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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
MONEYGRAM PAYMENT SYSTEMS, INC.
(NAME OF SUBJECT COMPANY)
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MONEYGRAM PAYMENT SYSTEMS, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASSES OF SECURITIES)
608910105
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MONEYGRAM PAYMENT SYSTEMS, INC.
7401 WEST MANSFIELD AVENUE
LAKEWOOD, COLORADO 80235
(303) 716-6800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON FILING STATEMENT)
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WITH A COPY TO:
PETER D. LYONS, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
212-848-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is MoneyGram Payment Systems, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 7401 West Mansfield Avenue, Lakewood, Colorado 80235.
The title of the classes of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company (the
"Statement") relates is the shares of common stock, par value $.01 per share, of
the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer by Pine Valley Acquisition
Corporation, a Delaware corporation ("Purchaser") and a wholly owned subsidiary
of Viad Corp, a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") dated April 10, 1998 to
purchase all outstanding shares (each a "Share") of the Company Common Stock at
a price of $17.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated April 10, 1998 (the "Offer to Purchase") and the related Letter
of Transmittal (the "Letter of Transmittal")(which together constitute the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of April 4, 1998 (the "Merger Agreement") among Parent, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the consummation of the Offer and satisfaction or, if
permissible, waiver of the conditions to the Merger, Purchaser shall be merged
with and into the Company (the "Merger"), the separate existence of Purchaser
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed as Exhibit 1
to this Statement and is incorporated herein by reference.
According to the Offer to Purchase, the principal executive offices of
Parent are located at 1850 North Central Avenue, Suite 2410, Phoenix, Arizona
85077. The principal offices of Purchaser are located at c/o Viad Corp, 1850
North Central Avenue, Suite 2212, Phoenix, Arizona 85077.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in the Company's Information Statement under the
heading "Material Contracts and Agreements with Executive Officers". A copy of
the Information Statement is set forth on Annex I hereto and is incorporated
herein by reference in its entirety. Except as described or incorporated by
reference herein, to the knowledge of the Company, as of the date hereof, there
exists no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii) the
Purchaser or its executive officers, directors or affiliates.
INDEMNIFICATION UNDER DELAWARE LAW, THE COMPANY'S CERTIFICATE OF INCORPORATION
AND BY-LAWS AND THE MERGER AGREEMENT
The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law ("Delaware Law"), which provides that a
corporation may indemnify any person who was, is or is threatened to be made, a
party to any threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such officer, director, employee or
agent acted in good faith and
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in a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to criminal proceedings, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without approval from the Delaware Court of Chancery if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of Delaware Law, which enables
a corporation in its certificate of incorporation to eliminate or limit the
personal liability of a director to the corporation or its stockholders for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of Delaware Law
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
a director derived an improper personal benefit.
Article Eight of the Certificate of Incorporation of the Company (the
"Certificate") provides for indemnification of the officers and directors of the
Company to the fullest extent permitted by Delaware Law. Article Seven of the
Certificate provides that, except under certain circumstances (similar to those
listed under Section 102(b)(7) of Delaware Law described above), directors of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duties as a director.
The Merger Agreement provides that the Certificate of Incorporation of the
Surviving Corporation shall contain provisions no less favorable, with respect
to indemnification, than those set forth in Article Eight of the Certificate,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the consummation of the Merger (the "Effective Time")
in any manner that would materially and adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification is required by
law.
The Merger Agreement also provides that, regardless of whether the Merger
becomes effective, the Company shall indemnify and hold harmless, and after the
Effective Time indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company and each directly or
indirectly owned subsidiary of the Company (a "Subsidiary") to the fullest
extent permitted under the Certificate and the By-laws of the Company (the
"By-laws") for a period of six years after the date of the Merger Agreement.
In addition, the Merger Agreement provides that Parent and the Surviving
Corporation shall use their respective reasonable best efforts to maintain in
effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that if the existing policies expire, are terminated or
canceled during such period Parent or the Surviving Corporation will use its
reasonable best efforts to obtain substantially similar policies.
Notwithstanding the foregoing, in no event shall Parent or the Surviving
Corporation be required to expend pursuant to the Merger Agreement more than an
amount per year equal to 200% of current annual premiums paid by the Company for
such insurance.
All information contained in this Statement or incorporated herein by
reference concerning Purchaser or Parent, or actions or events with respect to
any of them, was provided by Purchaser or Parent, respectively, and the Company
takes no responsibility for such information. Information contained in this
Statement with respect to the Company and its advisors has been provided by the
Company.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
Such summary is qualified in its entirety by reference to the Merger Agreement,
a copy of which is filed herewith as Exhibit 1 and is incorporated herein by
reference. Capitalized terms not otherwise defined in the following summary of
certain provisions of the Merger Agreement have the respective meanings ascribed
to them in the Merger Agreement.
The Offer. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, Purchaser will commence the Offer as promptly as
reasonably practicable, but in no event later than five business days after the
initial public announcement of Purchaser's intention to commence the Offer. The
obligation of Purchaser to accept for payment Shares tendered pursuant to the
Offer is subject to the satisfaction of the Minimum Condition (defined in the
Merger Agreement as the condition that at least the number of Shares that when
added to the Shares already owned by Parent shall constitute a majority of the
then outstanding Shares on a fully diluted basis shall have been validly
tendered and not withdrawn prior to the expiration of the Offer) and certain
other conditions that are described herein under the heading "Conditions to the
Merger". Purchaser and Parent have agreed that no change in the Offer may be
made which waives the Minimum Condition, and no change may be made which
decreases the price per Share payable in the Offer, reduces the maximum number
of Shares to be purchased in the Offer or which imposes conditions to the Offer
in addition to those set forth herein without the prior consent of the Company.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
will continue as the Surviving Corporation of the Merger. At the Effective Time,
by virtue of the Merger and without any action on the part of the Purchaser, the
Company or holders of any Shares, (a) each Share issued and outstanding
immediately prior to the Effective Time (other than any Shares held in the
treasury of the Company, or owned by Purchaser, Parent or any direct or indirect
wholly owned subsidiary of Parent or of the Company and any Shares which are
held by stockholders who have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Shares in accordance with Delaware Law) shall be cancelled and shall be
converted automatically into the right to receive $17.00 in cash (the "Merger
Consideration") payable, after reduction for any required Tax withholding,
without interest, to the holder of such Share, upon surrender, in the manner
provided in the Letter of Transmittal, of the certificate that formerly
evidenced such Share, (b) each Share held in the treasury of the Company and
each Share owned by Purchaser, Parent or any direct or indirect wholly owned
Subsidiary of Parent or the Company immediately prior to the Effective Time
shall be cancelled without any conversion thereof and no payment or distribution
will be made with respect thereto, and (c) each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
The Merger Agreement provides that the directors and officers of Purchaser
immediately prior to the Effective Time will be the initial directors and
officers of the Surviving Corporation each to hold office in accordance with the
Certificate of Incorporation and By-laws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified. The Merger Agreement provides that, at the Effective Time, the
Certificate restated in a form acceptable to Purchaser will be the Certificate
of Incorporation of the Surviving Corporation; provided, however, that such
restated Certificate will contain provisions in accordance with the Directors'
and Officers' Indemnification and Insurance Provision of the Merger Agreement
described above. The Merger Agreement also provides that the By-laws of
Purchaser, as in effect immediately prior to the Effective Time, will be the
By-laws of the Surviving Corporation.
The Merger Agreement provides that each Company Stock Option outstanding at
the Effective Time under the Company's 1996 Stock Option Plan or 1996
Broad-Based Stock Option Plan (the "Company Stock Options Plans"), shall be
canceled by the Company immediately prior to the Effective Time, and each holder
of a canceled Company Stock Option shall be entitled to receive at the Effective
Time or as soon as practicable thereafter from the Company in consideration for
the cancellation of such Company Stock Options
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an amount equal to the product of (i) the number of Shares previously subject to
such Company Stock Option and (ii) the excess, if any, of the per share amount
over the exercise price per share of Company Common Stock previously subject to
such Company Stock Option, which shall be paid in cash, after reduction for
applicable tax withholding. The Merger Agreement also provides that the Company
Stock Option Plans shall terminate upon the Effective Time.
The Merger Agreement provides that, notwithstanding any provision of the
Merger Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of Delaware Law shall not be converted into or represent the right
to receive the Merger Consideration. Such stockholders shall be entitled to
receive payment of the appraised value of such Shares held by them in accordance
with the provisions of such Section 262, except that all Dissenting Shares held
by stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Shares under such Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender of the certificate
or certificates that formerly evidenced the Shares in the manner provided in the
Merger Agreement.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, (i) duly call, give notice of, convene and hold an annual
or special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby (the
"Stockholders' Meeting") and (ii) subject to its fiduciary duties under
applicable law after receiving the advice of independent counsel, (A) include in
the proxy statement sent to the Stockholders in connection with the
Stockholders' Meeting (the "Proxy Statement") the recommendation of the Board
that the stockholders of the Company approve and adopt the Merger Agreement and
the transactions contemplated thereby, and (B) use all reasonable efforts to
obtain such approval and adoption. At the Stockholders' Meeting, Parent and
Purchaser will cause all Shares owned by them and their Subsidiaries to be voted
in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby.
The Merger Agreement provides that, notwithstanding the preceding
paragraph, in the event that Purchaser shall acquire at least 90% of the then
outstanding Shares, subject to certain conditions, Parent, Purchaser and the
Company agree, at the request of Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective in accordance with
Section 263 of Delaware Law, as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders, in accordance with
Delaware Law.
The Merger Agreement provides that the Company will, if required by
applicable law, as soon as practicable following consummation of the Offer, file
the Proxy Statement with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and use all reasonable efforts to have the Proxy Statement
cleared by the Commission. Parent, Purchaser and the Company will cooperate with
each other in the preparation of the Proxy Statement, and the Company will
notify Parent of the receipt of any comments from the Commission with respect to
the Proxy Statement and of any requests by the Commission for any amendment or
supplement thereto or for additional information and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the Commission. The Company will (i) give Parent and its
counsel the opportunity to review the Proxy Statement prior to its being filed
with the Commission; (ii) give Parent and its counsel the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, the Commission; and (iii) consider in good faith the
comments and information provided by Parent, Purchaser and their counsel with
respect thereto. Each of the Company, Parent and Purchaser agreed to use all
reasonable efforts, after consultation with the other parties, to respond
promptly to all such comments of and requests by the Commission and to cause the
Proxy Statement and all required amendments and supplements
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thereto to be mailed to the holders of Shares entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
The Merger Agreement provides that, except as contemplated therein, neither
the Company nor any Subsidiary shall, between the date of the Merger Agreement
and the Effective Time, directly or indirectly do, or propose to do, any of the
following, without the prior written consent of Parent: (a) amend or otherwise
change the Certificate or By-laws or equivalent organizational documents; (b)
issue, sell, pledge, dispose of, grant, encumber or authorize the issuance,
sale, pledge, disposition, grant or encumbrance of (i) any shares of capital
stock of any class of the Company or any Subsidiary, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Company or any Subsidiary (except for the issuance
of a maximum of 1,180,625 Shares issuable pursuant to employee stock options
outstanding on the date of the Merger Agreement) or (ii) any assets of the
Company or any Subsidiary except in the ordinary course of business consistent
with past practice; (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock; (d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(e) form any new Subsidiaries or implement the formation of a holding company or
expend any funds in preparation for any corporate restructuring (including, but
not limited to, the formation of a holding company or the merger of any
Subsidiary with and into the Company); (f) (i) acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets) any
corporation, partnership, other business organization or any division thereof or
any material amount of assets; (ii) except for borrowings under existing credit
facilities in the ordinary course of business, incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person or, except as permitted pursuant to paragraph (j) below, or the posting
of letters of credit required by licensing or regulatory authorities in the
ordinary course of business, make any loans or advances; (g) authorize capital
expenditures in excess of the amount set forth on the Merger Agreement;
provided, however, that (i) before making any expenditures for the Coleman
Bennet Multi-Currency Project, the Company will involve Purchaser in the
selection of a consultant and will not expend in excess of $5,500,000 for a
systems software package or $150,000 in consulting fees payable to Coleman
Bennett, without the consent of Purchaser and (ii) the Company will not make any
expenditures for new software or hardware for the Future System/Year 2000
Project prior to June 1, 1998, but the Company may incur consulting and similar
fees not to exceed $500,000 in aggregate prior to such date and (iii) the
Company will not make any capital expenditures other than as set forth in
clauses (g)(i) and (g)(ii) in excess of $4,000,000 in the aggregate without the
prior consent of Purchaser; or (iv) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in therein; (h)
other than as set forth in the Merger Agreement, increase the compensation
payable or to become payable to its officers or employees, except for increases
in accordance with past practices in salaries or wages of employees of the
Company or any Subsidiary who are not officers of the Company, or, other than in
accordance with existing policies, grant any severance or termination pay to, or
enter into any employment or severance agreement with any director, officer or
other employee of the Company or any Subsidiary, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee; (i) other
than as required by generally accepted accounting principles and except for the
reclassification of the financial paper outstanding from fiduciary liability to
operating liability on the balance sheet, make any material change to its
accounting policies or procedures; (j) (i) make any advances to agents or, other
than potential contractual arrangements with American Express Travel Related
Services, Inc. ("American Express"), enter into any agreement with any agent
that guarantees or assures payment of minimum aggregate commissions or which
grants any signing or other bonus in an amount in excess of $1,500,000 in the
aggregate; or (ii) enter into any agreement which would increase the period of
time during which any agent retains the proceeds of money order or wire transfer
sales prior to remitting such proceeds to the Company provided, however,
notwithstanding any other provision of Section 5.01 of the Merger Agreement, the
Company may enter into a contract with American Express containing terms
substantially similar to those in a specified form of draft contract previously
provided to the
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Purchaser if such contract does not contain any provision that would confer upon
American Express any right of termination, amendment, acceleration, cancellation
or withholding of services or payments upon the consummation of the Offer or the
Merger or any other transaction contemplated under the Merger Agreement (a
"Transaction"); (k) enter into or amend any agreement with any agent, with
respect to which the aggregate credit exposure (measured as actual agent
remittances due on any one business day) is greater than $500,000; (l) establish
any new lines of credit or other credit facilities or replace existing credit
facilities with facilities that have terms that are less favorable to the
Company; (m) pay, settle, discharge or enter into any agreement for the
settlement or compromise of any pending or threatened litigation requiring
payment(s) by the Company or any Subsidiary in excess of $1,000,000 in the
aggregate; (n) agree in writing, or otherwise, to take any of the foregoing
actions or to any other action which would make any representation or warranty
of the Company in the Merger Agreement untrue or incorrect in any material
respect; or (o) make any tax election or settle or compromise any material
federal, state local or foreign income tax liability.
Also pursuant to the Merger Agreement, after the date thereof and prior to
the Effective Time or the earlier termination of this Agreement, unless Parent
shall otherwise agree in writing, the Company covenanted and agreed that it
will, and cause each of its Subsidiaries to: (a) conduct their respective
businesses in the ordinary and usual course of business consistent with past
practice; (b) confer with Parent's designated representatives on a regular and
frequent basis regarding operational matters of a material nature and the
general status of the ongoing business of the Company; (c) promptly notify
Parent of any significant changes in the business, financial condition or
results of operation of the Company or its Subsidiaries taken as a whole; (d)
promptly notify Parent of any judgment, decree, injunction, rule, notice or
order of any Governmental Authority (as defined below) which is reasonably
likely to materially restrict the business of the Company and its Subsidiaries
as currently conducted or is reasonably likely to have a Material Adverse Effect
(as defined below); (e) maintain or renew with financially responsible insurance
companies, (i) insurance on its tangible assets and its business in such amounts
and against such risks and losses as are consistent with past practice and (ii)
the Company's existing directors and officers indemnification insurance; and (f)
use all reasonable best efforts to preserve the business, reputation and
prospects of the Company and the Subsidiaries and preserve the current relations
of the Company and its Subsidiaries with customers, employees, agents, suppliers
and other persons with which the Company or its Subsidiaries has business
relations.
