, Inc.
("TRS"), a wholly owned subsidiary of American Express, IPS managed the TRS
payment instruments business, which included the MoneyGram business ("the
Business"), under TRS licenses. For the periods presented in the accompanying
financial statements, up to the IPO Date, the Business 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. IPS and First Data agreed to
indemnify TRS against any losses, damages and costs with respect to the payment
instruments of TRS; therefore, MoneyGram's financial statements have been
prepared as if it were the issuer of the payment instruments.
In October 1995, First Data consummated a merger transaction with First
Financial Management Corporation whose subsidiary Western Union Financial
Services, Inc. ("Western Union"), provides money transfer services similar to
MoneyGram. In January 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 was allowed to perform processing
services for both MoneyGram and Western Union, but it was permitted to retain
the sales and marketing functions of only one of the two businesses. In
addition, First Data and the FTC entered into a "hold separate" agreement
whereby the Business was to 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
required that, prior to consummation of the divestiture, IPS expend not less
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 required that, during the "hold separate" period, IPS pay the
MoneyGram sales force 120% of the standard 1995 sales commission rates. The hold
separate arrangement continued until the IPO Date.
First Data decided to comply with the divestiture requirements of the
consent decree through a public stock offering of the Company's common stock 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 Company in exchange for 16,624,900 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, 1994 and
the assets and liabilities are reflected therein at their historical cost basis.
The MoneyGram 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
MoneyGram'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 contributed $12 million in cash to
the Company and paid certain liabilities prior to the IPO Date. Such capital
contributions are reflected in the Company's 1996 financial statements.
21
<PAGE>
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 letter agreement (the "Service Mark Letter
Agreement"), a 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 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, worldwide, irrevocable
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 Company is prohibited by the Facility from paying
dividends except to the extent such dividends would not exceed ten percent of
the Company's net income arising after September 30, 1996. The Facility will
terminate 180 days from the IPO Date. Pursuant to the Service Mark Letter
Agreement, the Company and First Data have agreed not to sue one another in
respect of certain disputed marks for a period of two years commencing at the
IPO Date and, at the option of the Company, it may cause Western Union and IPS
to enter into an agreement pursuant to which Western Union would grant the
Company a license to use certain of these disputed service marks in certain
languages. 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, 1994. 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, through the IPO Date.
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 principal value of all unsettled MoneyGram
transactions where the recipients have not yet picked up their funds. Since IPS
did not maintain specific cash or investment portfolio accounts for its
products, the 1995 balance sheet reflects zero balances for cash and cash
equivalents. All excess cash was transferred to IPS through a return of capital.
Specific fiduciary assets maintained by IPS for MoneyGram and the consequent
amounts due from IPS relative to the unsettled MoneyGram transactions liability
are included in the accompanying balance sheet under the caption "Assets
restricted to settlement of MoneyGram transactions".
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.
Until the IPO Date, 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
22
<PAGE>
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 and others relate substantially to the MoneyGram
service, and have been allocated accordingly, to the Company. The expenses,
included in the accompanying statements of operations, attributable to these
cost centers amounted to $25.4 million, $26.0 million and $13.7 million for the
years ended December 31, 1996, 1995 and 1994, respectively. These expenses
relate principally to IPS' two customer service centers and other processing
costs. The remaining $15.7 million, $12.8 million and $10.0 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 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. 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 operations.
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 its becoming a stand-alone entity and its execution of
the Contribution Agreement, the Operations Agreement and the Facility.
2. Summary of Significant Accounting Policies
Revenue Recognition
Fee revenue, net of refunds, 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.
Net Earnings Per Share
Net income per common share is computed using the weighted-average number of
common shares and common share equivalents outstanding during each period.
Common share equivalents represent the effect of outstanding stock options.
Cash and Cash Equivalents
The Company has classified as cash equivalents its investments in the
highest grade federal government discount notes and commercial paper each with a
maturity of less than thirty days. The investments are stated at cost, which
approximates fair value.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
amortization. Fixed assets comprise personal computers, equipment, furniture and
fixtures, leasehold improvements and agent signage. These assets are depreciated
over their estimated useful lives ranging from 3 to 8 years. Depreciation is
computed using the straight-line method.
23
<PAGE>
Advertising and Promotional Expense
The Company records advertising and promotional expense based on actual
expenses incurred.
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).
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 the
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, the Company, has other transactions and relationships with
First Data.
The allocated expenses in the accompanying statements of operations, as
described in Note 1, include allocations from First Data and affiliates of $2.3
million, $3.9 million and $2.6 million for the years ended December 31, 1996,
1995 and 1994, respectively. The First Data allocations relate principally to
the Company's estimated portion of its participation in certain First Data
insurance, benefit and incentive plans. In addition, the Company received
certain other services, including the estimated portion of charges to the
Company for data processing services provided by First Data Technologies, Inc.,
a wholly owned subsidiary of First Data, of $2.1 million, $2.2 million and $1.6
million for the years ended December 31, 1996, 1995 and 1994, respectively.
4. 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 for the periods up to the IPO Date has been 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 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 1994 have been recorded in those years. As a result, the accompanying
financial statements do not reflect any benefit for utilization of tax loss
carry forwards.
As a result of the IPO, the tax basis (for federal income tax purposes) of
the MoneyGram Assets has increased from the tax basis in the hands of IPS to
their fair market value at the IPO Date (determined by reference to the initial
public offering price). Such tax treatment will produce a tax benefit to the
Company in future years through depreciation or amortization deductions or
through decreased gain or (subject to certain limitations) increased loss on the
disposition of any MoneyGram asset. Pursuant to the requirements of SFAS No. 109
the Company recorded a deferred tax asset (with a corresponding credit to
capital surplus) for the tax effect of the excess of the MoneyGram assets
following the Contribution over their net book value. The amount of the deferred
tax asset that was recorded at the IPO Date was
24
<PAGE>
reduced by a valuation allowance of 12% or $7 million which is based upon
management's judgment as to the likelihood of the Company generating sufficient
taxable income to realize the assets through future tax deductions under the
"more likely than not" criteria prescribed by SFAS No. 109.
The income tax provision consists of the following (in thousands):
Year ended December 31,
------------------------------
1996 1995 1994
------ ------- ------
Federal............................. $7,885 $ 9,850 $6,556
State and local..................... 1,160 1,512 679
------ ------- ------
Total............................... $9,045 $11,362 $7,235
====== ======= ======
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 deferred tax provision was immaterial
for the years 1995 and 1994.
As a result of the IPO in December 1996, MoneyGram was no longer included in
the consolidated U.S. federal income tax return of First Data. For this short
period ending December 31, 1996, MoneyGram filed a separate U.S. federal income
tax return in which the Company utilized approximately $250 thousand of its
deferred tax asset. The primary component of the Company's deferred tax asset as
of December 31, 1996, on a stand alone basis, results from the differences in
book and tax basis in the carrying value of certain assets.
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to income tax expense is (in thousands):
Year ended December 31,
------------------------------
1996 1995 1994
------ ------- ------
Tax at U.S. statutory rate.......... $8,287 $10,379 $6,794
Increases in taxes resulting from
State and local taxes, net of
federal income tax benefit....... 758 983 441
------ ------- ------
Income tax expense............. $9,045 $11,362 $7,235
====== ======= ======
5. Retirement Plans and Retiree Medical Benefits
MoneyGram's employees were covered under First Data's benefit plans through
December 31, 1996. First Data sponsored a defined benefit and a defined
contribution retirement plan covering full-time employees of First Data and its
participating subsidiaries, of which MoneyGram was considered 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. All
liabilities associated with these plans are the responsibility of First Data.
25
<PAGE>
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. On January 1, 1997,
the Company adopted and implemented a defined contribution plan that mirrored
First Data's plan.
The Company does not provide to its retirees any form of health care or life
insurance benefits, other than those benefits required by law. Any benefits
provided will be fully paid for by the retirees without any corporate subsidy.
6. Operating Lease Commitments and Rental Expense
Certain facilities and operating equipment utilized in the operations of the
Business are leased under cancelable and noncancelable agreements. Rental
expense amounted to $0.8 million, $0.8 million and $0.4 million for the years
ended December 31, 1996, 1995 and 1994, respectively. These amounts relate
primarily to a portion of the rent expense attributable to IPS' customer service
centers. Future minimum lease payments at December 31, 1996 are: $1.0 million
for 1997 and 1998, $1.1 million for 1999 and 2000, $1.2 million for 2001 and $.6
million thereafter. Certain leases on office space contain renewal options and
escalation clauses providing for additional rentals based upon maintenance,
utility and tax increases.
7. Commitments and Contingencies
In certain instances, certain MoneyGram agents have been guaranteed minimum
commissions. As of December 31, 1996, the remaining maximum commitment amounts
to approximately $65.6 million as follows on a calendar year basis: 1997--$13.2
million; 1998--$14.2 million; 1999--$15.6 million; 2000--$16.7 million;
2001--$3.9 million; and years following--$2.0 million. Historically, MoneyGram's
volume growth has been sufficient to mitigate required performance under these
guarantees, and net payments under these guarantees amounted to $3.2 million,
$1.3 million and $2.0 million during the years ended December 31, 1996, 1995 and
1994, respectively.
MoneyGram is involved in litigation primarily arising in the normal course
of its business. In the opinion of management, MoneyGram's recovery or
liability, if any, under any pending litigation would not materially affect the
Company's financial condition or operations.
The Company currently offers its customers a free three minute phone call
with most transactions. In addition at December 1996 the Company began selling
phone cards through its agents. During 1996, the Company entered into a three
year agreement with a telecommunications provider for voice telephone services,
guaranteeing $14 million in usage by July 2000. The cost of previously providing
free phone calls was $2.9 million and $2.6 million in 1996 and 1995. Based on
annual growth in transactions and future phone card sales, management believes
that this commitment will be paid through normal operating costs.
8. Fixed Assets
The details of fixed assets, as shown on the balance sheet, are as follows:
December 31,
----------------
1996 1995
---- ----
Gross assets:
Leasehold improvements................. 1,132 -
Agent signs............................ 5,610 3,910
Computer related equipment............. 9,480 5,486
All other.............................. 816 557
------ -----
17,038 9,953
Less accumulated depreciation.......... 7,911 3,953
------ -----
Total fixed assets .................... 9,127 6,000
====== ======
26
<PAGE>
9. Stock Options
In connection with the IPO, the Board of Directors of the Company adopted,
and IPS as the Company's sole stockholder approved, 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 1,175,000 and 25,000
shares of common stock, respectively. The exercise price of the options granted
is $12.00, which is the price at which shares were initially offered to the
public. Options are vested at a rate of 25 percent per year over a four year
period from the date of grant.
Options Authorized 1,200,000
Granted (1,162,575)
Cancelled 250
----------
Available 37,675
==========
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") which established
financial accounting and reporting standards for stock-based employee
compensation plans. SFAS No. 123 permits companies to account for stock-based
compensation under Accounting Principles Board No. 25 ("APB No. 25") or adopt
SAFS No. 123 and reflect the fair value of stock options in the statement of
operations as additional expense.
The Company will follow APB No. 25 and its related interpretations in
accounting for its stock-based compensation plans. No compensation cost has been
recognized in the Statements of Operations for the stock options granted during
1996. The disclosure requirements of SFAS No. 123 require companies which do not
record the fair value in the statements of operations to provide pro forma
disclosures of net income and earnings per share in the notes to the financial
statements as if the fair value of the stock-based compensation had been
recorded.
The Company utilized a Black-Scholes option pricing model to quantify the
pro forma effect on net income and earnings per share of the fair value of the
options granted during 1996. Based on the results of the model, the value of the
options granted in December 1996 is $308 thousand with the following weighted
assumptions: no annual dividends, an expected life of 5 years, expected
volatility of 40% and a risk-free interest rate of 6.2%. The Company's 1996 pro
forma net income would have been $14.4 million compared to actual net income of
$14.6 million and pro forma earnings per common share would have been $.87
compared to $.88.
10. 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 is that a selling agent fails 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 to ensure compliance. The
agents are required to deposit daily the principal and fees received the prior
day into a trust account, and these funds are drawn down daily by MoneyGram.
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.
Approximately 55%, 64% and 60% 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, 1996, 1995 and 1994, respectively. The Mexican receive agent
for substantially all of these transactions is a major Mexican financial
institution operating under the terms of a contract expiring in April 2002.
27
<PAGE>
11. Subsequent Events
On February 12, 1997, MoneyGram and Thomas Cook announced the formation of a
joint venture that is 51% owned by MoneyGram. MoneyGram contributed the economic
value of certain of its international agents and Thomas Cook contributed use of
its sales force. The joint venture will expand the distribution of MoneyGram
services on an international basis. This venture will be accounted for as a
wholly owned subsidiary, with minority interest.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
MoneyGram Payment Systems, Inc.