The Merger Agreement defines "Governmental Authority" as any agent,
instrumentality, department, commission, court, tribunal or board of any
government, whether foreign or domestic and whether national, federal, state,
provincial or local.
The Merger Agreement defines "Material Adverse Effect" as any change,
effect, condition, event or circumstance that is or is reasonably likely to be
materially adverse to the business, financial condition, assets, properties or
results of operations of the Company and the Subsidiaries, taken as a whole,
including, (x) termination of the Company's Agency Agreement with Banco Nacional
de Mexico, S.N.C. or (y) termination of the Company's agency agreements with
agents (other than American Express and Safeway, Inc. ("Safeway")), representing
ten percent or more of the aggregate send or receive transaction volume either
sent or received by the Company and its Subsidiaries during 1997; provided,
however, that "Material Adverse Effect" shall not include any change, effect,
condition, event or circumstance arising out of or attributable to (i) any
decrease in the market price of the Shares (but not any change, effect,
condition, event or circumstance underlying such decrease to the extent that it
would otherwise constitute a Material Adverse Effect), (ii) changes, effects,
conditions, events or circumstances that generally affect the industries in
which the Company operates (including legal and regulatory changes), (iii)
general economic conditions or change, effects, conditions or circumstances
affecting the securities markets generally, (iv) changes arising from the
consummation of the Transaction or the announcement of the execution of the
Merger Agreement, (v) any reduction in the price of services or products offered
by the Company in response to the reduction in price of comparable services or
products offered by a competitor or (vi) any of the items set forth in Schedule
9.03(e) of the Merger Agreement, generally relating to the failure to enter into
a definitive agency agreement with American Express, termination of the current
relationship with American Express or termination of the agency agreement with
Safeway.
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The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, in addition
to its rights under applicable law and the Certificate and By-laws, Purchaser
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board and the boards of each of its Subsidiaries as
shall give Purchaser representation on the Board and the boards of each of its
Subsidiaries equal to the product of the total number of directors on the Board
and the boards of each of its Subsidiaries (giving effect to the directors
elected pursuant to this sentence), multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser or any Affiliate of
Purchaser following such purchase bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause Purchaser's Designees to be elected as directors of the
Company and each of its Subsidiaries, including increasing the size of the Board
and the boards of each of its Subsidiaries or securing the resignations of
incumbent directors, or both. The Merger Agreement also provides that, at such
times, the Company shall use all reasonable efforts to cause persons designated
by Purchaser to constitute the same percentage of the Board of each committee of
the Board to the extent permitted by applicable law.
The Merger Agreement provides that the Company shall promptly take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under Section 6.03
thereof and shall include in the Statement such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1 to fulfill such obligations. The Merger Agreement further provides
that Parent or Purchaser shall supply to the Company and be solely responsible
for any information with respect to either of them and their nominees, officers,
directors and Affiliates required by such Section 14(f) and Rule 14f-1.
The Merger Agreement provides that following the election of designees of
Purchaser in accordance with the second preceding paragraph and prior to the
Effective Time, any amendment of the Merger Agreement, the Certificate or the
By-laws, any termination of the Merger Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of Parent or Purchaser or waiver of any of the Company's rights
thereunder, will require the concurrence of a majority of those directors of the
Company then in office who were neither designated by Purchaser nor are
employees of the Company.
Pursuant to the Merger Agreement, from the date thereof until the Effective
Time, the Company shall, and shall cause the Subsidiaries and the officers,
directors, employees, auditors and agents of the Company and the Subsidiaries
to, afford the officers, employees and agents of Parent and Purchaser and
persons providing or committing to provide Parent or Purchaser with financing
for the transactions contemplated by the Merger Agreement reasonable access at
all reasonable times to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary, and shall furnish Parent and Purchaser and persons providing or
committing to provide Parent or Purchaser with financing for the transactions
contemplated by the Merger Agreement with all financial, operating and other
data and information as Parent or Purchaser, through its officers, employees or
agents, may reasonably request and Parent and Purchaser have agreed to keep such
information confidential pursuant to a separate Confidentiality Agreement. The
Company, Parent and Purchaser each also agree to promptly advise each other of
information required to update or correct any document filed, published or
issued by such parties pursuant to the Offer, the Stockholders' Meeting or the
Proxy Statement.
The Merger Agreement provides that the Company will, and will direct and
use reasonable efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties that may be ongoing with respect to an Acquisition Proposal (as
defined below). The Company will not, nor will it permit any of its Subsidiaries
to, nor will it authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding any Acquisition
Proposal, provided, however, that if, at any time prior to the consummation of
the Offer, the Board determines in good faith, after receipt of advice from its
outside counsel, that it is necessary to do so in order to comply
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with its fiduciary duties to the Company's stockholders under applicable law,
the Company may, in response to an Acquisition Proposal which was not solicited
by or on behalf of the Company subsequent to the date hereof, and subject to
compliance with Section 6.05(b) and (c) of the Merger Agreement, (x) furnish
information with respect to the Company to any person pursuant to a customary
confidentiality agreement (as determined by the Company after receipt of written
advice from its outside counsel) and (y) participate in negotiations regarding
such Acquisition Proposal. The Merger Agreement defines "Acquisition Proposal"
as (i) any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of 15% or more of the assets of the Company and
its Subsidiaries or 15% or more of any class of equity securities of the Company
or any of its Subsidiaries, (ii) any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or any of its Subsidiaries, (iii) any
merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries, other than the transactions contemplated by the Merger
Agreement, or (iv) any other transaction that could reasonably be expected to
prevent or materially delay the consummation of the Offer or Merger.
The Merger Agreement further provides that except as set forth therein,
neither the Board nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by such Board or such committee of the
Offer, the Merger, the Transactions or the Merger Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition Proposal
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal with any Person other than Parent or its Affiliates.
Notwithstanding the foregoing, in the event that prior to the Offer, the Board
determines in good faith, after receipt of advice from outside counsel, that it
is necessary to do in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Board may (x) withdraw or modify its
approval or recommendation of the Offer, the Merger, the Transactions or the
Merger Agreement or (y) approve or recommend a Superior Proposal (as defined
below) or terminate the Merger Agreement and, if it so chooses, cause the
Company to enter into any agreement with respect to any Superior Proposal. The
Merger Agreement defines "Superior Proposal" as any bona fide proposal made by a
third party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the combined voting power of the shares
of the Common Stock then outstanding or all or substantially all of the assets
of the Company and its Affiliates on terms which the Board determines in its
good faith judgment to be more favorable to the Company's stockholders than the
Offer and the Merger, and for which financing is committed or, in the good faith
judgment of the Board, is reasonably likely to be timely obtained, and also
taking into account the likelihood of any prohibition of, or delay in closing,
such Superior Proposal under applicable antitrust law.
In addition to the obligations of the Company summarized in the preceding
two paragraphs, the Merger Agreement provides that, if the Company intends to
withdraw or amend its recommendation of the Offer in accordance with Section
6.05 of the Merger Agreement, the Company shall give Purchaser 48 hours advance
written notice, such notice to specify the identity of any third party that has
made an Acquisition Proposal and the material terms of such Acquisition
Proposal. Following the delivery of such notice, the Company has also agreed
promptly to inform the Purchaser of material developments with respect to such
Acquisition Proposal.
The Merger Agreement provides that Parent agrees that for a period of two
years immediately following the Effective Time, it will, or will cause the
Surviving Corporation and its Subsidiaries to, continue to maintain employee
benefit and welfare plans, programs, contracts, agreements, severance plans and
policies (each referred to, for purposes of this paragraph, as a "plan"), for
the benefit of active employees of the Company and its Subsidiaries which in the
aggregate provide benefits that are comparable to and no less favorable than,
benefits provided to such active employees on the date of the Merger Agreement,
or to provide during such period benefits equivalent to those provided under
corresponding plans of Travelers Express Company, Inc. ("Travelers") or
Travelers' Subsidiaries if such benefits are greater. Parent guaranteed the
Surviving Corporation's performance of such obligations.
Pursuant to the Merger Agreement, Parent and Purchaser agreed to honor,
without modification, and after the purchase of Shares pursuant to the Offer,
Parent agreed to cause the Company and its Subsidiaries to
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<PAGE> 10
honor, all contracts, agreements, arrangements, policies, plans and commitments
of the Company (or any of its Subsidiaries) in effect as of the date of the
Merger Agreement which are applicable to any employee or former employee or any
director or former director of the Company (or any of its Subsidiaries) set
forth therein, including, without limitation, the Company's Executive Retention
Plan dated May 13, 1997, as amended on July 8, 1997 and July 21, 1997.
Pursuant to the Merger Agreement, Parent and Purchaser agreed to allow
active employees of the Company to be eligible to participate in incentive
compensation plans and stock option plans applicable to Travelers or its
Subsidiaries on terms comparable to the terms on which employees of comparable
status and seniority at other comparable Subsidiaries of Parent participate.
The Merger Agreement further provides that the Certificate of Incorporation
of the Surviving Corporation shall contain provisions no less favorable with
respect to indemnification than are set forth in Article Eight of the
Certificate, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would materially and adversely affect the rights thereunder of individuals who
at the Effective Time were directors, officers, employees, fiduciaries or agents
of the Company, unless such modification shall be required by law.
The Merger Agreement also provides that, regardless of whether the Merger
becomes effective, the Company shall indemnify and hold harmless, and after the
Effective Time indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary to the
fullest extent permitted under the Certificate and the By-laws for a period of
six years after the date of the Merger Agreement.
The Merger Agreement provides that the Parent and the Surviving Corporation
shall use their respective reasonable best efforts to maintain in effect for six
years from the Effective Time, if available, the current directors' and
officers' liability insurance policies maintained by the Company (provided that
the Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that if the existing policies expire, are terminated or
canceled during such period Parent or the Surviving Corporation will use its
reasonable best efforts to obtain substantially similar policies.
Notwithstanding the foregoing, in no event shall Parent or the Surviving
Corporation be required to expend pursuant to the Merger Agreement more than an
amount per year equal to 200% of current annual premiums paid by the Company for
such insurance.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the Transactions and (ii) use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including, without limitation, using all reasonable efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with the Company and
the Subsidiaries as are necessary for the consummation of the Transactions and
to fulfill the conditions to the Offer and the Merger. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of the Merger Agreement, the proper officers and directors of each
party to the Merger Agreement are required to use their reasonable best efforts
to take all such action.
The Merger Agreement provides that if any "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States, including, without
limitation, Section 203 of the Delaware Code, is or may become applicable to the
Offer, the Merger, the Merger Agreement or any Transactions, the Company and the
members of the Board (or any required and duly constituted Committee thereof)
will grant such approvals, and take such actions as are necessary so that the
Transactions may be consummated as promptly as practicable on the terms
contemplated thereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on any of the Transactions.
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The Merger Agreement provides that, following the consummation of the Offer
but prior to the Effective Time, (i) the Company will, if requested by the
Purchaser, issue Shares to the Purchaser representing a maximum of 19.9% of the
Shares outstanding immediately prior to such issuance and (ii) the Company will
terminate the Credit Agreement between the Company and The Northern Trust
Company.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including,
without limitation, representations by the Company as to the organization and
qualification, capitalization, authority to enter into the transactions
contemplated by the Merger Agreement, no conflicts, required filings and
consents, compliance with law, Commission filings, financial statements, absence
of certain changes or events concerning the Company's business, absence of
litigation, employee benefit plans, labor matters, offer documents, taxes,
brokers, certain contracts, real property and leases, trademarks, patents,
copyrights and intellectual property, environmental matters, state takeover
statutes, insurance and agents. The Merger Agreement also contains customary
representations and warranties of the Parent and Purchaser as to corporate
organization, authority relative to the Merger Agreement, no conflict, required
filings and consents, financing, offer documents and brokers. The
representations and warranties in the Merger Agreement shall terminate at the
Effective Time or upon the termination of the Merger Agreement pursuant to the
terms thereof.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the extent
required by Delaware Law; (b) no Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Shares by Parent or Purchaser or any Affiliate of either of them illegal or
otherwise, preventing consummation of the Transactions; and (c) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
not be applicable to the obligations of Parent or Purchaser if Purchaser fails
to purchase any Shares validly tendered and not withdrawn pursuant to the Offer.
Termination: Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other Transactions may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the other Transactions by the stockholders
of the Company: (a) by mutual written consent duly authorized by the boards of
directors of Parent, Purchaser and the Company; (b) by either Parent, Purchaser
or the Company if (i) the Offer is not completed on or before August 30, 1998;
provided, however, that the right to terminate the Merger Agreement under this
clause (i) shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in, the
failure to complete the Offer on or before such date; (ii) the Effective Time
shall not have occurred on or before October 30, 1998; provided, however, that
the right to terminate the Agreement under this clause (ii) shall not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; or (iii) any Governmental Authority shall
have enacted or promulgated any law, rule or regulation or shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Offer or Merger or making the acquisition of Shares by
Parent or Purchaser, or any Affiliate thereof, illegal, and such law, rule,
regulation and such order, decree, ruling or other action shall remain in effect
or have become final and nonappealable; (c) by Parent if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any
condition listed in Annex A to the Merger Agreement (as detailed below under the
heading "Conditions to the Offer") or the continuing existence of such
conditions, Purchaser shall have (A) failed to commence the Offer within five
Business Days following the date of the Merger Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder or (C) failed to
pay for Shares pursuant to the Offer within 75 calendar days following the
commencement of the Offer, unless such failure to pay for Shares shall have been
caused by or resulted from the failure of Parent or Purchaser to perform in any
material respect any material covenant or
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agreement of either of them contained in the Merger Agreement or the material
breach by Parent or Purchaser of any material representation or warranty of
either of them contained in the Merger Agreement; or (ii) prior to the purchase
of Shares pursuant to the Offer, the Board or any committee thereof shall have
withdrawn or modified in a manner adverse to Purchaser or Parent its approval or
recommendation of the Offer, the Merger Agreement, the Merger or any other
Transaction or shall have taken any action to facilitate (other than as
contemplated by the Agreement), approve or recommend any Acquisition Proposal;
or (d) by the Company, upon approval of the Board, if (i) Purchaser shall have
(A) failed to commence the Offer within five Business Days following the date of
the Merger Agreement, (B) terminated the Offer without having accepted any
Shares for payment thereunder or (C) failed to pay for Shares pursuant to the
Offer within 75 calendar days following the commencement of the Offer, unless
such failure to pay for Shares shall have been caused by or resulted from the
failure of the Company to perform in any material respect any material covenant
or agreement of it contained in the Merger Agreement or the material breach by
the Company of any representation or warranty of it contained in the Merger
Agreement; or (ii) prior to the purchase of Shares pursuant to the Offer, the
Board shall have withdrawn or modified in a manner adverse to Purchaser or
Parent its approval or recommendation of the Offer, the Agreement, the Merger or
any other Transaction in order to enter into any agreement for any Acquisition
Proposal.
In the event of the termination of the Merger Agreement pursuant to the
terms of the Merger Agreement, the Merger Agreement provides that it shall
forthwith become void and there shall be no liability thereunder on the part of
any party thereto except under the provisions of the Merger Agreement related to
confidentiality, fees and expenses described below, and under certain other
provisions of the Merger Agreement which survive termination provided, however,
nothing in the Merger Agreement shall relieve any party from liability for any
breach of the Merger Agreement.
The Merger Agreement provides that, (a) in the event that (i) the Merger
Agreement is terminated pursuant to clause (c)(ii) or (d)(ii) of the second
preceding paragraph, or (ii) the Merger Agreement is terminated pursuant to
clause (b) of the second preceding paragraph and (A) an Acquisition Proposal
shall have been publicly disclosed prior to the date of such termination and (B)
a Superior Proposal shall have been consummated on or prior to the first
anniversary of such termination, the Company shall pay Parent promptly (but, in
no event later than three Business Days after such termination shall have
occurred or such Superior Proposal shall have been consummated, as the case may
be), a fee of $10,000,000 (the "Fee"), which amount shall be payable in
immediately available funds.
Except as set forth in the Merger Agreement, the Merger Agreement provides
that all costs and expenses incurred in connection with the Merger Agreement and
the Transactions shall be paid by the party incurring such expenses, whether or
not any Transaction is consummated.
The Merger Agreement provides that in the event that the Company fails to
pay the Fee when due, the Company shall reimburse Parent and the Purchaser for
the costs and expenses actually incurred or accrued by Parent and the Purchaser
(including, without limitation, fees and expenses of counsel) in connection with
the collection and enforcement of Section 8.03 of the Merger Agreement, together
with interest on such unpaid Fee, commencing on the date that the Fee became
due, at a rate of interest equal to the Base Rate periodically announced by
Citibank, N.A., plus two percent.
Conditions to the Offer. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if (a)
the Minimum Condition shall not have been satisfied, (b) any applicable waiting
period under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer, (c) any Pre-Offer Approval shall not have been obtained
or (d) at any time on or after the date of the Merger Agreement, and prior to
the acceptance for payment of Shares pursuant to the Offer, any of the following
conditions shall exist:
(a) there shall be pending before any court any action or proceeding
instituted by any Governmental Authority (i) that is reasonably likely to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their Subsidiaries, of all or any material portion of the
business or assets of the Company and the Subsidiaries, taken as a whole,
or any material portion of the business or assets of
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Parent and its Subsidiaries, taken as a whole, or to compel the Company,
Parent or any of their Subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, or Parent and its Subsidiaries taken as a
whole, as a result of the Transactions; (ii) reasonably likely to impose or
confirm limitations on the ability of Parent or Purchaser to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by Purchaser pursuant to
the Offer or otherwise on all matters properly presented to the Company's
stockholders including, without limitation, the approval and adoption of
the Merger Agreement and the Transactions; or (iii) seeking to require
divestiture by Parent or Purchaser of any Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued and deemed
applicable to (i) Parent, the Company or any Subsidiary or Affiliate of
Parent or the Company or (ii) any Transaction, by any Governmental
Authority, domestic or foreign, which is reasonably likely to result,
directly or indirectly in any of the consequences referred to in clauses
(i) through (iii) of paragraph (a) above;
(c) there shall have occurred, and be continuing, any change,
condition, event or other development that, individually or in the
aggregate, has a Material Adverse Effect;
(d) any representation or warranty of the Company in the Merger
Agreement that is qualified by materiality or Material Adverse Effect shall
not be true and correct, or without regard to such qualifications, any such
representations or warranties shall not be true and correct so as to in
aggregate have a Material Adverse Effect, or any representation or warranty
not so qualified shall not be true and correct in all material respects, in
each case as if such representation or warranty was made as of such time on
or after the date of the Merger Agreement (except for representations and
warranties made as of a specific date which shall be true and correct as of
such date) or the Company shall not have delivered to Parent a certificate
of the Company to such effect signed by a duly authorized officer thereof
and dated as of the date on which Parent shall first accept Shares for
payment;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) the Merger Agreement shall have been terminated in accordance with
its terms; or
(g) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of a payment for
Shares thereunder.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion;
provided, however, that the Minimum Condition may not be waived without the
prior approval of the Company and that no change may be made which decreases the
price per Share payable in the Offer or which imposes conditions to the Offer in
addition to those set forth above. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
At a special meeting held on April 4, 1998, the Board unanimously approved
the Merger Agreement, the Offer and the Merger (as these terms are defined
herein) and determined that the Offer and the Merger are fair to and in the best
interests of the stockholders of the Company.
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THE BOARD UNANIMOUSLY RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS OF THE
COMPANY.
Copies of a letter to the Company's stockholders and a joint press release
communicating such approval and recommendation are filed as Exhibits 2 and 3,
respectively, to this Statement and are incorporated herein by reference.
(b) BACKGROUND OF THE MERGER AND THE OFFER; REASONS FOR THE RECOMMENDATION
Background of the Merger and the Offer. In 1995, First Data Corporation
("First Data"), the former parent of the Company, agreed to divest itself of its
controlling interest in Company in order to resolve Federal Trade Commission
objections to a merger between First Data and First Financial Management Corp.,
the former parent of Western Union Financial Services, Inc. As part of that
process, in 1996, Travelers, through its investment bankers, Salomon Smith
Barney ("Salomon"), contacted First Data about the possibility of acquiring the
Company. However, discussions did not proceed beyond preliminary stages and
Travelers did not submit a bid at that time.
In December 1996, the Company was divested by First Data through an initial
public offering of the Company's stock at a price of $12.00 per share. Travelers
continued to monitor the performance and operations of the Company and the
possibility of an acquisition.
During the summer and continuing into the fall of 1997, the Company was
approached by, and held preliminary discussions with, a potential strategic
partner who signed a confidentiality agreement and conducted both business and
financial due diligence. However, agreement on valuation was not reached and a
formal written proposal was never made. Also during the fall of 1997, the
Company had preliminary discussions with one other potential strategic partner
who signed a confidentiality agreement but did not conduct diligence to further
pursue discussions.
In December 1997, Parent directed its financial advisor, Salomon, to
contact the Company's Chief Executive Officer, James F. Calvano, regarding a
potential merger of the Company with Travelers. On December 23, 1997, Robert H.
Bohannon, Chairman, President and Chief Executive Officer of Parent, met with
Mr. Calvano near his home in Florida. Mr. Bohannon and Mr. Calvano discussed
several topics, including the rationale for a transaction. Mr. Calvano agreed to
present the potential for a transaction to the Board of Directors of the Company
and to contact Mr. Bohannon after determining the level of interest of the
Board. Also, during this time frame, two additional parties contacted Mr.
Calvano to express interest in a transaction with the Company.
In the first week of January 1998, Mr. Calvano contacted each member of the
Board regarding the interest of Parent and other parties in pursuing a strategic
transaction. Each member of the Board agreed that Mr. Calvano should investigate
strategic opportunities and retain a financial advisor.
In early January, the senior management of the Company met with
representatives from Morgan Stanley & Co. Incorporated ("Morgan Stanley") to
discuss overall strategic alternatives, valuation, recommended sales process and
potential buyers for the Company. Morgan Stanley recommended that the Company
begin a formal sale process.
On January 23, 1998, representatives of the Company's management and
representatives of Morgan Stanley initiated a formal sale process. Morgan
Stanley then contacted potential strategic and financial buyers to solicit
interest in the Company. A total of 18 potential buyers, including Travelers and
the four other potential buyers referred to above, were contacted.
Confidentiality agreements were executed between the Company and four interested
parties (in addition to the two parties that executed confidentiality agreements
in 1997). One additional party that had expressed interest did not sign a
confidentiality agreement.
On February 6, 1998, members of one potential buyer's management met with
the Company's management and representatives from Morgan Stanley in the
Company's New Jersey offices. At that meeting, management of the Company
presented a detailed overview of the Company and responded to questions.
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On February 10, 1998, the Board held its regular meeting at the Company's
New Jersey offices. Representatives of Shearman & Sterling, counsel to the
Company, discussed the Board's fiduciary duties and the potential transaction
structures available to the Company. Morgan Stanley updated the Board on the
status of the sale process, interested potential parties and the valuation of
the Company.
On February 11, 1998, members of Parent's and Travelers' management,
together with representatives from Salomon, met with Company's management and
representatives from Morgan Stanley at the offices of Morgan Stanley in New
York. At that meeting, the Company presented a detailed overview of the Company
and responded to questions.
During the week of February 13, 1998, representatives of the Company and
representatives of Morgan Stanley, met with two additional potential bidders at
the offices of Morgan Stanley in New York. At those meetings, the Company
presented a detailed overview of the Company and responded to questions.
On February 23, 1998, Morgan Stanley received, on behalf of the Company,
letters from Parent and only one of the other potential buyers who had attended
a management presentation indicating interest in the Company. Parent's letter
outlined Parent's interest in acquiring 100% of the equity of the Company at a
price of $16.00 per Share. The Parent's proposal was not subject to a financing
contingency. The other potential buyer's proposal indicated a price range of
$15.00 - $17.00 per Share but was subject to further due diligence and to a
contingency for obtaining acquisition financing. Both parties were invited to
conduct further due diligence.
On March 4, 1998, members of Travelers' management team and representatives
from Salomon conducted due diligence with members of the Company's management in
the Company's Colorado offices. This due diligence meeting focused on the
operational aspects of Company's business and included meetings with the
Company's management team.
On March 6, 1998, representatives from Morgan Stanley and Shearman &
Sterling participated in a conference call with the Company's senior management
to discuss the status of the sale process and recommend a course of action to
further negotiations and secure formal proposals from the two interested
parties.
On March 9 and 10, 1998, representatives from Parent, Travelers, Salomon,
as well as representatives from Parent's counsel, Bryan Cave LLP ("Bryan Cave"),
conducted further due diligence at the offices of Shearman & Sterling in New
York. These due diligence sessions included a review of financial and
operational documents, as well as additional interviews with the senior
management group of the Company. On March 13, 1998, the Company's senior
management and systems experts participated in a conference call with Travelers'
management and information systems experts to discuss systems issues.
On March 16, 1998, representatives of the other bidder conducted due
diligence at the offices of Shearman & Sterling in New York. In addition,
representatives from Morgan Stanley met with such representatives from the other
potential buyer at the Company's New Jersey offices to discuss the potential for
a transaction. At such meeting, Morgan Stanley expressed concern about the
ability of such potential buyer to obtain financing but invited it to continue
due diligence and submit a formal proposal. No such proposal was ever made.
On March 19, 1998, representatives of the Company, Parent and Travelers
participated in an additional conference call to continue the due diligence
process and address follow-up issues regarding the Company's systems, including
Year 2000 compliance contingencies.
On March 23, 1998, Parent's board of directors and its Executive Committee
held telephonic meetings to discuss a potential transaction with the Company.
All members of the Executive Committee and Board were in attendance. The
Parent's Board and its Executive Committee received presentations from
Travelers' management as to the status of discussions with Company, the results
of the due diligence evaluation of Company, the principal terms of the proposed
transaction, including several terms that were yet to be resolved, and the
merits of the transaction. Parent's board of director's unanimously approved the
transaction, subject to resolution of several key issues.
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During this time, the Company was again contacted by one of the potential
strategic buyers with whom preliminary discussions had been held previously but
who did not sign a Confidentiality Agreement or submit an indication of interest
on February 23. However, such potential buyer was unable to satisfactorily
address the Company's concern that its acquisition of the Company could not be
consummated due to the likelihood of opposition by federal antitrust regulators.
On March 24, 1998, Parent reiterated its original proposal to purchase all
outstanding Shares at $16.00 per Share in cash and through its counsel, Bryan
Cave LLP ("Bryan Cave"), provided proposed changes to the draft merger agreement
that had been previously provided by the Company's legal counsel to Parent. At
the Company's request, Morgan Stanley rejected the Parent's proposal but
suggested that the two parties continue discussions. On March 26, 1998, senior
management of the Company and Morgan Stanley participated in a conference call
with representatives of Parent, Travelers, and Salomon to discuss Parent's
business assumptions regarding the Company. Based on these discussions, Morgan
Stanley suggested that Parent increase its proposal.
During the weekend of March 28, 1998, Parent raised its proposal to $17.00
per Share.
On March 30 and 31, 1998, representatives from the Company, Morgan Stanley
and Shearman & Sterling analyzed and discussed Parent's revised proposal as well
as the status of negotiations with the remaining potential buyers. Based on
Parent's ability to consummate the transaction quickly with the proposed terms
and other relevant criteria, the Company chose to continue to pursue discussions
with Parent.
On April 2 and 3, 1998, representatives from Parent, Travelers, Salomon and
Bryan Cave, met with representatives from the Company, Shearman & Sterling and
Morgan Stanley at Shearman & Sterling's offices in New York for further due
diligence and to continue negotiations concerning the terms and conditions of a
proposed merger agreement.
On April 4, 1998, the Board held a special meeting to review, with the
advice and assistance of the Company's financial and legal advisors, the
proposed terms and conditions of the proposed transaction. All members of the
Board participated either in person or by telephone. At such meeting, Morgan
Stanley provided an oral and a written opinion that, as of such date and based
upon and subject to the matters discussed with the Board and contained in such
written opinion, the cash consideration to be received by the holders of the
Shares in the Offer and the Merger was fair from a financial point of view to
such holders. Shearman & Sterling reviewed the Board's fiduciary duties to
shareholders and outlined the principal terms of the Offer and the Merger. The
Board then unanimously determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to and in the
best interests of the Company's stockholders, and approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger
and authorized the execution and delivery of the Merger Agreement, recommended
that the Company's stockholders accept the Offer and tender their Shares
pursuant to the Offer, and recommended that the Company's stockholders approve
and adopt the Merger Agreement.
Following approval by the boards of directors of the Company, Parent and
Purchaser, the Merger Agreement was executed and delivered on April 4, 1998. The
transaction was publicly announced through a joint press release before the
opening of the financial markets in the United States on April 6, 1998.
Purchaser commenced the Offer on April 10, 1998.
Reasons for the Board's Recommendation. In approving the Merger Agreement
and the transactions contemplated thereby, and recommending that holders of
Shares accept the Offer and tender their shares pursuant to the Offer, the Board
considered a number of factors, including, but not limited to, the following:
(i) the views expressed by management of the Company (at the Board
meeting on April 4, 1998 and at previous Board meetings) and the Board's
knowledge regarding: (a) the financial condition, results of operations,
business and prospects of the Company, including the prospects of the
Company if the Company were to remain independent and (b) the strategic
alternatives available to the Company;
15
<PAGE> 17
(ii) the results of the process designed and executed by the Company
and Morgan Stanley to identify and solicit proposals from third parties to
enter into a strategic transaction with the Company;
(iii) the trading price of the shares of Common Stock following the
Company's initial public offering on December 11, 1996; in particular, the
Board acknowledged that the Shares had briefly traded as high as $18.625
per Share on the New York Stock Exchange (the "NYSE") in September, but
noted that the $17.00 per Share to be paid in the Offer and as the
consideration in the Merger represents a premium of approximately 9.24%
over the $15.5625 closing sale price for the Shares on the NYSE on April 3,
1998, the last trading day prior to the public announcement of the
execution of the Merger Agreement, a premium of approximately 34.65% over
the $12.625 closing sale price for the shares on the NYSE one month prior
to April 6, 1998 and a premium of approximately 25.31% over the average
closing price for the Shares of $13.5667 in the 12 months prior to April 6,
1998;
(iv) the views expressed by management and Morgan Stanley that
numerous other potential purchasers had been contacted, that there appeared
to be a limited number of parties with which the Company would be a good
strategic fit and that there was only one formal bid; the views of the
Company's counsel that antitrust and other issues would materially affect
the likelihood of consummation of an alternative transaction with one other
party which had expressed an interest; the views of the Company's
management that one other party which had expressed interest (and did not
submit a proposal) would not be able to obtain financing; and the Board's
conclusion that it was not likely that any other party would propose a
transaction that was more favorable to the Company and its stockholders;
(v) the analyses conducted by Morgan Stanley, oral and written
presentations by Morgan Stanley at the March 31, 1998 and April 4, 1998
Board meetings and the written opinion of Morgan Stanley delivered to the
Board at the April 4, 1998 Board meeting that, as of such date, and subject
to the assumptions made, matters considered and limitations set forth in
such opinion, the consideration to be received by the holders of the Common
Stock pursuant to the Merger Agreement is fair from a financial point of
view to such stockholders (a copy of the opinion of Morgan Stanley which
sets forth the assumptions made, matters considered and limitations on the
review undertaken is attached hereto as Annex II to this Schedule 14D-9 and
is incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ THE
OPINION OF MORGAN STANLEY CAREFULLY AND IN ITS ENTIRETY);
(vi) the business reputation and capabilities of Parent and its
management, and Parent's financial strength and commitments, including its
ability to finance the Offer and the Merger;
(vii) the fact that the transactions contemplated by the Merger
Agreement provided for an all cash payment to shareholders, with no
financing condition; there appeared to be no significant regulatory
impediments to consummation of the Merger, accordingly, the Offer and the
Merger could be promptly completed with a high degree of certainty; and
(viii) the fact that the Merger Agreement provides that if the Board
determines in good faith, after receipt of advice from its outside counsel,
that it is necessary to do so in order to comply with fiduciary duties
under applicable law, it may furnish nonpublic information and data and
enter into discussions and negotiations in connection with an Acquisition
Proposal; similarly, the fact that the Merger Agreement permits the Board,
in the exercise of its fiduciary duties, to terminate the Merger Agreement
in favor of a Superior Proposal (upon such termination, the Company would
pay Parent a fee of $10,000,000).