(Registrant)
By: /s/ James F. Calvano
---------------------------------
James F. Calvano
Chairman of the Board and
Chief Executive Officer
March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Name Title Date
/s/ James F. Calvano Chairman of the Board and March 25, 1997
- ------------------------------ Chief Executive Officer
James F. Calvano (Principal Executive Officer)
/s/ Robbin L. Ayers Director and Executive March 25, 1997
- ------------------------------ Vice President
Robbin L. Ayers
/s/ John M. Fowler Director, Executive Vice March 25, 1997
- ------------------------------ President and Chief Financial
John M. Fowler Officer (Principal Financial
and Accounting Officer)
/s/ Brian J. Fitzpatrick Director March 25, 1997
- -------------------------------
Brian J. Fitzpatrick
/s/ William D. Guth Director March 25, 1997
- -------------------------------
William D. Guth
/s/ Sanford Miller Director March 25, 1997
- -------------------------------
Sanford Miller
29
EXHIBIT 2.1
CONTRIBUTION AGREEMENT
DATED AS OF DECEMBER 10, 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............................................... 9
Section 2.3. Assumed Liabilities........................................... 9
Section 2.4. Excluded Liabilities.......................................... 10
Section 2.5. Transfer of Title to Agent Contracts.......................... 10
Section 2.6. Representation and Warranty Regarding Contributed Assets...... 11
ARTICLE III
ISSUANCE OF SHARES..................................................... 12
Section 3.1. Issuance of Shares and Other Consideration.................... 12
ARTICLE IV
CLOSING................................................................ 12
Section 4.1. Closing Date.................................................. 12
Section 4.2. Amendment of Schedules........................................ 12
Section 4.3. The Company's Closing Date Deliveries......................... 13
Section 4.4. IPS' Closing Date Deliveries.................................. 13
i
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS.................................................. 13
Section 5.1. Use of Names.................................................. 13
Section 5.2. Collection of Accounts........................................ 14
Section 5.3. Taxes......................................................... 14
Section 5.4. Allocation of Consideration................................... 16
Section 5.5 Tax Contests.................................................. 16
Section 5.6. Right to Use MoneyGram Agent Assets........................... 18
Section 5.7. Employees..................................................... 18
Section 5.8. Pending Service and Trademarks................................ 18
Section 5.9. Lakewood Lease................................................ 19
Section 5.10. Financial Systems............................................. 19
Section 5.11. Delivery of Software.......................................... 20
Section 5.12. Additional Services........................................... 20
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF IPS AND FDC..................... 20
Section 6.1. FTC Approval.................................................. 20
Section 6.2. No Restraint.................................................. 20
Section 6.3. Underwriting Agreement........................................ 20
ARTICLE VII
INDEMNIFICATION........................................................ 21
Section 7.1. Indemnification by IPS........................................ 21
Section 7.2. Indemnification by the Company................................ 22
Section 7.3. Notice of Claims.............................................. 23
Section 7.4. Third Person Claims........................................... 24
ii
<PAGE>
Section 7.5. Limitations................................................... 25
ARTICLE VIII
TERMINATION............................................................ 26
Section 8.1. Termination................................................... 26
ARTICLE IX
GENERAL PROVISIONS..................................................... 26
Section 9.1. Survival of Obligations....................................... 26
Section 9.2. Notices....................................................... 27
Section 9.3. Successors and Assigns........................................ 27
Section 9.4. Access to Records after Closing............................... 28
Section 9.5. Entire Agreement; Amendments.................................. 29
Section 9.6. Partial Invalidity............................................ 29
Section 9.7. Execution in Counterparts..................................... 29
Section 9.8. Further Assurances............................................ 29
Section 9.9. Governing Law................................................. 29
EXHIBITS
Exhibit 1 Covenant Not to Sue
Exhibit 2 Facility
Exhibit 3 Human Resources Agreement
Exhibit 4 Instrument of Assumption
Exhibit 5 Instrument of Contribution
Exhibit 6 Operations Agreement
Exhibit 7 Registration Rights Agreement
Exhibit 8 Service Mark Letter Agreement
Exhibit 9 Software License Agreement
Exhibit 10 Telecommunications Services Sharing Agreement
Exhibit 11 Western Union Letter Agreement
Exhibit 12 Instrument of Assignment (Western Union)
iii
<PAGE>
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 5.7 MoneyGram Business Employees
Schedule 5.11 Form of Delivery of Software
iv
<PAGE>
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of December 10, 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, 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, IPS has obtained all licenses necessary under State Licensing
Requirements and, prior to, or simultaneous with, the Closing (as defined in
Section 1.1), will begin 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.
<PAGE>
"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.
"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)" and the sales and distribution of a "MoneyGram"
phonecard, it being acknowledged and agreed to by the parties hereto that the
Business shall not include any 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.
"COMMON STOCK" has the meaning specified in Section 3.1.
"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.
-2-
<PAGE>
"CONSUMER MONEY WIRE TRANSFER SERVICES" 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 to a different
person through a MoneyGram Agent and the services marketed under the phrase
"Express Payment" or "Cash Advance."
"CONTRIBUTION AMOUNT" has the meaning specified in Section 3.1.
"COVENANT NOT TO SUE" means the Covenant Not to Sue in the form of
Exhibit 1.
"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 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 2.
"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.
-3-
<PAGE>
"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 3.
"INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption in the
form of Exhibit 4.
"INSTRUMENT OF CONTRIBUTION" means the Instrument of Contribution in
the form of Exhibit 5.
"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.
-4-
<PAGE>
"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 6.
"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 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 7.
"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.
-5-
<PAGE>
"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 LETTER AGREEMENT" means the Service Mark Letter
Agreement in the form of Exhibit 8.
"SERVICE MARK LICENSE AGREEMENT" means the Service Mark License
Agreement included as Exhibit B to the Service Mark Letter Agreement.
"SOFTWARE LICENSE AGREEMENT" means the Software License Agreement in
the form of Exhibit 9.
"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.
"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 10.
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"WESTERN UNION LETTER AGREEMENT" means the Letter Agreement in the
form of Exhibit 11.
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 Affiliates, 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 Affiliates 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) certain
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;
(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
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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 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; and
(k) any and all rights IPS may have in the Disputed Marks (as defined
in the Service Mark Letter Agreement).
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; and
(c) all Governmental Permits of IPS in respect of the Business.
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
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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 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 certain 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
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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.
(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 (as defined in the Consent Decree)
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 (as defined in the Consent Decree) 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 (i) the services provided by IPS and its Affiliates to the
Company under the Operations Agreement, (ii) the services made available to the
Company under the Telecommunications Services Sharing Agreement, (iii) the
rights of the Company under the Covenant Not to Sue and the Service Mark Letter
Agreement (including the right to be granted a license to the Licensed Marks (as
defined in the Service Mark License Agreement) and (iv) the license to the
Utility Software (as defined in the Software License Agreement), constitute all
services and assets necessary to conduct the Business as currently conducted by
IPS. THE
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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 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
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.