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it.
The Board recognized that, while the consummation of the Offer gives the
Company's stockholders the opportunity to realize a premium over the price at
which the Shares were traded prior to the public announcement of the Offer,
tendering in the Offer would eliminate the opportunity for such stockholders to
participate in the future growth and profits of the Company. The Board believes
that the loss of the opportunity to participate in the growth and profits of the
Surviving Corporation was reflected in the Offer
16
<PAGE> 18
price of $17.00 per Share. The Board also recognized that there can be no
assurance as to the level of growth or profits to be attained by the Surviving
Corporation in the future.
It is expected that, if the Shares are not purchased by Parent in
accordance with the terms of the Offer or if the Merger is not consummated, the
Company's current management, under the general direction of the Board, will
continue to manage the Company as an ongoing business.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Except as described below, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders on its behalf
concerning the Offer.
Morgan Stanley has been retained by the Company to act as financial advisor
to the Company with respect to an acquisition transaction, such as the Offer,
the Merger and matters arising in connection therewith. Pursuant to a letter
agreement dated February 10, 1998 between the Company and Morgan Stanley, Morgan
Stanley is entitled to a transaction fee of $3,100,000 (less amounts previously
paid by the Company in connection with the Company's retention of Morgan
Stanley, including an amount between $50,000 and $150,000 for time and efforts
expended) which shall become payable in cash upon acquisition by the Purchaser
of fifty percent (50%) or more of the Shares. The Company also has agreed to
reimburse Morgan Stanley for its reasonable out-of-pocket expenses, including
reasonable fees and expenses of its counsel. The Company has further agreed to
indemnify and hold harmless Morgan Stanley and each of its directors, officers,
agents, employees and controlling persons against losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) related to or arising
out of its rendering of services under its engagement as financial advisor, and
will reimburse Morgan Stanley and each other person indemnified for all legal
and other expenses as incurred in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding.
Morgan Stanley has provided certain investment banking services to the
Company from time to time for which they have received customary compensation.
In the ordinary course of its business, Morgan Stanley may from time to time
effect transactions and hold positions in securities of both the Company and
Parent.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as set forth in the following sentences, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the best
of the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company. Pursuant to the Company's stock buy-back program, the
Company repurchased 6,700 Shares on February 10, 1998, 9,400 Shares on February
9, 1998 and 4,600 Shares on February 6, 1998.
(b) To the best of the Company's knowledge, all of the Company's executive
officers, directors, affiliates and subsidiaries currently intend to tender
pursuant to the Offer all Shares held of record or beneficially owned by such
persons, subject to and consistent with applicable securities laws and any
fiduciary obligations of such person.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described in Items 3 and 4 above, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company; (ii) a purchase, sale or transfer of a material amount of assets by
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Items 3 or 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in Item 7(a) above.
17
<PAGE> 19
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
BOARD OF DIRECTORS
The Information Statement attached hereto as Annex I is being furnished in
connection with the contemplated designation by Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders, following the purchase by Purchaser of
the number of Shares pursuant to the Offer necessary to satisfy the Minimum
Condition.
REGULATORY APPROVALS
The Company generally conducts its business pursuant to separate licenses
issued by each of the states in which Company operates. Many of these states, as
well as Puerto Rico and Canada, have state laws addressing a change in control
of a licensee. Purchaser or Parent will be subject to these laws in connection
with the Offer or the Merger. While these laws differ from jurisdiction to
jurisdiction, they typically require prior notice to the licensing authority of
a proposed change in control. In some cases, the licensing authority must
approve the change in control in advance of a transaction effectuating a change
in control. In other cases, express approval is not required prior to the change
in control, but the relevant laws, expressly or by implication, authorize the
licensing authority to deny a transaction resulting in a change in control. Some
typical factors that may be considered by the licensing authorities when
reviewing a change in control notice or application are the financial condition,
competence, experience, and moral character of the acquiror, as well as an
assessment of whether the acquiror will conduct the business of the licensee in
compliance with applicable laws.
CERTAIN LITIGATION
Following the April 6, 1998, announcement of the proposed acquisition of
the Company by Parent and Purchaser, two putative class actions on behalf of
stockholders of the Company were filed in the Delaware Court of Chancery.
In Harbor Finance Partners v. James F. Calvano, et al. (Case No. 16306-NC),
the plaintiff is Harbor Finance Partners on behalf of itself and allegedly on
behalf of all others similarly situated. The defendants are the Company and the
directors and certain officers of the Company. Plaintiff alleges, among other
things, that the individual defendants have violated their fiduciary obligations
to the Company's stockholders and that the consideration to be paid to the
Company's stockholders in the Merger is inadequate. The relief sought by
plaintiff includes, among other things, an injunction against consummation of
the proposed transactions or, alternatively, rescission and setting aside of
such transactions, damages in an unspecified amount, costs, attorneys' fees, and
such other relief as may be just and proper.
In TAAM Associates, Inc. v. James F. Calvano, et al. (Case No. 16305-NC),
the plaintiff is TAAM Associates, Inc. on behalf of itself and allegedly on
behalf of all others similarly situated. The defendants are the Company, the
directors and certain officers of the Company, and Parent. Plaintiff alleges,
among other things, that the individual defendants have violated their fiduciary
obligations to the Company's stockholders; that the consideration to be paid to
the Company's stockholders in the Merger is inadequate; and that Parent aided
and abetted such breaches of duty. The relief sought by plaintiff includes,
among other things, an injunction against consummation of the proposed
transactions or, alternatively, rescission and setting aside of such
transactions, damages in an unspecified amount, costs, attorneys' fees, and such
other relief as the Court deems just and proper.
Copies of the Complaints are filed as exhibits to the Schedule 14D-9, and
may be obtained in the manner described in the Information Statement attached
hereto as Annex I under the heading "Right to Designate Directors; The Purchaser
Designees" and are incorporated herein by reference.
The Company believes, and has been advised by Parent that it believes, the
allegations contained in both Complaints are meritless for the reasons set forth
elsewhere herein and intends to defend both actions vigorously.
18
<PAGE> 20
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
<C> <S>
Exhibit 1 Agreement and Plan of Merger dated as of April 4, 1998 among
the Parent, the Purchaser and the Company.
Exhibit 2 Letter dated April 10, 1998, from the Chairman of the Board
and Chief Executive Officer to the stockholders of the
Company*
Exhibit 3 Joint Press release issued by Parent and the Company dated
April 6, 1998.
Exhibit 4 Joint Press release issued by Parent and the Company dated
April 10, 1998.
Exhibit 5 Opinion of Morgan Stanley dated April 4, 1998 (included as
Annex II to this Statement).*
Exhibit 6 Confidentiality Agreement between Parent and the Company
dated February 11, 1998.
Exhibit 7 1996 Stock Option Plan of the Company (incorporated herein
by reference to Exhibit 10.7 of the 1997 10-K).
Exhibit 8 1996 Broad-Based Stock Option Plan (incorporated herein by
reference to Exhibit 10.8 of the 1997 10-K).
Exhibit 9 Executive Retention Plan, dated May 15, 1997, as amended to
date (incorporated by reference to Exhibit 10 of the
Company's Quarterly Report on Form 10Q for the quarter ended
June 30, 1997).
Exhibit 10 Complaint filed in Taam v. Calvano et. al., Court of
Chancery of the State of Delaware in and for New Castle
County, April 9, 1998.
Exhibit 11 Complaint filed in Harbor v. Calvano et. al., Court of
Chancery of the State of Delaware in and for New Castle
County, April 9, 1998.
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders of the Company.
19
<PAGE> 21
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
MoneyGram Payment Systems, Inc.
By: /s/ ANDREA M. KENYON
------------------------------------
Name: Andrea M. Kenyon
Title: General Counsel and Secretary
Dated: April 10, 1998
20
<PAGE> 22
ANNEX I
MONEYGRAM PAYMENT
SYSTEMS, INC.
7401 WEST MANSFIELD AVENUE
LAKEWOOD, COLORADO 80235
------------------------
INFORMATION STATEMENT PURSUANT
TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
------------------------
This information statement (the "Information Statement"), which is being
mailed on or about April 10, 1998 to the holders of shares of the common stock,
par value $.01 per share (the "Common Stock"), of Moneygram Payment Systems,
Inc., a Delaware corporation (the "Company"), is being furnished in connection
with the designation by Pine Valley Acquisition Corporation, a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Viad Corp, a Delaware
corporation, ("Parent"), of persons (the "Purchaser Designees") to the Board of
Directors of the Company (the "Board"). Such designation is to be made pursuant
to an Agreement and Plan of Merger dated as of April 4, 1998 (the "Merger
Agreement") among the Company, Parent and Purchaser. Terms not defined in this
Information Statement shall have the meaning ascribed to them in the Merger
Agreement.
Pursuant to the Merger Agreement, among other things, Purchaser commenced a
cash tender offer on April 10, 1998 to purchase all of the issued and
outstanding shares (the "Shares") of Common Stock at a price of $17.00 per
Share, net to the seller in cash, as described in Purchaser's Offer to Purchase
dated April 10, 1998 and the related Letter of Transmittal (which Offer to
Purchase and related Letter of Transmittal together constitute the "Offer"). The
Offer is scheduled to expire at 12:00 Noon, New York City time, on Friday, May
8, 1998, unless extended. The Offer is subject to, among other things, the
condition that a number of Shares representing not less than a majority of the
Company's outstanding voting power on a fully diluted basis being validly
tendered prior to the expiration of the Offer and not withdrawn (the "Minimum
Condition"). The Merger Agreement also provides for the merger (the "Merger") of
Purchaser with and into the Company as soon as practicable after consummation of
the Offer. Following the consummation of the Merger (the "Effective Time"), the
Company will be the surviving corporation (the "Surviving Corporation") and a
wholly owned subsidiary of Parent. In the Merger, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held in
the treasury of the Company or by Parent, Purchaser, or any indirect or direct
wholly owned subsidiary of the Parent or the Company, all of which will be
cancelled, and other than Shares, if any, held by stockholders who have
perfected rights as dissenting stockholders under the Delaware General
Corporation Law (the "Delaware Law") will be converted into the right to receive
cash in an amount of $17.00 per Share.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer and from time to time thereafter, Purchaser
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board to give Purchaser representation on the Board
that equals the product of (i) the total number of directors on the Board
(giving effect to the election of any additional directors pursuant to the
Merger Agreement) and (ii) the percentage that the aggregate number of
<PAGE> 23
Shares beneficially owned by Purchaser and its affiliates (including any Shares
purchased pursuant to the Offer) bears to the total number of outstanding
Shares. The Company shall, upon request by Purchaser, promptly either increase
the size of the Board (and shall if necessary, amend the Company's By-laws to
permit such an increase) or use its reasonable best efforts to secure the
resignation of such number of directors as is necessary to enable Purchaser's
Designees to be elected to the Board and shall cause Purchaser's Designees to be
so elected. The Merger Agreement also provides that, promptly upon request by
Purchaser, the Company will use its reasonable best efforts to cause persons
designated by Purchaser to constitute the same percentage as the number of
Purchaser's Designees to the Board to the total number of directors on the Board
on (i) each committee of the Board, (ii) each board of directors or similar
governing body or bodies of each subsidiary of the Company designated by
Purchaser and (iii) each committee of each such board or body.
Following the election or appointment of the Purchaser Designees and prior
to the Effective Time, any amendment of the Merger Agreement or the Certificate
of Incorporation or By-laws of the Company, any termination of the Merger
Agreement by the Company, any extension by the Company of the time for the
performance of any obligations or other acts of Parent or Purchaser or any
waiver of any of the Company's rights thereunder shall require the concurrence
of a majority of the Directors of the Company present at the meeting who are not
designees of Purchaser or employees of the Company.
The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase and
in the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
(the "Schedule 14D-9") with respect to the Offer, copies of which are being
delivered to stockholders of the Company contemporaneously herewith. Certain
other documents (including the Merger Agreement) were filed with the Securities
and Exchange Commission (the "SEC") as exhibits to the Schedule 14D-9 and as
exhibits to the Tender Offer Statement on Schedule 14D-1 of the Purchaser and
Parent (the "Schedule 14D-1"). The exhibits to the Schedule 14D-9 and the
Schedule 14D-1 may be examined at, and copies thereof may be obtained from, the
regional offices of and public and reference facilities maintained by the SEC
(except that the exhibits thereto cannot be obtained from the regional offices
of the SEC) in the manner set forth in Sections 7 and 8 of the Offer to
Purchase. The Company has been informed that the Parent intends to finance the
purchase of Shares in the Offer and the Merger by making capital contributions
to Purchaser from available cash and from some combination of borrowings
(currently estimated to be $225 million), under the $300 million long-term
revolving bank credit facility, uncommitted bank money market loans or under
such other financing resources available to Parent.
No action is required by the stockholders of the Company in connection with
the election or appointment of the Purchaser Designees to the Board. However,
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the mailing to the Company's stockholders of the information set
forth in this Information Statement prior to a change in a majority of the
Company's directors otherwise than at a meeting of the Company's stockholders.
The information contained in this Information Statement concerning Parent,
Purchaser and the Purchaser Designees, has been furnished to the Company by such
persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The Schedule 14D-1 indicates that the
principal executive offices of Parent are located at 1850 North Central Avenue,
Suite 2410, Phoenix, Arizona 85077. The principal offices of Purchaser are
located in c/o Viad Corp, 1850 North Central Avenue, Suite 2212, Phoenix,
Arizona 85077.
2
<PAGE> 24
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The shares of Common Stock are the only class of voting securities of the
Company outstanding. Each share of Common Stock is entitled to one vote. As of
April 4, 1998, there were 16,513,800 shares of Common Stock outstanding. The
Board currently consists of six members. Each director holds office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 6, 1998 (except with respect to
Gotham Partners, L.P. as detailed in footnote 1 below, and Weiss, Peck & Greer,
LLC, as detailed in footnote 4 below), certain information with respect to each
stockholder known to the Company to beneficially own more than five percent of
its Common Stock (based solely on filings with the SEC) and information with
respect to the beneficial ownership of the Common Stock by (i) the current
directors of the Company, (ii) the executive officers of the Company and (iii)
all such directors and executive officers of the Company as a group. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment power with respect to the Common Stock owned by them. To the
Company's knowledge, other than the Offer, the Merger and as set forth in
footnote 6 below, there are no arrangements or agreements which would result in
a change in control of the Company at a subsequent date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------- ----------------------- --------
<S> <C> <C>
Gotham Partners, L.P.(1).................................... 5,124,300 31.03%
110 East 42nd Street
New York, NY 10017
Transamerica Corporation(2)................................. 3,274,400 19.83%
600 Montgomery Street
San Francisco, CA 94111
The Capital Group Companies, Inc.(3)........................ 2,469,900 14.96%
333 South Hope Street
Los Angeles, CA 90071
Weiss, Peck & Greer, LLC(4)................................. 1,412,000 8.55%
One New York Plaza
New York, NY 10004
The Kaufman Fund, Inc.(5)................................... 914,500 5.54%
140 East 45th Street
New York, NY 10017
James F. Calvano............................................ 119,875(6)
Robbin L. Ayers............................................. 12,000(6) (7)
John M. Fowler.............................................. 120,000(6)
Brian J. Fitzpatrick........................................ 1,000(6) (7)
Alan H. Friedman............................................ 8,000(6) (7)
William D. Guth............................................. 500(6) (7)
Andrea M. Kenyon............................................ 200(6) (7)
Sanford Miller.............................................. 12,000(6) (7)
All Directors and Executive Officers as a Group (8
Persons).................................................. 273,575(6)
</TABLE>
- ---------------
(1) According to the amended Schedule 13D dated April 7, 1998 (the "Gotham
Schedule 13D"), jointly filed by Gotham Partners, L.P. ("Gotham"), Gotham
Partners II, L.P. ("Gotham II") and Gotham International Advisors, L.L.C.