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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 Letter
Agreement, the Human Resources Agreement, the Telecommunications Services
Sharing Agreement, the Western Union Letter 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 Letter Agreement, the Human Resources
Agreement, the Telecommunications Services Sharing Agreement, the Western
Union Letter Agreement, the Covenant Not to Sue and the Registration Rights
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 12 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 Section 5.8), 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 Section 5.8 or the Operations Agreement or the
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Service Mark Letter Agreement (or, if applicable, 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.
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
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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, 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;
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(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(a)(i) or 7.2(a)(i) 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) or
7.2(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 based on the initial public offering price of the Common Stock and 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.
SECTION 5.5 TAX CONTESTS.
(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
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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 7.1(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 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 5.7 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 as of 11:59 p.m. on December 20, 1996, 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.
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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 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) Within 30 days after the 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 currently used
by IPS located on the third 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
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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. DELIVERY OF SOFTWARE. IPS shall deliver to the Company
the MoneyGram Application Software and the PC MoneyGram Application Software in
the manner and in accordance with the time frame set forth in Schedule 5.11.
SECTION 5.12. 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 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 AND FDC
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 conditi ons:
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.
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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 breach of any warranty or representation of IPS contained in
this Agreement;
(iii) any Excluded Liability; or
(iv) 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 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)(iv) 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 Sections 7.1(a)(i) through
(iii) shall terminate two years after the Closing Date and the indemnification
provided for in Section 7.1(a)(iv) 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 continue as to:
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(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;
(ii) any Assumed Liability;
(iii) the employment by FDC or any of its Affiliates of the MoneyGram
Business Employees from Closing through December 20, 1996; or
(iv) 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
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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 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
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<PAGE>
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 Indemnified Party must notify the Indemnitor with a copy of the
complaint within five business days after receipt thereof and
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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
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<PAGE>
by the Indemnitor to or on behalf of the Indemnified Party in respect of such
matter and (ii) any amount expended by the 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 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. Subject to the provisions of
Article VII, all representations, warranties, covenants and obligations
contained in this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.
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<PAGE>
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 80235
Attention: Chief Executive Officer
with a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 80235
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
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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.
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
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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.
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 /s/ Charles T. Fote
-------------------------------
Name: Charles T. Fote
Title: Executive Vice President
INTEGRATED PAYMENT SYSTEMS INC.
By /s/ Charles W. Brooks
-------------------------------
Name: Charles W. Brooks
Title: President
MONEYGRAM PAYMENT SYSTEMS, INC.
By /s/ James F. Calvano
-------------------------------
Name: James F. Calvano
Title: Chairman and CEO
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EXHIBIT 10.1
OPERATIONS AGREEMENT
DATED AS OF DECEMBER 10, 1996
AMONG
MONEYGRAM PAYMENT SYSTEMS, INC.,
FIRST DATA TECHNOLOGIES, INC.
AND
INTEGRATED PAYMENT SYSTEMS INC.
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE 1
DEFINITIONS ............................................................. 1
ARTICLE 2
SERVICES ................................................................ 9
Section 2.1. Support Services ................................... 9
Section 2.2. Additional Services ................................ 9
ARTICLE 3
TRANSACTION SETTLEMENT; PORTFOLIO AND REGULATORY COMPLIANCE ............. 9
Section 3.1. Transaction Settlement ............................. 9
Section 3.2. Portfolio .......................................... 10
Section 3.3. MoneyGram Agents ................................... 11
Section 3.4. Compliance with Laws ............................... 13
Section 3.5. Transition of Business ............................. 14
ARTICLE 4
SECURITY ................................................................ 15
ARTICLE 5
GENERAL AGREEMENTS OF THE PARTIES ....................................... 15
Section 5.1. Company Obligations ................................ 15
Section 5.2. First Data Obligations ............................. 16
Section 5.3. Extension of Term; Money Order Processing .......... 16
Section 5.4. License to Certain Software ........................ 17
ARTICLE 6
PAYMENTS TO FIRST DATA .................................................. 18
Section 6.1. Fees and Charges ................................... 18
Section 6.2. IPS Reports and Payments ........................... 18
Section 6.3. Taxes .............................................. 19
Section 6.4. Certification of Charges ........................... 19
ARTICLE 7
CONFIDENTIALITY ......................................................... 19
Section 7.1. General ............................................ 19
i
<PAGE>
Section Page
- ------- ----
Section 7.2. Confidential Information Defined ................... 20
Section 7.3. Permitted Disclosure; Public and Generic
Information; Legally Required Disclosure ........... 21
Section 7.4. Notices ............................................ 22
Section 7.5. Company Disclosure of Confidential Information
to First Data ...................................... 22
Section 7.6. Remedy ............................................. 23
ARTICLE 8
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ............................ 23
ARTICLE 9
TERM AND TERMINATION .................................................... 23
Section 9.1. Term ............................................... 23
Section 9.2. Termination by Company ............................. 24
Section 9.3. Termination by First Data .......................... 26
Section 9.4. Orderly Transition ................................. 27
Section 9.5. Effect of Termination .............................. 27
ARTICLE 10
INDEMNITIES, LIABILITY AND LIMITS OF LIABILITY .......................... 28
Section 10.1. First Data's Indemnification ....................... 28
Section 10.2. Company's Indemnification .......................... 29
Section 10.3. Notification ....................................... 31
Section 10.4. Claims Period ...................................... 32
Section 10.5. Subrogation ........................................ 33
Section 10.6. Exclusive Remedy ................................... 33
Section 10.7. No Special Damages ................................. 33
ARTICLE 11
DISPUTE RESOLUTION ...................................................... 34
Section 11.1. Dispute Resolution ................................. 34
Section 11.2. Recourse to Courts and Other Remedies .............. 37
Section 11.3. Affiliates ......................................... 37
Section 11.4. Exception to Article 11 ............................ 37
ARTICLE 12
MISCELLANEOUS ........................................................... 37
Section 12.1. Expenses ........................................... 37
Section 12.2. Relationship of Parties ............................ 38
ii
<PAGE>
Section Page
- ------- ----
Section 12.3. Force Majeure ...................................... 38
Section 12.4. Entire Agreement ................................... 39
Section 12.5. Assignment ......................................... 39
Section 12.6. Notices ............................................ 39
Section 12.7. Counterparts ....................................... 40
Section 12.8. Governing Law ...................................... 41
Section 12.9. Media Releases ..................................... 41
Section 12.10. Waiver ............................................. 41
Section 12.11. Severability ....................................... 41
Section 12.12. Construction Rules ................................. 42
iii
<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
<PAGE>
OPERATIONS AGREEMENT
THIS OPERATIONS AGREEMENT (this "Agreement") dated as of December 10,
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 the date hereof (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
<PAGE>
and shall not affect the meaning or interpretation of this 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 A-1.
"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
2
<PAGE>
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 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) and the sales and distribution of a "MoneyGram"
phonecard.
"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,
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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 other
technology now existing or later developed, from one person to a different
person through a 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.
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"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 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 until such
time as the Utility Software is available to perform such services in accordance
with Exhibit A-3, 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.
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"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.
"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.
"New Utility Software" means all developments, improvements,
modifications, additions, expansions, new versions, new releases, rewrites or
enhancements to the Utility Software that are developed by or on behalf of
Company after the 45-day period provided in Exhibit A-3.
"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
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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, 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 Letter Agreement" means the Service Mark Letter
Agreement dated as of the date hereof among Company, FDC and Western Union
Financial Services, Inc. ("Western Union"), which includes as an exhibit thereto
the Service Mark License Agreement among IPS, Western Union and Company.
"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
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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, 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, governmental 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.
"Utility Software" means the application Software owned by IPS or its
Affiliates that will be licensed to Company under the Software License
Agreement, delivered pursuant to Exhibit A-3
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and used by First Data to provide the Data Center Services, together with the
documentation (if any) relating thereto.
"Voice Center Disaster Recovery Services" means the services specified
in Exhibit A-4.
"Voice Center Services" means the services specified in Exhibit A-2.
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.
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.
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(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
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,
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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.
(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
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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 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
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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 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
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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 and the Utility Software are and shall
remain First Data's property, and Company shall have no rights to, or interest
in, the IPS Application Software or the Utility Software, except as provided in
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. 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.
(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 understood that First Data has provided to
Company a copy of such procedures as in effect on the date hereof; and
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(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 or New
Utility 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 or New Utility 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
or New Utility Software. Company represents and warrants to First Data that any
New MoneyGram Application Software and New Utility Software 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 or New Utility 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.
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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 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 be 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
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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 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.
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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 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, if applicable, 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, if applicable, 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, any New Utility Software and
any Third Party Software that is licensed to or used by Company, (ii) with
respect to First Data, the IPS Application Software, the Utility 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
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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 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, if
applicable, the Service Mark License Agreement if effected in accordance with
the
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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 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
Confidential 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
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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.
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)
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(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 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;
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(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, (5) the Voice
Center Services or (6) any Additional Services, in the case of clause (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 Exhibit E),
and, in the case of clause (4) or (5), 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;
(E) in the case of the Voice Center Services, 30 days' notice;
and
(F) in the case of any Additional Services, as agreed to by the
Parties.
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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:
(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
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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:
(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, 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,
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in each case, other than any Confidential Information licensed to Company under
the Software License Agreement or, if applicable, the Service Mark License
Agreement.
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:
(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 (i) any Company Indemnitee's gross negligence or
willful misconduct, (ii) the breach by Company or any Affiliate of Company any
of its covenants or agreements contained in this Agreement or (iii) any
modification contained in the New MoneyGram Application Software or the New
Utility Software or the incapability of any such Software with the First Data
Equipment.
(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
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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 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 or New Utility 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 New Utility
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
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that an infringement claim is made with respect to Software (other than the
MoneyGram Application Software, the PC MoneyGram Application Software, the
IPS Application Software or the Utility 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).
(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.
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(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.
(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
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such claim, suit or proceeding. The Indemnifying Party, within 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 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 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 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
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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.
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.
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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, if
applicable, 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 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 days' written notice.
(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.
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(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.
(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.
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(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).
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.
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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. First Data shall bear all costs incurred by
or on behalf of each Party for services rendered on or prior to the date hereof
in connection with the negotiation and preparation of this Agreement, including
fees and expenses of financial consultants, accountants and counsel. 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 hereunder, including fees and expenses of its own financial
consultants, accountants and counsel.
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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 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
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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 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
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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
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
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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 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.
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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.
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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 /s/ James F. Calvano
-------------------------------
Name: James F. Calvano
Title: Chairman and CEO
FIRST DATA CORPORATION
By /s/ Charles T. Fote
-------------------------------
Name: Charles T. Fote
Title: President
INTEGRATED PAYMENT SYSTEMS INC.
By /s/ Charles W. Brooks
-------------------------------
Name: Charles W. Brooks
Title: President
43
EXHIBIT 10.2
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT (this "Agreement") is entered into as
of December 10, 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 will
provide, inter alia, certain data processing services to the Company; and
WHEREAS, IPS wishes to grant to the Company a license to use the
Utility 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 controlled by or is under common control
with such Person;
<PAGE>
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"(SM) and the sales and distribution of a "MoneyGram"
phonecard.
"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 to a different
person through a MoneyGram Agent and the services marketed under the phrases
"Express Payment" and "Cash Advance."
"Contribution Agreement" means the Contribution Agreement dated as of
the date hereof among the Company, IPS and First Data Corporation, a Delaware
corporation.
"Costs" means all direct costs, expenses and charges plus all indirect
costs, expenses and charges, excluding allocations of overhead.
"Data Processing Services" means the data processing services provided
by IPS and its Affiliates to the Company under the Operations Agreement.
"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
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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.
"Force Majeure Event" shall have the meaning specified in Section
10(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, copyright, 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.
"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.
"MoneyGram Application Software" shall have the meaning set forth in
the Contribution Agreement.
"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.
"PC MoneyGram Application Software" shall have the meaning set forth
in the Contribution Agreement.
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"Services" shall have the meaning set forth in Section 5(a).
"Travel Related Services" means American Express Travel Related
Services Company, Inc., a New York corporation.
"Utility Software" means that certain software owned by or licensed to
IPS or its Affiliates used in the Business, together with the documentation (if
any) relating thereto as described in Exhibit A.
2. License Grant.
(a) Utility Software. IPS hereby grants to the Company a perpetual,
irrevocable, worldwide, nonexclusive, royalty-free license to use the Utility
Software in the Business or for any other purpose. The foregoing license shall
include the right to assign, transfer and modify the Utility Software and to
distribute, license or sublicense derivative works incorporating the Utility
Software.
(b) Reservation. All right, title and interest in and to the Utility
Software, other than those rights expressly granted herein, shall remain in IPS
and its licensors.
(c) 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
10(e).
(d) Company Covenants. The Company hereby agrees that it will use
reasonable efforts to cause any licensee, sublicensee or assignee with respect
to the Utility Software licensed to the Company pursuant to this Agreement to
comply with the terms and conditions of this Agreement.