("Gotham Advisors") (collectively, the "Gotham Investors") the 5,124,300
shares of Common Stock reflected as beneficially owned by the Gotham
Investors includes 4,063,558 owned by Gotham, 27,842 owned by Gotham II with
each entity having sole voting and
3
<PAGE> 25
investment power with respect to the shares that it owns, and 1,032,900
shares for which Gotham Advisors has voting and investment power pursuant to
an investment management agreement with Gotham Partners International, Ltd.
According to the Gotham Schedule 13D, the Gotham Investors believe that
$17.00 per Share is inadequate.
(2) According to the amended Schedule 13D dated August 13, 1997, the amount
reflected as beneficially owned by Transamerica Corporation ("Transamerica")
includes 989,500 shares owned directly and 2,284,900 owned by its direct and
indirect subsidiaries, including 602,000 shares owned for the benefit of
unaffiliated investment advisory clients of one of such subsidiaries.
Transamerica Corporation expressly disclaims beneficial ownership as well as
voting and investment power with respect to all shares owned by its
subsidiaries and claims that such subsidiaries are eligible to file on
Schedule 13G to report their respective ownership interests. Some of the
Shares purchased by the Gotham Investors on April 6 (see footnote 1 above)
may have been sold by Transamerica. However, because no amendment has been
filed by Transamerica as of the close of business on Thursday, April 9,
1998, the Company has been unable to confirm such a sale of Shares.
(3) According to the amended Schedule 13G dated February 10, 1998 jointly filed
by Capital Group Companies, Inc. ("Capital") and its wholly owned
subsidiaries, Capital Guardian Trust Company ("Capital Trust"), SMALLCAP
World Fund, Inc. ("SMALLCAP") and Capital Research and Management Company
("Capital Management"), Capital claims sole investment power with respect to
all shares reflected as beneficially owned and sole voting power with
respect to 1,591,300 shares. Capital Trust claims sole voting and investment
power with respect to 1,591,300 shares as a result of serving as investment
manager of various of its institutional banking accounts. SMALLCAP, which
receives investment advisory advice from Capital Management, claims sole
voting power with respect to 878,600 shares, attributing investment power
over those shares to Capital Management.
(4) According to the Schedule 13D dated April 6, 1998 filed by Weiss, Peck &
Greer, L.L.C. ("Weiss Peck") (the "Weiss Peck 13D"), Weiss Peck shares
voting and investment power of these shares with its brokerage and
investment advisory clients but disclaims beneficial ownership of any of
such shares. According to the Weiss Peck 13D, Weiss Peck believes that
$17.00 per Share is inadequate.
(5) According to the Schedule 13G dated December 31, 1997 filed by The Kaufman
Fund, Inc., it is an investment company that has sole voting and dispositive
power over such shares.
(6) On April 6, 1998, as described in footnote 1 above, Gotham Investors became
the beneficial owner of more than 25% of the Shares. The acquisition by a
person or group of 25% or more of the Shares constitutes a Change in Control
(as defined under the Option Plans). Upon such Change of Control, the
Company became obligated to immediately cancel all outstanding options and,
within ten days of the Change of Control, remit a cashout payment as
calculated pursuant to the Option Plans. Accordingly, the above indicated
individuals held options that are subject to such Change of Control
provisions. The Shares represented by such options are not included in the
above Beneficial Ownership amounts. Had a Change of Control not occurred,
the respective Beneficial Ownership amounts would have been greater by the
following amounts: 71,775 for Mr. Calvano; 17,500 for Mr. Ayers; 59,825 for
Mr. Fowler; 1,250 for Mr. Fitzpatrick; 11,375 for Mr. Friedman; 1,250 for
Mr. Guth; 8,250 for Ms. Kenyon; 1,250 for Mr. Miller; and 172,475 for all
Executive Officers and directors as a group.
(7) Less than 1%.
DIRECTORS AND EXECUTIVE OFFICERS
THE PURCHASER DESIGNEES
Purchaser has informed the Company that each of the Purchaser Designees
listed below has consented to act as a director.
None of the Purchaser Designees is a director of, or holds any position
with, the Company. To the best knowledge of the Company, none of the Purchaser
Designees or their associates beneficially owns any equity securities, or rights
to acquire any equity securities, of the Company or has been involved in any
transactions
4
<PAGE> 26
with the Company or any of its directors or executive officers that are required
to be disclosed pursuant to the rules and regulations of the SEC.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Purchaser of such number of Shares that satisfies the
Minimum Condition, which purchase cannot be earlier than May 8, 1998 and that,
upon assuming office, the Purchaser Designees will thereafter constitute at
least a majority of the Board.
Biographical information concerning each of the Purchaser Designees,
directors and executive officers is presented on the following pages.
PURCHASER DESIGNEES
The Purchasers Designees are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert H. Bohannan.................... 53 Chairman of the Board
Phillip W. Milne...................... 39 Director
Ronald G. Nelson...................... 56 Director
Anthony P. Ryan....................... 35 Director
Richard C. Stephan.................... 58 Director
Wayne A. Wight........................ 55 Director
</TABLE>
Robert H. Bohannan
Mr. Bohannan has served as Chairman, President and Chief Executive Officer
of Parent since January 1997. He has been a director of Parent since 1996. He is
also a director of Purchaser since March 1998. Prior to January 1997, Mr.
Bohannan served as President and Chief Operating Officer of Parent since August
15, 1996. Prior thereto, he was President and Chief Executive Officer of
Travelers Express Company, Inc. ("Travelers Express"), a subsidiary of Parent,
since 1993, and prior to that was a senior officer at Marine Midland Bank of
Buffalo, New York.
Philip W. Milne
Mr. Milne has served as President and Chief Executive Officer of Travelers
Express since August 1996. He has also been a director and President and Chief
Executive Officer of Purchaser since March 1998. Prior to August 1996, Mr. Milne
was Vice President -- General Manager -- Retail Payment Products of Travelers
Express, since May 15, 1993, and prior thereto served in similar executive
capacities at Travelers Express.
Ronald G. Nelson
Mr. Nelson has been the Vice President -- Finance and Treasurer of Parent
since 1994, and prior thereto was Vice President -- Treasurer of Parent. He has
also been a director and Vice President and Assistant Treasurer of Purchaser
since March 1998.
Anthony P. Ryan
Mr. Ryan has been Vice President, Chief Financial Officer and Assistant
Treasurer of Purchaser since March 1998. Mr. Ryan has also been Vice President,
Chief Financial Officer and Assistant Treasurer of Travelers Express since May
1997. He was Vice President -- Division Controller of Travelers Express from
September 1996 to May 1997 and was Controller Payment Systems Group of Travelers
Express from May 1995 to September 1996. Prior to May 1995, he served in various
management positions, including Director of Finance, at First Data Corporation
("First Data") since August 1985.
Richard C. Stephan
Mr. Stephan has been the Vice President -- Controller of Parent since 1980.
5
<PAGE> 27
Wayne A. Wight
Mr. Wight has been the Vice President -- Corporate Development of Parent
since February 1998. Prior to February 1998, Mr. Wight served as Executive
Director -- Corporate Development of Parent.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James F. Calvano.......................... 61 Chairman of the Board and Chief Executive
Officer
Robbin L. Ayers........................... 46 Executive Vice President, General
Manager -- International and Director
John M. Fowler............................ 48 Executive Vice President, Chief Financial
Officer, Treasurer and Director
Alan H. Friedman.......................... 52 Executive Vice President
Andrea M. Kenyon.......................... 43 General Counsel and Secretary
Brian J. Fitzpatrick...................... 57 Director
William D. Guth........................... 65 Director
Sanford Miller............................ 45 Director
</TABLE>
James F. Calvano
Mr. Calvano has served as Chairman and Chief Executive Officer of the
Company since October 1996 and was a consultant to the Company from February
1996 until December 1996. In January 1998, he became President and a director of
Mid-America Money Order Company ("MAMO"), a wholly owned subsidiary of the
Company. Prior to joining the Company, Mr. Calvano was employed by Travelers
Group, Inc. as Executive Vice President of Marketing and by Travelers Insurance
Companies, a division of Travelers Group Inc., as Executive Vice President and
Chief Administrative Officer from November 1993 until February 1995. Mr. Calvano
served as President and Chief Operating Officer of New Valley Corporation ("New
Valley"), then the parent of Western Union Financial Services, Inc. ("Western
Union"), from June 1991 through April 1993. Two months before he assumed these
positions, New Valley suspended payments on its publicly held debt. In March
1993, New Valley consented to an involuntary bankruptcy petition filed against
it on November 15, 1991 under Title 11 of the United States Code. Mr. Calvano
serves on the board of directors of Budget Group, Inc. ("BGI"), formerly known
as Team Rental Group, Inc.
Robbin L. Ayers
Mr. Ayers has served as Executive Vice President and General
Manager -- International of the Company since October 1996. From September 1995
until October 1996, he served in the Company's Office of the President and has
been a director since January 1996. Prior to his appointment to the Office of
the President, Mr. Ayers served from January 1995 to September 1995 as Senior
Vice President, for Europe and Pacific Rim Retail Services, for Integrated
Payment Systems, Inc. ("IPS") in relation to IPS' consumer money wire transfer
service business under the name "MoneyGram". From 1992 to 1994, Mr. Ayers was
the Senior Vice President of Marketing for IPS and, from 1985 to 1992, served in
various management positions with IPS. Mr. Ayers founded the MoneyGram service
during 1988 and was its General Manager until 1991.
John M. Fowler
Mr. Fowler has served as Executive Vice President, Chief Financial Officer
and a director of the Company since October 1996, and Treasurer of the Company
since September 19, 1997. He has been Vice President, Treasurer and a director
of MAMO since January 1998, and President, Treasurer and a director of MoneyGram
Payment Systems Canada, Inc. ("MPSC"), a subsidiary of the Company, since
October 21, 1997. Prior to joining the Company, Mr. Fowler worked as a private
consultant. From 1989 to 1994,
6
<PAGE> 28
Mr. Fowler was employed by Travelers Group, Inc. as Executive Vice President and
Chief Administrative Officer, responsible for operations and administration. Mr.
Fowler held the position of Chairman and Chief Executive Officer of Gulf
Insurance Group, a subsidiary of Travelers Group, Inc., from 1987 to 1994. Mr.
Fowler serves as a director of Air Express International Corporation and
TransAtlantic Holdings, Inc.
Alan H. Friedman
Mr. Friedman has served as Executive Vice President of the Company since
October 1996 and was employed by First Data from April 1996 until December 1996.
Prior to joining First Data, Mr. Friedman was employed by Western Union as
Senior Vice President and Chief Financial Officer from November 1994 to March
1996. Mr. Friedman previously held various financial management positions at New
Valley, where he served as Vice President and Controller from January 1991 until
November 1994. In March 1993, New Valley consented to an involuntary bankruptcy
petition that had been filed against it on November 15, 1991 under Title 11 of
the United States Code.
Andrea M. Kenyon
Ms. Kenyon has served as Secretary and General Counsel of the Company since
October 1996, and was employed by First Data from July 1996 until December 1996.
Since January 1998, she also has served as Secretary and a director of MAMO and,
since October 21, 1997, as Secretary of MPSC. Prior to joining the Company, Ms.
Kenyon served for six years in the general counsel's office of American Express
Company, where she provided bank regulatory and legislative support for the
company and its bank and financial service subsidiaries. She also provided legal
support to IPS on payment product issues and anti-money laundering regulations
when First Data was a subsidiary of American Express Company.
Brian J. Fitzpatrick
Mr. Fitzpatrick has served as a director of the Company since October 1996.
He has been President and Chief Executive Officer of Fits Systems, a computer
software company, since 1972. Mr. Fitzpatrick also serves as a director of Jade
Cricket Corporation.
William D. Guth
Dr. Guth has served as a director of the Company since October 1996. He is
a professor of management and strategy at the Stern School of Business at New
York University and also serves as a principal of Faculty Practice Associates, a
strategic management consulting firm.
Sanford Miller
Mr. Miller has served as a director of the Company since October 1996. His
current term as director expires in 1998. He has, since December 1993, served as
the Chairman of the Board of Directors and Chief Executive Officer of BGI, the
parent company for Budget Rent a Car Corporation ("Budget") and its affiliates
including Budget Car Sales, Inc., Van Pool Services, Inc., Premier Rental Car,
LLC and Cruise America, Inc. Prior to owning Budget, BGI owned Budget franchises
in seven metropolitan regions in the United States.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1997, Mr. Robert Calvano, the brother of James Calvano, was
hired by the Company as its East Coast Regional Vice President -- Sales.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held five meetings during the fiscal year ended December 31,
1997. No director attended fewer than 75% of the total meetings of the Board and
the meetings of the committees on which the director serves.
7
<PAGE> 29
The Board has an Audit Committee composed of Messrs. Fitzpatrick (Chairman)
and Miller. The Audit Committee is responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Audit Committee reviews the qualifications of the Company's
independent auditors, makes recommendations to the Board as to the selection of
independent auditors, reviews the scope, fees and results of any audit and
reviews non-audit services and related fees of the independent auditors. The
Audit Committee met twice during fiscal year 1997.
The Board has a Compensation Committee composed of Messrs. Guth (Chairman)
and Fitzpatrick. The Compensation Committee is responsible for the
administration of all salary and incentive compensation plans, including
bonuses, for the officers and key employees of the Company. The Committee also
administers the Company's 1996 Stock Option Plan. The Compensation Committee met
twice during 1997.
The Board does not have a nominating committee. The selection of nominees
for the Board is made by the entire Board.
DIRECTOR COMPENSATION
All directors of the Company are entitled to reimbursement for their
reasonable out-of-pocket expenses for travel and other necessary business
expenses incurred in the performance of their services for the Company. In
addition for fiscal year 1997, all directors who were not employees of the
Company were paid an annual retainer of $12,000. Those directors who are
employees of the Company do not receive any compensation for their services as
directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
compensation earned by, awarded to or paid to, the Company's Chief Executive
Officer and each of the other four most highly compensated executive officers
(collectively, the "Named Executive Officers"), for services rendered to the
Company, during the fiscal year ended December 31, 1997. All amounts shown in
the following table for the years 1995 and 1996 were paid by First Data or its
affiliates other than the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------- AWARDS
SALARY/ SECURITIES
CONSULTING OTHER ANNUAL UNDERLYING ALL OTHER
FEES BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- ---- ---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James F. Calvano.............. 1997 356,743 -- -- -- --
Chairman of the Board and 1996 517,400(a) 300,000 -- 287,100 514,482(b)
Chief Executive Officer
John M. Fowler................ 1997 200,000 -- -- -- --
Executive Vice President and 1996 53,077(c) 350,000 -- 239,300 --
Chief Financial Officer
Robbin L. Ayers............... 1997 158,462 -- -- -- 15,021(e)
Executive Vice President and 1996 143,200 150,000 10,664(d) 70,000 13,064(c)
GM -- International 1995 131,437 60,000 45,066(d) 5,000(f) 14,100(e)
Alan H. Friedman.............. 1997 165,000 -- -- -- 9,300(e)
Executive Vice President 1996 146,154(g) 75,000 -- 45,500 9,609(e)
Andrea M. Kenyon.............. 1997 150,000 -- -- -- 346(e)
General Counsel and 1996 66,346(h) 45,000 -- 33,000 --
Secretary
</TABLE>
- ---------------
(a) Represents payment for services from February 1996 rendered on behalf of the
Company.