3. Delivery of Software.
(a) Initial Delivery. Within 90 days of the Parties' execution of
this Agreement, IPS shall deliver to the Company the Utility Software (including
the source code, object code, JCLs and existing documentation) in the form and
format set forth in Exhibit B.
(b) Final Delivery. 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
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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 Utility Software as of the
date of such amendment, IPS shall deliver to the Company the Utility
Software in the form and format set forth in Exhibit B, such delivery to
include all modifications, enhancements, updates and revisions made by IPS
on behalf of the Company through the date of such final delivery.
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 Utility Software. Subject to such ownership rights in
the Utility 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 Utility Software.
5. Transition Responsibilities.
(a) Services. IPS or its Affiliates shall provide the Company with
up to 500 hours of training and application support relating to the Utility
Software (the "Services") at locations and times agreed to by IPS and the
Company over the period beginning on the date hereof through the date that
is 90 days after final delivery of the Utility Software pursuant to Section
3(b). The Parties agree that an hour of Services shall mean any hour during
which one or more employees of the Company are receiving Services. At the
request of the Company, IPS shall provide the Company additional Services,
provided that the Company shall pay IPS for each such additional hour of
Services on a time and materials basis (i.e., not including allocations of
overhead associated with delivery of such Services) and for the travel and
lodging expenses of its employees who perform the Services.
(b) No Other Services. Except as contemplated by Section 5(a), IPS
shall have no responsibility to update, maintain or support the Utility
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 of any third Person; (ii) the Utility Software as
delivered
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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; and (iv) the Utility Software, the PC
MoneyGram Application Software and the MoneyGram Application Software
constitute all of the software required to process Consumer Money Wire
Transfer Service transactions for the Business as conducted on the date
hereof.
(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 UTILITY 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 WARRANTIES, 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
6
<PAGE>
(iii) any claim that the Company's use or possession of the Utility
Software or the license granted hereunder, infringes or violates the
Intellectual Property of any third Person. If a final injunction is
obtained against the Company's use of the Utility Software by reason of
such infringement, or if in IPS' opinion the Utility 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 Utility Software, or any portion thereof, in the manner permitted
hereunder; or (ii) replace or modify the Utility 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 Utility Software in
combination with any software not furnished by IPS, (2) the Utility
Software is used in a manner for which it is not designed or (3) the
infringement is based upon modifications of the Utility 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.
7
<PAGE>
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.
10. 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
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.
8
<PAGE>
(d) Entire Agreement. This Agreement, including the Exhibits hereto,
and the provisions of the Operations Agreement expressly referenced herein,
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.
(e) Assignment. 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. The Company may assign, transfer, sublicense
and/or delegate its rights and duties under this Agreement, in whole or in
part, in accordance with the license grant set forth in Section 2(a),
provided that such assignee, transferee, sublicensee or delegatee agrees to
be bound in writing to the terms and conditions of 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.
9
<PAGE>
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
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
10
<PAGE>
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 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.
11
<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 /s/ James F. Calvano
-------------------------------
Name: James F. Calvano
Title: Chairman and CEO
INTEGRATED PAYMENT SYSTEMS INC.
By /s/ Charles W. Brooks
-------------------------------
Name: Charles W. Brooks
Title: President
12
EXHIBIT 10.3
December 10, 1996
MoneyGram Payment Systems, Inc.
7401 West Mansfield Ave.
Lakewood, Colorado 80235
The undersigned, First Data Corporation, a Delaware corporation
("First Data"), and Western Union Financial Services, Inc., a Delaware
corporation ("Western Union"), hereby refer to the transactions contemplated by
the Registration Statement of MoneyGram Payment Systems, Inc., a Delaware
corporation ("MoneyGram"), on Form S-1 (Registration No. 333-228), as amended
(the "Registration Statement"), filed under the Securities Act of 1933, as
amended, in respect of the initial public offering of shares of common stock,
par value $.01 per share (the "Common Stock"), of MoneyGram. Such initial public
offering is intended by First Data to satisfy its obligations under the Consent
Decree dated January 19, 1996 (Docket No. C-3635) between First Data and the
Federal Trade Commission and will be effected through the sale by First Data of
its shares of Common Stock. In connection with such initial public offering,
MoneyGram, First Data and certain subsidiaries of First Data will enter into
agreements that are described in the Registration Statement as the "Transition
Agreements."
In consideration of the foregoing, and of the promises and covenants
hereinafter set forth, the parties to this letter agreement agree as follows:
During the two years following the date of the closing of the initial
sale of Common Stock by First Data pursuant to the Registration Statement
(the "Period"), MoneyGram, on the one hand, and First Data and Western
Union, on the other hand, each agrees not to sue the other party or any of
such other party's Affiliates (as defined below), officers, directors or
employees in respect of any of the service marks set forth in Exhibit A to
this letter agreement (the "Disputed Marks") in any jurisdiction, and,
after the Period, MoneyGram, on the one hand, and First Data and Western
Union, on the other hand, each agrees not to sue the other party or any of
such other party's Affiliates, officers, directors or employees in respect
of the use of any Disputed Mark during the Period. Nothing in the preceding
sentence shall preclude First Data or MoneyGram from prosecuting or
challenging applications in respect of
<PAGE>
MoneyGram Payment Systems, Inc.
December 10, 1996
Page 2
any of the Disputed Marks at the United States Patent and Trademark Office
or any governmental authority in any state or other jurisdiction of the
United States or country other than the United States that performs
functions similar to those performed by the United States Patent and
Trademark Office.
The parties hereto agree that each statute of limitations that may be
applicable to a claim in respect of any Disputed Mark shall be deemed to
have been tolled during the Period.
MoneyGram, First Data and Western Union agree that, upon written
notice from MoneyGram to First Data and Western Union at any time during
the Period, First Data shall cause Integrated Payment Systems Inc. to, and
Western Union shall, enter into the Service Mark License Agreement attached
hereto as Exhibit B. Upon execution and delivery of the Service Mark
License Agreement, the parties hereto agree that their agreements set forth
in the two immediately preceding paragraphs shall terminate.
MoneyGram, First Data and Western Union each agrees to be responsible
for ensuring that each of their respective Affiliates complies with this
letter agreement and does not take any action which, if done by MoneyGram,
First Data or Western Union, as the case may be, would constitute a breach
of this letter agreement. "Affiliate" of any person means any other person
which, directly or indirectly, controls, is controlled by or is under
common control with such person.
This letter 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 MoneyGram, First Data and Western Union.
This letter agreement shall not be amended, modified or supplemented,
except by a written instrument signed by an authorized representative of each of
the parties hereto.
This letter 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.
<PAGE>
MoneyGram Payment Systems, Inc.
December 10, 1996
Page 3
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement among MoneyGram,
First Data and Western Union.
Very truly yours,
FIRST DATA CORPORATION
By /s/ Charles T. Fote
-------------------------------
Name: Charles T. Fote
Title: Executive Vice President
WESTERN UNION FINANCIAL
SERVICES, INC.
By /s/ George D. McNary
-------------------------------
Name: George D. McNary
Title: President
The foregoing agreement is hereby confirmed and accepted as of the date of this
letter.
MONEYGRAM PAYMENT SYSTEMS, INC.
By /s/ James F. Calvano
-------------------------------
Name: James F. Calvano
Title: Chairman and Chief
Executive Officer
EXHIBIT 10.4
===============================================================================
HUMAN RESOURCES AGREEMENT
dated as of December 10, 1996
among
FIRST DATA CORPORATION
INTEGRATED PAYMENT SYSTEMS INC.
and
MONEYGRAM PAYMENT SYSTEMS, INC.
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
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 6
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 8
Section 6.1. Stock Option Plans 8
Section 6.2. Bonus and Incentive Plans. 8
Section 6.3. Workers' Compensation 8
Section 6.4. Vacation Pay Policy 9
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 12
Section 7.4. Subrogation 12
Section 7.5. Exclusive Remedy 12
Section 7.6. No Special Damages 13
Section 7.7. Timely Payment 13
ARTICLE 8 MISCELLANEOUS 13
Section 8.1. No Rights 13
Section 8.2. Corporate Action; Delegation of Authority 13
Section 8.3. No Solicitation 13
<PAGE>
Section 8.4. Termination 14
Section 8.5. Survival of Obligations 14
Section 8.6. Notices 14
Section 8.7. Successors and Assigns 15
Section 8.8. Access to Records after Closing 16
Section 8.9. Entire Agreement; Amendments 16
Section 8.10. Partial Invalidity 16
Section 8.11. Execution in Counterparts 17
Section 8.12. Further Assurances 17
Section 8.13. Governing Law 17
<PAGE>
HUMAN RESOURCES AGREEMENT
THIS HUMAN RESOURCES AGREEMENT (this "Agreement") is dated as of
December 10, 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 the date hereof (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 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
<PAGE>
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 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 and Sections
means the Articles and Sections 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 5.7 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 the MoneyGram Payment System, Inc.
Employee Welfare Benefit Plan.
-2-
<PAGE>
"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 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 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.
-3-
<PAGE>
"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, (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.
-4-
<PAGE>
"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, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Transfer Date" means December 21, 1996.
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 Transfer
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 Transfer Date
(including, but not limited to, any and all action necessary to enable Company
to administer such plan on the Transfer 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 Transfer Date, qualified
under section 401(a) of the Code. The Company Savings Plan shall contain such
terms and conditions as Company shall determine, provided that the Company
Savings Plan shall provide that (i) any Affected Business Employee who
immediately before the Transfer Date is a participant in the FDC Savings Plan
shall be on the Transfer Date a participant in the Company Savings Plan, (ii)
periods of employment with the FDC Group prior to the Transfer 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
-5-
<PAGE>
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 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 Transfer Date.
SECTION 3.2. TRANSFER OF ACCOUNT BALANCES FROM FDC SAVINGS PLAN TO
COMPANY SAVINGS PLAN. Subject to applicable law and the provisions of the FDC
Savings Plan, not later than the first day of the second calendar month
beginning after the Transfer 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
Transfer 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, Company
shall establish the Company Welfare Plans to the extent such plans are not
already in existence prior to the Effective Date. The Company
-6-
<PAGE>
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 the comparable 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
deductibles 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, Company shall assume and be responsible for all
liabilities and obligations to Affected 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 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
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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 Transfer Date, 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 Transfer Date, and any
stock options remaining outstanding thereunder that are not fully exercisable
pursuant to their terms shall become fully exercisable on the Transfer 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 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
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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
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, 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
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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
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) 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
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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, 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
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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 notification period provided in Section 7.2; 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 Section 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.
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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. Except for rights of any Indemnified
Party under Article 7 or any FDC Group member or Company Group member under
Section 8.3, 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 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 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
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enter into employment with 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 Company. The Parties 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 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 term, 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 Company, FDC and IPS. In the
event this Agreement shall be terminated, no Party shall have any liability to
any other Party hereunder.
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
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personally or when sent by registered or certified mail or by private courier
addressed as follows:
If to Company, to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 80235
Attention: Chief Executive Officer
with a copy to:
MoneyGram Payment Systems, Inc.
7401 West Mansfield Avenue
Lakewood, Colorado 80235
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
shall not be assignable by such Party 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 initial public offering of the
common stock of Company, 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 and their successors and permitted assigns.
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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 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 Company shall desire to dispose of any of such books and records
prior to the expiration of such six-year period, 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, 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. 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 Company a reasonable opportunity, at Company's
expense, to segregate and remove such books and records as Company may select.
SECTION 8.9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, and any
agreements and documents delivered pursuant hereto, contain the entire
understanding of the Parties 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. This Agreement shall not be
amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the Parties.
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,
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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 and delivered to each of FDC, IPS and Company.
SECTION 8.12. FURTHER ASSURANCES. On and after the Effective Date,
each Party shall take such other actions and execute such other documents and
instruments as may be reasonably requested by the other Parties 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.
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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: /s/ Charles T. Fote
----------------------------------
Name: Charles T. Fote
Title: Executive Vice President
INTEGTRATED PAYMENT SYSTEMS INC.
By: /s/ Charles W. Brooks
----------------------------------
Name: Charles W. Brooks
Title: President
MONEYGRAM PAYMENT SYSTEMS, INC.
By: /s/ James F. Calvano
----------------------------------
Name: James F. Calvano
Title: Chairman & CEO
EXHIBIT 10.5
TELECOMMUNICATIONS SERVICES SHARING AGREEMENT
DATED AS OF DECEMBER 10, 1996
BETWEEN
MONEYGRAM PAYMENT SYSTEMS, INC.