8
<PAGE> 30
(b) Represents payments to compensate Mr. Calvano for certain stock options
($396,000) and restricted stock awards ($118,482) granted by his former
employer and forfeited by him when he began rendering services on behalf of
the Company.
(c) Represents payment for services from September 1996 rendered on behalf of
the Company.
(d) Represents reimbursable living expenses provided for an expatriate
assignment.
(e) Represents contributions to the Company's Retirement Savings Plan.
(f) Represents shares of First Data prior to the two-for-one stock split
effective November 1, 1996.
(g) Represents payment for services from April 1996 rendered on behalf of the
Company.
(h) Represents payment for services form July 1996 rendered on behalf of the
Company.
OPTION VALUE TABLE
The following table sets forth information as of December 31, 1997,
concerning the value of unexercised options held by each of the Named Executive
Officers. No Named Executive Officer exercised any stock options in 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT DECEMBER 31, 1997
----------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
James F. Calvano............................................ 71,775 215,325
John M. Fowler.............................................. 59,825 179,475
Robbin L. Ayers............................................. 17,500 52,500
Alan H. Friedman............................................ 11,375 34,125
Andrea M. Kenyon............................................ 8,250 24,750
</TABLE>
All options held by the Named Executive Officers have an exercise price of
$12.00 per share which amount exceeds the trading price of the Common Stock at
December 31, 1997 of $10.75.
MATERIAL CONTRACTS AND AGREEMENTS WITH EXECUTIVE OFFICERS
Stock Option Plans. As described above, on April 6, 1998 the Gotham
Investors became the beneficial owner of more than 25% of the Shares. Pursuant
to the Company's 1996 Stock Option Plan and the Company's 1996 Broad Based Stock
Option Plan (collectively the "Option Plans") the acquisition by a person of 25%
or more of the Shares constitutes a Change in Control (as defined in the Option
Plans). Upon a Change in Control, the Company is obligated to immediately cancel
all outstanding options and, within ten days of the Change in Control, remit in
cash to each option holder an amount equal to the number of Shares then subject
to such option, multiplied by the excess 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 (as
defined under the Plans) of a Share 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 estimates that its payment obligation under the Plans
approximately $6.0 million.
Retention Plan. Each Named Executive Officer is subject to the Company's
Executive Retention Plan (the "Retention Plan"). The Retention Plan generally
provides for severance payments and benefit continuation following a Change in
Control of the Company (as defined in the Retention Plan) after which the
affected Named Executive Officer is either terminated without cause, leaves
after suffering a reduction in salary or benefits, or is required to relocate
(collectively, a "Termination"). Under the Retention Plan, Mr. Calvano is
entitled to receive a severance payment in an amount equal to three times his
salary and bonus for the immediately preceding twelve months upon a Termination.
Each of the other Named Executive Officers is entitled to receive a severance
payment of two times his or her respective salary and bonus for the immediately
preceding twelve months upon a Termination. In addition, certain persons which
have been selected by the Chief Executive Officer are entitled to receive a
severance payment of one times his or her respective salary and bonus for the
immediately preceding twelve months upon a Termination. Employees who
9
<PAGE> 31
collect payments under the Retention Plan may not receive payments under the
Company's Severance Pay Plan for Senior Management. As defined in the Retention
Plan, a change in control of the Company would occur upon completion of the
Offer.
The Retention Plan was amended on May 13, 1997 to provide, that in the
event that the payments described above constitute an excess parachute payment
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), the
Company will pay to the employee an additional amount (the Gross-up Payment)
equal to the excise tax and all income taxes related to such payment, such that
the net amount retained by the employee will equal the total payments.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board is responsible for establishing
compensation policies applicable to the Company's Executive Officers and,
pursuant to such policies, determining the compensation payable to the Company's
Chief Executive Officer and, after taking into account recommendations of the
Chief Executive Officer, all other Executive Officers. The following report
relates to compensation payable to the Company's Executive Officers, including
the Named Executive Officers, for the year ended December 31, 1997.
COMPONENTS OF COMPENSATION
There are three components to compensation payable to the Company's
Executive Officers: (1) base salary; (2) annual incentive compensation in the
form of cash bonuses; and (3) equity-based incentive compensation in the form of
stock options.
COMPENSATION POLICIES
The Compensation policies of the Compensation Committee are: (i) to
establish base salaries that are competitive with those payable by national
companies with which the Company competes in the recruitment of senior
management; (ii) to tie cash bonuses to achievement of pre-established targets
for the Company's profitability and to individual performance; and (iii) to use
stock options to promote equity ownership in the Company at levels deemed
appropriate considering each executive's position within the Company.
COMPENSATION PAYABLE TO EXECUTIVE OFFICERS
Base Salaries. Base salaries for Executive Officers are reviewed and
adjusted annually based on information regarding competitive salaries, including
salary survey data provided by third parties and information prepared by
management regarding salaries payable by the Company's competitors in similar
industries. The average increase in base salaries for all Executive Officers
corresponds to the average percentage increase in salaries payable to all
employees. Individual increases are established by the Compensation Committee,
taking into account recommendations of the Chief Executive Officer concerning
the overall effectiveness of each executive.
Cash Bonuses. Cash bonuses are determined under the Company's Incentive
Compensation Plan adopted by the Compensation Committee, which annually
establishes payout amounts based on a Company profitability target. No bonus is
payable unless the profitability target is achieved and larger bonuses, up to a
maximum, are payable in the event the profitability target is exceeded. In
considering the amount of payout, the individual's performance is a major
factor. Payments under the Incentive Compensation Plan are made after results of
the applicable year are known. No bonuses were paid for the year 1997.
Stock Options. Stock options are granted by the Compensation Committee to
provide equity-based long-term incentive compensation to the Company's Executive
Officers. Individual grants to Executive Officers are made by the Compensation
Committee, taking into account recommendations of the Chief Executive Officer.
The Compensation Committee believes that encouraging equity ownership through
stock options will enhance management incentives to improve shareholder value.
In addition, the grant of stock options, which vest over time, encourages
executives to remain with the Company and to focus on longer term results.
10
<PAGE> 32
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation payable to the Company's Chief Executive Officer consists of
the same three components described above, and is determined by the Compensation
Committee following the same policies utilized for all executives. Base salary
is reviewed and adjusted annually, utilizing national salary survey data
provided by third parties and comparable industry information (generated by
management) based on the Compensation Committee's evaluation of the Chief
Executive Officer's overall effectiveness. The Chief Executive Officer is
entitled to a bonus under the Incentive Compensation Plan that is tied primarily
to corporate profitability.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
There were no Compensation Committee interlocks or insiders participation
during 1997.
SECTION 16(a) REPORTING
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Executive officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1997, officers,
directors and greater than ten-percent beneficial owners timely filed all
required reports under Section 16(a), except that Mr. Ayers failed to report one
acquisition transaction in March of 1997 on a timely basis.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation of the Common Stock) with cumulative total return of the S&P
Small Cap 600 Index and the S&P Services (Data Processing) Index for the period
of December 11, 1996 through December 31, 1997.
<TABLE>
<CAPTION>
MONEYGRAM S&P SERVICES
Measurement Period PAYMENT S&P SMALLCAP (DATA
(Fiscal Year Covered) SYSTEMS, INC. 600 PROCESSING)
<S> <C> <C> <C>
12/11/96 100 100 100
Dec-96 110 101 92
Dec-97 90 127 101
</TABLE>
11
<PAGE> 33
ANNEX II
[MORGAN STANLEY LETTERHEAD]
APRIL 4, 1998
Board of Directors
MoneyGram Payment Systems, Inc.
Park 80 West Plaza I
Saddle Brook, NJ 07663
Members of the Board:
We understand that MoneyGram Payment Systems, Inc. ("MoneyGram" or the
"Company"), Viad Corp. ("Viad") and Pine Valley Acquisition Corporation, a
wholly owned subsidiary of Viad, ("Acquisition Sub") propose to enter into an
Agreement and Plan of Merger dated April 4, 1998 (the "Merger Agreement"), which
provides, among other things, for (i) the commencement by Acquisition Sub of a
tender offer (the "Tender Offer") for all outstanding shares of common stock,
par value $.01 per share (the "Company Common Stock") of the Company for $17.00
per share net to the seller in cash and (ii) the subsequent merger (the
"Merger") of Acquisition Sub with and into the Company. Pursuant to the Merger,
the Company will become a wholly owned subsidiary of Viad, and each outstanding
share of Company Common Stock, other than shares held in treasury or held by
Viad or any affiliate of Viad or as to which dissenters' rights have been
perfected, will be converted into the right to receive $17.00 per share in cash.
The terms and conditions of the Tender Offer and the Merger are more fully set
forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Company Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of MoneyGram;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning MoneyGram prepared by the
management of MoneyGram;
(iii) analyzed certain financial projections prepared by the
management of MoneyGram;
(iv) discussed the past and current operations and financial condition
and the prospects of MoneyGram with senior executives of MoneyGram;
(v) reviewed the pro forma impact of the Merger on Viad's earnings per
share;
(vi) reviewed the reported prices and trading activity of the Company
Common Stock;
(vii) compared the financial performance of the Company and the prices
and trading activity of the Company Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
<PAGE> 34
(ix) participated in discussions and negotiations among
representatives of MoneyGram and Viad and their financial and legal
advisors;
(x) reviewed the draft Merger Agreement and certain related documents;
and
(xi) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of MoneyGram
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for MoneyGram and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors MoneyGram and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by the Company in respect of the transaction with the Securities and
Exchange Commission.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by holders of shares of the Company
Common Stock pursuant to the Merger Agreement is fair from a financial point of
view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ SCOTT R. BRAKEBILL
------------------------------------
Scott R. Brakebill
Managing Director
<PAGE> 1
Exhibit 1
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
VIAD CORP,
PINE VALLEY ACQUISITION CORPORATION
AND
MONEYGRAM PAYMENT SYSTEMS, INC.
DATED AS OF APRIL 4, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE OFFER
Section 1.01. The Offer................................................... 1
Section 1.02. Company Action.............................................. 3
ARTICLE II
THE MERGER
Section 2.01. The Merger.................................................. 4
Section 2.02. Effective Time; Closing..................................... 4
Section 2.03. Effect of the Merger........................................ 5
Section 2.04. Certificate of Incorporation; By-laws....................... 5
Section 2.05. Directors and Officers...................................... 5
Section 2.06. Conversion of Securities.................................... 5
Section 2.07. Employee Stock Options...................................... 6
Section 2.08. Dissenting Shares........................................... 6
Section 2.09. Surrender of Shares; Stock Transfer Books................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization and Qualification; Subsidiaries................ 8
Section 3.02. Certificate of Incorporation and By-laws.................... 9
Section 3.03. Capitalization.............................................. 9
Section 3.04. Authority Relative to this Agreement........................ 9
Section 3.05. No Conflict; Required Filings and Consents.................. 10
Section 3.06. Compliance.................................................. 11
Section 3.07. SEC Filings; Financial Statements........................... 11
Section 3.08. Absence of Certain Changes or Events........................ 12
Section 3.09. Absence of Litigation....................................... 13
Section 3.10. Employee Benefit Plans...................................... 13
Section 3.11. Labor Matters............................................... 15
Section 3.12. Offer Documents; Schedule 14D-9; Proxy Statement............ 15
Section 3.13. Taxes....................................................... 16
Section 3.14. Brokers..................................................... 16
Section 3.15. Certain Contracts........................................... 16
Section 3.16. Real Property and Leases.................................... 17
Section 3.17. Trademarks, Patents, Copyrights and Intellectual Property... 17
Section 3.18. Environmental Matters....................................... 18
Section 3.19. Statute Takeover Statutes................................... 18
Section 3.20. Insurance................................................... 18
Section 3.21. Agents...................................................... 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 4.01. Corporate Organization...................................... 19
Section 4.02. Authority Relative to this Agreement........................ 20
Section 4.03. No Conflict; Required Filings and Consents.................. 20
Section 4.04. Financing................................................... 21
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.05. Offer Documents; Proxy Statement............................ 21
Section 4.06. Brokers..................................................... 21
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01. Conduct of Business by the Company Pending the Merger....... 22
Section 5.02. Additional Covenants........................................ 24
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Stockholders' Meeting....................................... 25
Section 6.02. Proxy Statement............................................. 26
Section 6.03. Company Board Representation; Section 14(f)................. 26
Section 6.04. Access to Information; Confidentiality...................... 27
Section 6.05. No Solicitation of Transactions............................. 27
Section 6.06. Employee Benefits Matters................................... 29
Section 6.07. Directors' and Officers' Indemnification and Insurance...... 29
Section 6.08. Further Action; Reasonable Best Efforts..................... 30
Section 6.09. Public Announcements........................................ 30
Section 6.10. Confidentiality Agreement................................... 30
Section 6.11. SEC and Stockholder Filings................................. 31
Section 6.12. Takeover Statutes........................................... 31
Section 6.13. Certain Actions............................................. 31
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01. Conditions to the Merger.................................... 31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination................................................. 32
Section 8.02. Effect of Termination....................................... 33
Section 8.03. Fees........................................................ 33
Section 8.04. Amendment................................................... 34
Section 8.05. Waiver...................................................... 34
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Non-Survival of Representations, Warranties and
Agreements.................................................. 34
Section 9.02. Notices..................................................... 35
Section 9.03. Certain Definitions......................................... 36
Section 9.04. Severability................................................ 38
Section 9.05. Entire Agreement; Assignment................................ 39
Section 9.06. Parties in Interest......................................... 39
Section 9.07. Governing Law............................................... 39
Section 9.08. Headings.................................................... 39
Section 9.09. Counterparts................................................ 39
</TABLE>
ii
<PAGE> 4
ANNEX A
Conditions to the Offer
ANNEX B
Agreement Respecting the Plans and Other Employee Benefit Matters
SCHEDULES
<TABLE>
<S> <C>
3.01........................................................ Subsidiaries
3.03........................................................ Stock Options
3.04(b)..................................................... Company Approvals
3.05(a)..................................................... Conflicts
3.05(b)..................................................... State/Foreign Regulatory
Consents/Notices
3.06........................................................ Compliance
3.07(c)..................................................... Financials
3.08........................................................ Certain Changes or Events
3.09........................................................ Litigation
3.10(a)..................................................... Employee Benefits Plans
3.10(f)..................................................... WARN Disclosure
3.10(g)..................................................... Foreign Benefit Plans
3.13........................................................ Taxes
3.15........................................................ First Data Corporation Agreements
3.17(b)..................................................... Intellectual Property
3.17(c)..................................................... Intellectual Property
3.20........................................................ Insurance
3.21........................................................ Agents
5.01(g)..................................................... Capital Expenditures
9.03........................................................ Material Adverse Affect
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
GLOSSARY OF DEFINED TERMS(NOT PART OF THIS AGREEMENT)
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
------------ ----------------------
<S> <C>
Acquisition Proposal........................................ sec. 6.05(a)
Affiliate................................................... sec. 9.03(a)
Agents...................................................... sec. 3.21
Agreement................................................... Preamble
American Express............................................ sec. 5.01(j)
Banamex..................................................... sec. 3.15
Beneficial Owner............................................ sec. 9.03(b)
Blue Sky Laws............................................... sec. 3.05(b)
Board....................................................... Recitals
Business Day................................................ sec. 9.03(c)
Certificate of Merger....................................... sec. 2.02
Certificates................................................ sec. 2.09(b)
Code........................................................ sec. 9.03(d)
Company..................................................... Preamble
Company Approvals........................................... sec. 3.04(b)
Company Common Stock........................................ Recitals
Company Stock Option........................................ sec. 2.07
Company Stock Option Plans.................................. sec. 2.07
Confidentiality Agreement................................... sec. 6.04(c)
Control..................................................... sec. 9.03(e)
Delaware Law................................................ Recitals
Dissenting Shares........................................... sec. 2.08
Effective Time.............................................. sec. 2.02
Environmental Laws.......................................... sec. 9.03(f)
Environmental Permits....................................... sec. 3.18
ERISA....................................................... sec. 3.10(a)
Exchange Act................................................ sec. 1.02(b)
Fee......................................................... sec. 8.03(a)
Foreign Plan................................................ sec. 3.10(g)
Governmental Authority...................................... sec. 9.03(g)
Hazardous Substances........................................ sec. 9.03(h)
HSR Act..................................................... sec. 3.05(b)
Indemnified Parties......................................... sec. 6.07(b)
Intellectual Property....................................... sec. 3.17(b)
IRS......................................................... sec. 3.10(a)
Material Adverse Effect..................................... sec. 9.03(i)
Merger...................................................... Recitals
Merger Consideration........................................ sec. 2.06(a)
Minimum Condition........................................... sec. 1.01(a)
Morgan Stanley.............................................. sec. 1.02(a)
1997 Balance Sheet.......................................... sec. 3.07(c)
Offer....................................................... Recitals
Offer Documents............................................. sec. 1.01(b)
Offer to Purchase........................................... sec. 1.01(b)
Option Spread............................................... sec. 2.07
Parent...................................................... Preamble
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
------------ ----------------------
<S> <C>
Paying Agent................................................ sec. 2.09(a)
Per Share Amount............................................ Recitals
Person...................................................... sec. 9.03(j)
Plans....................................................... sec. 3.10(a)
Pre-Offer Approvals......................................... sec. 3.05(b)
Proxy Statement............................................. sec. 3.12
Purchaser................................................... Preamble
Returns..................................................... sec. 9.03(k)
Schedule 14D-1.............................................. sec. 1.01(b)
Schedule 14D-9.............................................. sec. 1.02(a)
SEC......................................................... sec. 9.03(l)
SEC Reports................................................. sec. 3.07(a)
SEC Rules................................................... sec. 9.03(m)
Securities Act.............................................. sec. 3.07(a)
Shares...................................................... Recitals
Stockholders' Meeting....................................... sec. 6.01(a)
Subsidiary.................................................. sec. 9.03(n)
Superior Proposal........................................... sec. 6.05(b)
Surviving Corporation....................................... sec. 2.01
Takeover Statute............................................ sec. 6.12
Tax......................................................... sec. 9.03(o)
Taxpayer.................................................... sec. 3.13
Transactions................................................ sec. 3.04(a)
WARN........................................................ sec. 3.10(f)
</TABLE>
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER dated as of April 4, 1998 (this "Agreement")
among VIAD CORP, a Delaware corporation ("Parent"), PINE VALLEY ACQUISITION
CORPORATION, a Delaware corporation and a wholly owned Subsidiary of Parent
("Purchaser"), and MONEYGRAM PAYMENT SYSTEMS, INC., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
shall make a cash tender offer (the "Offer") to acquire all the issued and
outstanding shares of Common Stock, par value $0.01 per share, of the Company
("Company Common Stock") (such shares of Company Common Stock being hereinafter
collectively referred to as "Shares") for $17.00 per Share (such amount, or any
greater amount per Share paid pursuant to the Offer, being hereinafter referred
to as the "Per Share Amount") net to the seller in cash, upon the terms and
subject to the conditions of this Agreement and the Offer; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved and agreed to
recommend that holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Parent, Purchaser and the Company have each approved the merger (the
"Merger") of Purchaser with and into the Company in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.01. The Offer. (a) Upon the terms, and subject to the conditions
of this Agreement, Purchaser shall commence the Offer as promptly as reasonably
practicable after the date hereof, but in no event later than five Business Days
after the initial public announcement of Purchaser's intention to commence the
Offer. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer shall be subject to the condition (the "Minimum
Condition") that at least the number of Shares that when added to the Shares
already owned by Parent shall constitute a majority of the then outstanding
Shares on a fully diluted basis (including, without limitation, all Shares
issuable upon the conversion of any convertible securities or upon the exercise
of any options, warrants or rights) shall have been validly tendered and not
withdrawn prior to the expiration of the Offer and also shall be subject to the
satisfaction of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; provided, however, that the Minimum Condition may not
be waived without the prior approval of the Company and that no change may be
made which decreases the price per Share payable in the Offer or which reduces
the maximum number of Shares to be purchased in the Offer or which imposes
conditions to the Offer in addition to those set forth in Annex A hereto.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer beyond the scheduled expiration date (the initial
scheduled expiration date being 20 Business Days following the commencement of
the Offer computed in accordance with SEC Rules) if, at the scheduled expiration
date of the Offer, any of the conditions to Purchaser's obligation to accept for
payment, and to pay for, the Shares, shall not be satisfied or waived, (ii)
extend the Offer for any period required by the SEC Rules applicable to the
Offer, or (iii) extend the Offer for an aggregate period of not more than 10
Business Days beyond the latest applicable date that would otherwise be
permitted under clause (i) or (ii) of this sentence, if as of such date, all of
the conditions to Purchaser's obligations to accept for payment, and to pay for,
the Shares are satisfied or waived, but the
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<PAGE> 8
number of Shares validly tendered and not withdrawn pursuant to the Offer equals
75 percent or more, but less than 90 percent, of the outstanding Shares on a
fully diluted basis; provided, however, that (A) if, on the initial scheduled
expiration date of the Offer, the sole condition remaining unsatisfied is either
(x) the failure of the waiting period under the HSR Act to have expired or been
terminated, or (y) the failure to obtain a Pre-Offer Approval, the Purchaser
shall extend the Offer from time to time until five Business Days after the
later of expiration or termination of the waiting period under the HSR Act or
the receipt of all Pre-Offer Approvals and (B) if the sole condition remaining
unsatisfied on the initial scheduled expiration date of the Offer is the
condition set forth in paragraph (e) of Annex A, the Purchaser shall, so long as
the breach can be cured and the Company is vigorously attempting to cure such
breach, extend the Offer from time to time until five Business Days after such
breach is cured (provided that Purchaser shall not be required to extend the
Offer under A or B beyond 45 calendar days after such initial scheduled
expiration date). The Per Share Amount shall, subject to applicable withholding
of taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offer. Subject to the terms and conditions of the Offer,
Purchaser shall pay, as promptly as practicable after expiration of the Offer,
for all Shares validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Purchaser shall file with the SEC (i) a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Parent, Purchaser and the
Company agree to correct promptly any information provided by any of them for
use in the Offer Documents which shall have become false or misleading, and
Parent and Purchaser further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
Section 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that (i) the Board, at a
meeting duly called and held on April 4, 1998, has unanimously (A) determined
that this Agreement and the transactions contemplated hereby, including each of
the Offer and the Merger, are fair to and in the best interests of the holders
of Shares, (B) approved and adopted this Agreement and the transactions
contemplated hereby (such approval and adoption having been made in accordance
with the provisions of sec.203 of Delaware Law) and (C) recommended that the
stockholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby, and (ii) Morgan Stanley,
Dean Witter, Discover & Co. ("Morgan Stanley") has delivered to the Board a
written opinion that the consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view. Unless the recommendation of the Board has been
withdrawn in accordance with Section 6.05, the Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board described in
the immediately preceding sentence and agrees to cause Morgan Stanley to consent
to the inclusion of its written opinion in the offering documents forming a part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (together with
all amendments and supplements thereto, the "Schedule 14D-9"). The Company has
been advised by each of its directors and executive officers that they intend
either to tender all Shares beneficially owned by them to Purchaser pursuant to
the Offer or to vote such Shares in favor of the approval and adoption by the
stockholders of the Company of this Agreement and the transactions contemplated
hereby.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the SEC the Schedule 14D-9 containing, unless
the recommendation of the Board has been withdrawn in accordance with Section
6.05, the recommendation of the Board described in Section 1.02(a) and shall
disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other applicable federal securities laws. The Company, Parent and Purchaser
agree to correct promptly any information provided by any of them for use in the
Schedule 14D-9 which shall have become false or misleading, and the Company
further agrees to
2
<PAGE> 9
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall hold in confidence the information contained in such labels, listings and
files, shall use such information only in connection with the Offer and the
Merger, and, if this Agreement shall be terminated in accordance with Section
8.01, shall deliver to the Company all copies of such information then in their
possession.
ARTICLE II
THE MERGER
Section 2.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with Delaware Law, at the Effective Time
(as hereinafter defined) Purchaser shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
Section 2.02. Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or a certificate of merger or certificate of ownership and
merger (in either case, the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law. The Merger shall
become effective at the time of filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with Delaware Law or
such later time as may be specified in the Certificate of Merger (the date and
time when the Merger shall become effective being the "Effective Time").
Section 2.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
Section 2.04. Certificate of Incorporation; By-laws. (a) At the Effective
Time, the Certificate of Incorporation of the Company shall be restated in the
form acceptable to Purchaser and shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation; provided, however, that such restated Certificate
of Incorporation shall be in accordance with the provisions of Section 6.07
hereof.
(b) The By-laws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
Section 2.05. Directors and Officers. The directors and officers of
Purchaser immediately prior to the Effective Time shall be the initial directors
and officers of the Surviving Corporation, each to hold office in
3
<PAGE> 10
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
Section 2.06. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Purchaser, the Company or
the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section
2.06(b) and any Dissenting Shares (as hereinafter defined)) shall be
canceled and shall be converted automatically into the right to receive an
amount equal to the Per Share Amount in cash (the "Merger Consideration")
payable, after reduction for any required Tax withholding, without
interest, to the holder of such Share, upon surrender, in the manner
provided in Section 2.08, of the certificate that formerly evidenced such
Share;
(b) Each Share held in the treasury of the Company and each Share
owned by Purchaser, Parent or any direct or indirect wholly owned
Subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Each share of Common Stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.07. Employee Stock Options. Each stock option (a "Company Stock
Option") outstanding at the Effective Time under the Company's 1996 Stock Option
Plan or 1996 Broad-Based Stock Option Plan (the "Company Stock Option Plans")
shall be canceled by the Company immediately prior to the Effective Time, and
each holder of a canceled Company Stock Option shall be entitled to receive at
the Effective Time or as soon as practicable thereafter from the Company in
consideration for the cancellation of such Company Stock Option an amount (the
"Option Spread") equal to the product of (i) the number of Shares previously
subject to such Company Stock Option and (ii) the excess, if any, of the Per
Share Amount over the exercise price per share of Company Common Stock
previously subject to such Company Stock Option. The Option Spread, after
reduction for applicable Tax withholding, if any, shall be paid in cash. Upon
the Effective Time, the Company Stock Option Plans shall terminate.
Section 2.08. Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such Shares in accordance with Section 262 of
Delaware Law (collectively, the "Dissenting Shares") shall not be converted into
or represent the right to receive the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such Shares held
by them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon, upon surrender,
in the manner provided in Section 2.09, of the certificate or certificates that
formerly evidenced such Shares.
Section 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior to the
Effective Time, Purchaser shall designate a bank or trust company to act as its
paying agent (the "Paying Agent") who shall also act as agent for the holders of
Shares in connection with the Merger to receive the funds to which holders of
Shares shall become entitled pursuant to Section 2.06(a). Promptly upon receipt,
any such funds shall be invested by the Paying Agent as directed by the
Surviving Corporation, provided that such investments shall be in obligations of
or guaranteed by the United States of America or of any agency thereof and
backed by the full faith and credit of the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or
4
<PAGE> 11
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $500 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, after reduction for any required withholding Tax
and such Certificate shall then be canceled. No interest shall accrue or be paid
on the Merger Consideration payable upon the surrender of any Certificate for
the benefit of the holder of such Certificate. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other Taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such Taxes
either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and thereafter such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the Company. From
and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
(e) Parent and/or the Surviving Corporation shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts, if any, as Parent and/or the Surviving
Corporation is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign Tax
law. To the extent that amounts are so withheld by Parent and/or the Surviving
Corporation, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent and/or the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that:
Section 3.01. Organization and Qualification; Subsidiaries. (a) Each of
the Company and each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its
5
<PAGE> 12
jurisdiction of organization and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect (as defined below). Each of the Company and each
Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. A true and complete list of all
the Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary and the percentage of the outstanding capital stock of each
Subsidiary owned by the Company and each other Subsidiary, is set forth in
Schedule 3.01. Except as disclosed in Schedule 3.01, the Company and its
Subsidiaries does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
Section 3.02. Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Certificate of
Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation and By-Laws or equivalent organizational documents are in full
force and effect, and neither the Company nor any Subsidiary is in violation of
any provision thereof.
Section 3.03. Capitalization. The authorized capital stock of the Company
consists of 100,000,000 Shares. As of the date hereof, (i) 16,513,800 Shares are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable and free of preemptive rights, (ii) 111,200 Shares are held in the
treasury of the Company, (iii) no Shares are held by the Subsidiaries and (iv)
1,200,000 Shares are reserved for future issuance pursuant to employee stock
options granted pursuant to the Company's Stock Option Plans. Except as set
forth in this Section 3.03, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Subsidiary. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Schedule 3.03 contains a list of
all options to purchase any capital stock of the Company. There are no
outstanding contractual obligations of the Company or any Subsidiary to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary or any other person other than to agents and
wholly owned Subsidiaries of the Company, in the ordinary course of business
consistent with past practice. There are no commitments, understandings,
restrictions or arrangements obligating the Company to purchase, redeem or
acquire, or register under any securities law any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe to any shares of capital stock of the Company. Except for any
obligations in connection with this Agreement, there are not as of the date
hereof, and there will not be at the Closing Date, any stockholder agreement,
voting trust or other agreements or understandings to which the Company is a
party or to which it is bound, relating directly or indirectly to any Company
Common Stock.
Section 3.04. Authority Relative to this Agreement. (a) The Company has
all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby (the "Transactions"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the Transactions
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the then outstanding Shares if and to the extent
required by applicable law, and the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Purchaser, constitutes a legal, valid and
binding obligation of the Company.
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(b) Schedule 3.04(b) lists all material permits, registrations, licenses,
franchises, certifications and other approvals, including without limitation,
all money transfer or sale of checks licenses (collectively, the "Company
Approvals") required from any Governmental Authority, in order for the Company
and its Subsidiaries to conduct its business as presently conducted. The Company
has obtained all Company Approvals except where the lack of such Company
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is subject to, nor bound
by, any agreement with, or judgment, decree or order issued by, any Governmental
Authority which, individually or in the aggregate, has a Material Adverse
Effect.
Section 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement and the consummation of the Transactions by the
Company will not, (i) conflict with or violate the Certificate of Incorporation
or By-laws or equivalent organizational documents of the Company or any
Subsidiary, (ii) except as set forth in Schedule 3.05(a), conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected other than conflicts or violations that
would not, individually or in the aggregate, have a Material Adverse Effect, or
(iii) except as set forth on Schedule 3.05(a), result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, other than
breaches or defaults that would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement and the consummation of the Transactions
by the Company will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and
filing and recordation of appropriate merger documents as required by Delaware
Law, (ii) requirements of state and foreign banking, currency or other
regulatory authorities (all of which requirements including, without limitation,
the identification of all authorizations, consents or approvals required to
consummate the Offer ("Pre-Offer Approvals") are set forth in Schedule 3.05(b))
and (iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent the Company from
performing its obligations under this Agreement, and would not, individually or
in the aggregate, have a Material Adverse Effect.
Section 3.06. Compliance. Except as set forth on Schedule 3.06, neither
the Company nor any Subsidiary is in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected, including, without limitation, the Foreign
Corrupt Practices Act of 1977, as amended, the Money Laundering Control Act, and
the Bank Secrecy Act, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
affected, except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.07. SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
December 11, 1996 and has heretofore made available to Parent, in the form filed
with the SEC, (i) its Registration Statement on Form S-1, as amended, filed with
the SEC on December 11, 1996, (ii) its Annual Reports on Form 10-K for the
fiscal years ended December 31, 1996 and 1997, (iii) all proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
held since December 31, 1996 and (iv) all other forms, reports and other
registration statements filed by the Company with the SEC since January 1, 1996
(the forms, reports and
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other documents referred to in clauses (i), (ii), (iii) and (iv) above being
referred to herein, collectively, as the "SEC Reports"). The SEC Reports (i)
were prepared in accordance with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and each fairly presented the consolidated
financial position, results of operations and changes in financial position of
the Company and the Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (except as otherwise noted therein and
subject, in the case of unaudited statements, to normal and recurring year-end
adjustments).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the Subsidiaries as at December 31, 1997, including the notes
thereto (the "1997 Balance Sheet"), neither the Company nor any Subsidiary has
any liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles, except for
liabilities and obligations (i) incurred in the ordinary course of business
consistent with past practice since December 31, 1997, (ii) that would not,
individually or in the aggregate, have a Material Adverse Effect or (iii) as set
forth on Schedule 3.07(c).