AND
FIRST DATA CORPORATION
<PAGE>
TABLE OF CONTENTS
SECTION Page
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ARTICLE 1
Definitions.......................................................... 1
ARTICLE 2
SERVICES............................................................. 5
Section 2.1. Telecommunications Services............................ 5
Section 2.2. No Guarantee or Provision of Services.................. 5
Section 2.3. Related Services....................................... 5
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.............................................. 6
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.......................................... 7
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................ 9
Section 6.5. Effect of Termination.................................. 10
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SECTION PAGE
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ARTICLE 7
INDEMNIFICATION...................................................... 10
Section 7.1. Indemnification by MG.................................. 10
Section 7.2. Third-Party Beneficiaries.............................. 11
Section 7.3. No Special Damages..................................... 11
ARTICLE 8
DISPUTE RESOLUTION................................................... 11
ARTICLE 9
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES......................... 11
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........................................... 12
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......................................... 14
Section 10.10. Construction Rules................................... 14
SCHEDULES
1.1A Other Telecommunications Agreements
1.1B Other Telecommunications Services Providers
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TELECOMMUNICATIONS SERVICES SHARING AGREEMENT
THIS TELECOMMUNICATIONS SERVICES SHARING AGREEMENT (this "Agreement")
dated as of December 10, 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 the date hereof (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 and the plural, and
reference to the neuter gender includes the
<PAGE>
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 and Sections means the
Articles and Sections 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 Virtual Telecommunications Network Service
Agreement between American Express Company and American Telephone and Telegraph
Company and the related letter agreements, each dated July 29, 1993, between
American Express Company and FDC and among American Express Travel Related
Services Company, Inc. and several affiliated entities, including FDC, as the
same may be amended after the date hereof.
"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 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
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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.
"Losses" means any and all losses, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, deficiencies
or other charges.
"MCI" means MCI Telecommunications Corporation.
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"MCI Agreement" means the Agreement for Special Customer Arrangement
Telecommunications Services by and between MCI Telecommunications Corporation
and American Express Company dated October 14, 1995 and the related letter
agreement dated October 14, 1993 among American Express Travel Related Services
Company, Inc. and several affiliated entities, including FDC, as the same may be
amended after the date hereof.
"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 the same may be amended after
the date hereof.
"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, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Body.
"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.
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"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.
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 any of 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.
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 Telecommunications Services used by FDC and its Affiliates
and MG and its Affiliates.
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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 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.
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(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.
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 responsible for any expenses
and charges that relate solely to services provided under a Telecommunications
Agreement solely for or at the request of such Party.
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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, 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:
(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
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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;
(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
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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 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
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"Indemnified Parties"), from and against any and all Losses 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 or Expense or the facts or transactions
giving rise to such Loss or Expense 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 FOREGOING REPRESENTS AN
EXPRESS ALLOCATION OF RISK BETWEEN THE PARTIES.
ARTICLE 8
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.
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
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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 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
Schedules hereto, and Article 7 and Article 11 of the Operations Agreement,
constitute the entire 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
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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
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.
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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.
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 Schedule.
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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: /s/ James F. Calvano
----------------------------------
Name: James F. Calvano
Title: Chairman & CEO
FIRST DATA CORPORATION
By: /s/ Charles T. Fote
----------------------------------
Name: Charles T. Fote
Title: President
Exhibit 10.7
MONEYGRAM PAYMENT SYSTEMS, INC.
1996 STOCK OPTION PLAN
(AS ADOPTED December 6, 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
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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
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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
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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,
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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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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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III. GENERAL
3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall become effective as of the
date of approval hereof by the Board. 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.
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
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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
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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
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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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(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
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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
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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
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(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
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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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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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EXHIBIT 10.8
MONEYGRAM PAYMENT SYSTEMS, INC.
1996 BROAD-BASED STOCK OPTION PLAN
(AS ADOPTED December 6, 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
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<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
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<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
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<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 become effective as of the
date of approval hereof by the Board. 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.
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
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<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
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<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
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<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
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<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
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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.
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.
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Exhibit 10.10
REVOLVING CREDIT AGREEMENT
Dated as of December 10, 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
________, 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.
<PAGE>
SECTION 1.04. Optional Prepayments. The Borrower may, upon at least
four Business Days' notice to the Lender stating 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 365 days, 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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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.
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<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:
(i) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its
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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 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
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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
(ii) Investments which do not exceed $5,000,000 in the aggregate at
any time.
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"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 Lender 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 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
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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;
(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
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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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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 Indemnitees shall be designated a party thereto), which any of them may
incur and reasonably pay arising out of or relating to
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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.
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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.
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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: /s/
----------------------------
Title: Chairman and CEO
LENDER: FIRST DATA CORPORATION
By: /s/
----------------------------
Vice President
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EXHIBIT A
PROMISSORY NOTE
$20,000,000.00 Dated: December 10, 1996
FOR VALUE RECEIVED, the undersigned, MONEYGRAM PAYMENT SYSTEMS, INC.,
a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
FIRST DATA CORPORATION, a Delaware corporation (the "Lender"), the principal
amount of TWENTY MILLION DOLLARS ($20,000,000.00) or, if less, the aggregate
principal amount of all Advances made by the Lender to the Borrower pursuant to
the Credit Agreement (as hereinafter defined) outstanding, on __________, 1997,
or on such earlier date as may be required by the terms of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein are defined as
defined in the Credit Agreement.
The Borrower shall pay interest on the principal amount hereof from
time to time outstanding from the date hereof until such principal amount is
paid in full, payable quarterly in arrears on the first day of each calendar
quarter during the term hereof and on the final day when such principal amount
becomes due at a fluctuating interest rate per annum in effect from time to time
equal at all times to the higher of:
(a) the rate of interest announced publicly by The Chase Manhattan
Bank, N.A. ("Chase"), the rate or interest announced publicly by Chase,
from time to time, as its prime rate (the "Prime Rate") plus one percent
(1.0%) per annum; provided, however, that any overdue amount of principal,
interest, fees or other amounts payable hereunder or under the Credit
Agreement referred to below shall bear interest, payable on demand, at the
Prime Rate plus three percent (3.0%) per annum. Each change in the
fluctuating interest rate hereunder shall take effect simultaneously with
the corresponding change in the Prime Rate.
Both principal and interest are payable in lawful money of the United
States of America to the Lender at 2121 N. 117th Ave., NP 30, Omaha, Nebraska
68164, Attention: General Counsel, in same day funds. All Advances made by the
Lender to the Borrower, and all payments made on account of the principal amount
hereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Promissory Note.
A-1
<PAGE>
This Promissory Note is the Note referred to in, and is entitled to
the benefits of, the Revolving Credit Agreement dated as of December 10, 1996
(the "Credit Agreement") between the Borrower and the Lender. The Credit
Agreement, among other things, (i) provides for the making of advances (the
"Advances") by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Advance
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
MONEYGRAM PAYMENT SYSTEMS, INC.
By:
---------------------------
Title:
A-2
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-17939) and in the related Prospectus of MoneyGram Payment Systems,
Inc. of our report dated March 14, 1997, with respect to the financial
statements of MoneyGram Payment Systems, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1996.
Ernst & Young LLP
New York, New York
March 31, 1997