(d) The Transactions Summaries, dated March 10, 1998 and April [1], 1998,
provided to Parent and Purchaser by the Company, accurately sets forth the
number of transactions sent and received by the Company and its Subsidiaries
during the 1997 fiscal year and January and February 1998.
Section 3.08. Absence of Certain Changes or Events. From December 31, 1997
through the date hereof, except as set forth on Schedule 3.08 or disclosed in
any SEC Report, there has not been (i) a Material Adverse Effect, (ii) any
material change by the Company in its accounting methods, principles or
practices, (iii) any entry by the Company or any Subsidiary into any contract
material to the Company and the Subsidiaries, taken as a whole, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities or (v) other than pursuant to the contracts
specified in Section 3.10 and Annex B, any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any Subsidiary, except in the ordinary course of business
consistent with past practice.
Section 3.09. Absence of Litigation. Except as set forth on Schedule 3.09,
as of the date hereof, there is no claim, action, proceeding or investigation
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary, or any property or asset of the Company or any Subsidiary,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect. As of the date hereof,
neither the Company nor any Subsidiary nor any property or asset of the Company
or any Subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Material
Adverse Effect.
Section 3.10. Employee Benefit Plans. (a) Schedule 3.10(a) contains a true
and complete list of all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all material bonus, stock option, incentive, deferred
compensation, severance or other benefit plans, programs or arrangements, and
all material employment, termination, severance or other contracts or agreements
to which the Company or any Subsidiary is a party, with respect to which the
Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the
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Company or any Subsidiary (collectively, the "Plans"). Each Plan is in writing
and the Company has previously made available to Parent a true and complete copy
of (i) each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the most recently filed
Internal Revenue Service (the "IRS") Form 5500. Neither the Company nor any
Subsidiary has any express or implied commitment (i) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide material
compensation or benefits to any individual or (iii) to modify or terminate any
Plan, other than with respect to a modification, change or termination required
by ERISA or the Code.
(b) Other than as specifically disclosed in Schedule 3.10(a), none of the
Plans are subject to Title IV of ERISA. The Company does not maintain or
contribute to any Voluntary Employee Benefit Association under Section 501(c)(9)
of the Code. Other than as specifically disclosed in Schedule 3.10(a), none of
the Plans (i) provides for the payment of separation, severance, termination or
similar-type benefits to any person, (ii) obligates the Company or any
Subsidiary to pay separation, severance, termination or other benefits as a
result of any Transaction or (iii) obligates the Company or any Subsidiary to
make any payment or provide any benefit that could be subject to a tax under
Section 4999 of Code. Other than as specifically disclosed in Schedule 3.10(a),
none of the Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of the
Company or any Subsidiary. The Company is not a Party to any Multi-Employer Plan
as that term is defined in ERISA.
(c) Each Plan which is intended to be qualified under Section 401(a) of the
Code is so qualified, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code is so exempt, it being understood that the Company has yet to file a
determination letter request with the IRS with regard to such plans.
(d) There has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan that could
reasonably be expected to result in a material liability to the Company or any
Subsidiary. The Company has not incurred any material liability under, arising
out of or by operation of Title IV of ERISA (other than liability for premiums
to the Pension Benefit Guaranty Corporation arising in the ordinary course). No
Reportable Event (within the meaning of Section 4043 of ERISA) has occurred or
is expected to occur with respect to any Plan subject to Title 4 of ERISA other
than a Reportable Event with respect to which the 30-day notice requirement has
been waived).
(e) Each Plan is now and has been operated in all material respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and each Subsidiary has
performed all material obligations required to be performed by them under, are
not in any material respect in default under or in violation of, and has no
knowledge of any material default or violation by any party to, any Plan. No
Plan is under audit or investigation by any Governmental Authority nor has the
Company or any Subsidiary been notified of any audit or investigation.
(f) The Company and the Subsidiaries have not incurred any liability under,
and have complied in all material respects with, the Worker Adjustment
Retraining Notification Act and the regulations promulgated thereunder ("WARN")
and do not reasonably expect to incur any such liability as a result of actions
taken or not taken prior to the Effective Time. Schedule 3.10(f) lists (i) all
the employees terminated or laid off by the Company or any Subsidiary during the
90 days prior to the date hereof and (ii) all the employees of the Company or
any Subsidiary who have experienced a reduction in hours of work of more than
50% during any month during the 90 days prior to the date hereof and describes
all notices given by the Company and the Subsidiaries in connection with WARN.
The Company will, by written notice to Parent and Purchaser, update Schedule
3.10(f) to include any such terminations, layoffs and reductions in hours from
the date hereof through the Effective Time and will provide Parent and Purchaser
with any related information which they may reasonably request.
(g) Except as set forth in Schedule 3.10(g) the Company and its
Subsidiaries do not have any Plan that is not subject to the laws of the United
States or governed by the laws of any other country (a "Foreign Plan"). With
respect to each Foreign Plan: (i) each Foreign Plan required to be registered
has been registered and has been maintained in good standing with applicable
regulatory authorities. Each Foreign Benefit Plan is
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now and has always been operated in full compliance with all applicable
non-United States laws. No Foreign Benefit Plan is under audit, or notice of
audit or investigation; (ii) all employer and employee contributions to each
Foreign Plan required by law or by the terms of such Foreign Plan have been
made, or if applicable, accrued in accordance with normal accounting practices
and a pro rata contribution for the period prior to and including the Effective
Time has been made or accrued; and (iii) the fair market value of the assets of
each funded Foreign Plan, the liability of each insurer of any Foreign Plan
funded through insurance, or the book reserve established by the Company for any
Foreign Plan, together with any accrued contributions, is sufficient to procure
or provide for the benefits determined on any ongoing basis (actual or
contingent) accrued to the Effective Time with respect to all current and former
participants under such Plan according to actuarial assumptions and valuations
most recently used to determine employer contributions to such Plan or benefit
liabilities for such Plan and no transaction contemplated by this Agreement
shall cause such assets or insurance obligations to be less than such benefit
obligations.
Section 3.11. Labor Matters. (i) There are no controversies pending, or,
to the knowledge of the Company, threatened between the Company or any
Subsidiary and any of their respective employees, which controversies have or
could have a Material Adverse Effect, and (ii) neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary
or, to the knowledge of the Company, are there any activities or proceedings of
any labor union to organize any such employees.
Section 3.12. Offer Documents; Schedule 14D-9; Proxy Statement. Neither
the Schedule 14D-9 nor any information supplied by the Company for inclusion in
the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to stockholders of the Company or at the
expiration date or the date of purchase, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. Neither the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting (as hereinafter defined) or the information statement to
be sent to such stockholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, being referred to herein as
the "Proxy Statement"), shall, at the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, at the
time of the Stockholders' Meeting and at the Effective Time, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. The Schedule 14D-9 and the Proxy
Statement shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
Section 3.13. Taxes. Except as disclosed on Schedule 3.13, the Company and
each of its Subsidiaries, its previously owned subsidiaries and any affiliated
group within the meaning of Section 1504 of the Code of which the Company, its
Subsidiaries or previously owned Subsidiaries is or has been a member (each a
"Taxpayer") has timely filed, or caused to be timely filed all Returns required
to be filed and all such Returns were complete and accurate in all material
respects, and has paid, collected or withheld, or caused to be paid, collected
or withheld, all Taxes required to be paid, collected or withheld, other than
(i) such Taxes for which adequate reserves in the Company's financial statements
have been established or which are being contested in good faith or (ii) such
Taxes that, individually or in the aggregate, would not have a Material Adverse
Effect. Neither the IRS nor any other taxing authority or agency, domestic or
foreign, is now asserting or, to the best knowledge of the Company, threatening
to assert against the Company or any Subsidiary any deficiency or claim for
additional Taxes or interest thereon or penalties in connection therewith that
individually or in the aggregate, would have a Material Adverse Effect. Neither
the Company nor any Subsidiary has made an election under Sections 341(f) or
338(h)(10) of the Code, except as set forth in Schedule 3.13. Except as set
forth on Schedule 3.13, neither the Company nor any of its Subsidiaries is a
party to any Tax sharing agreement or any other agreement with respect to Taxes.
As of the date hereof, the Company has not received
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any notification from the IRS or First Data Corporation, whether formal or
informal, that the IRS has taken or is considering taking a position, which if
upheld, would result in the inability of the Company to use, for accounting
purposes, the deferred tax asset currently reflected in the financial
statements. The Company will take no action with respect to the tax treatment of
such deferred tax asset prior to the consummation of the Offer.
Section 3.14. Brokers. No broker, finder or investment banker (other than
Morgan Stanley) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Morgan
Stanley pursuant to which such firm would be entitled to any payment relating to
the Transactions.
Section 3.15. Certain Contracts. The contracts listed on Schedule 3.15
between the Company and First Data Corporation or its Affiliates, and the agent
agreement between the Company (as assignee) and Banco Nacional de Mexico, S.N.C.
("Banamex") are valid, binding and legal obligations of the parties, enforceable
in accordance with their respective terms, and are in full force and effect.
There has been no event and there are no circumstances constituting, and the
execution, delivery and performance of this Agreement and the consummation of
the Transactions will not (i) constitute a breach of or an event of default (or
an event which with notice or lapse of time or both would become such a default)
or (ii) confer upon First Data Corporation or Banamex, as the case may be, any
right of termination, amendment, acceleration, cancellation or withholding of
performance, under such agreements.
Section 3.16. Real Property and Leases. All leases of real property leased
for the use or benefit of the Company or any Subsidiary to which the Company or
any Subsidiary is a party requiring rental payments in excess of $100,000 during
any calendar year are in full force and effect, and there exists no default
under any such lease by the Company or any Subsidiary, nor any event which with
notice or lapse of time or both would constitute a default hereunder by the
Company or any Subsidiary, except as would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.17. Trademarks, Patents, Copyrights and Intellectual
Property. (a) The Company and the Subsidiaries own or possess adequate licenses
or other valid rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
business of the Company and the Subsidiaries as currently conducted or as
contemplated to be conducted, and the Company is unaware of any assertion or
claim challenging the validity of any of the foregoing which would, individually
or in the aggregate, have a Material Adverse Effect. To the knowledge of the
Company, the conduct of the business of the Company and the Subsidiaries as
currently conducted and as contemplated to be conducted does not conflict in any
way with, violate or infringe upon, any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service mark,
copyright, trade secret or other intellectual property of any third party that
would, individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, neither it nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any proprietary information on
terms or in a manner that would, individually or in the aggregate, have a
Material Adverse Effect.
(b) Schedule 3.17(b) sets forth a complete list of each material patent,
trademark or service mark registration, copyright registration and application
therefor, and a complete list of all material software (including any software
being developed by or for the Company) owned, used, licensed, or assigned by or
to the Company which is used in or is reasonably necessary to conduct the
business and operations of the Company and its Subsidiaries ("Intellectual
Property").
(c) Except as set forth on Schedule 3.17(c) and as would not, individually
or in the aggregate, have a Material Adverse Effect:
(i) The Company or a Subsidiary is the sole and exclusive owner of, or
has the unrestricted right to use, any and all Intellectual Property and
all items of Intellectual Property are valid and subsisting and
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Schedule 3.17(b) identifies the owner, licensor and licensee of each item
of Intellectual Property, as applicable; and
(ii) The use, licensing or sale by or to the Company or its
Subsidiaries of any of the Intellectual Property does not require the
acquiescence, agreement or consent of any third party. In addition, to the
Company's knowledge, the Intellectual Property and the products and
services of the Company and its Subsidiaries are not subject to a challenge
or claim of infringement, interference or unfair competition or other claim
and the Intellectual Property is not being infringed upon or violated by
any third party.
Section 3.18. Environmental Matters. To the knowledge of the Company or as
would not, individually or in the aggregate, have a Material Adverse Effect: (i)
the Company and its Subsidiaries have not violated and are not in violation of
any Environmental Law; (ii) none of the properties owned or leased by the
Company or any Subsidiary (including, without limitation, soils and surface and
ground waters) are contaminated with any Hazardous Substance; (iii) the Company
and its Subsidiaries are not liable for any off-site contamination; (iv) the
Company and its Subsidiaries are not liable under any Environmental Law
(including, without limitation, pending or threatened liens); (v) the Company
and its Subsidiaries have all permits, licenses and other authorizations
required under any Environmental Law ("Environmental Permits"); and (vi) the
Company and its Subsidiaries are in compliance with their Environmental Permits.
Section 3.19. Statute Takeover Statutes. The Board of Directors of the
Company has approved the Merger and any related transactions, and, to the
knowledge of the Company, no provision of any Takeover Statute will prevent,
impair, impede or prevent, any Transactions. Section 203 of Delaware Law is and
shall be inapplicable to the Merger, the other Transactions and this Agreement.
Section 3.20. Insurance. Schedule 3.20 contains a description of all
policies of fire, liability, workers' compensation and other forms of insurance
providing insurance coverage to or for the Company or its Subsidiaries
(including any such policies which name the Company or its Subsidiaries as a
loss payee or pursuant to which such party otherwise has rights). The Company
and/or its Subsidiaries is a named insured under such policies owned by them,
all premiums with respect thereto have been paid when due and no notice of
cancellation or termination has been received with respect to any such policy.
In the three year period ending on the date hereof, neither the Company nor its
Subsidiaries has received any written notice from, or on behalf of, any
insurance carrier relating to or involving an increase in insurance rates
(except to the extent that insurance risks may be increased for similarly
situated risks) or non-renewal of a policy, or requiring or suggesting material
alternation of any of the Company's or its Subsidiaries' assets, purchase of
material addition equipment or material modification of any of the Company's or
any of its Subsidiaries' methods of doing business. Neither the Company nor any
of its Subsidiaries has made any material claim for reimbursement from its
insurance carriers (other than health insurance carriers) since December 11,
1996.
Section 3.21. Agents. Part I of Schedule 3.21 sets forth the five largest
money order agents, the fifteen largest wire transfer agents by send transaction
volume and the five largest wire transfer agents by receive transaction volume
of the Company and its Subsidiaries (collectively, the "Agents"), in each case
during the fiscal year ended December 31, 1997. Except as described in Part II
of Schedule 3.21, with respect to any Agent on the date hereof, (i) no Agent of
the Company or any Subsidiary has canceled or otherwise terminated, or
threatened in writing to cancel or otherwise terminate, its relationship with
the Company or any Subsidiary or has during the twelve months period ending on
the date hereof, decreased materially or limited materially, or threatened to
decrease materially or limit materially, its services to the Company or any
Subsidiary or its usage or purchase of the services of the Company and its
Subsidiaries, and the Company has no knowledge of any material breach by any
Agent of its agency agreements with the Company or any Subsidiary; and (ii)
there has been no event and there are no circumstances constituting an event,
and the execution, delivery and performance of this Agreement and the
consummation of the Transactions will not (x) constitute a breach or an event of
default (or an event which with notice, lapse of time or both, would become such
a default) or (y) confer upon any such Agent any right of termination,
amendment, acceleration, cancellation or withholding of services or payments.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that:
Section 4.01. Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
material adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
Section 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement have been duly and
validly executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes legal, valid
and binding obligations of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms.
Section 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws of either Parent or
Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any property or asset of either of
them is bound or affected, except for any such violations, breaches, defaults or
other occurrences which would not, individually or in the aggregate, have a
material adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
(b) The execution and delivery of this Agreement by Parent and Purchaser do
not, and the performance of this Agreement by Parent and Purchaser will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky
Laws and state takeover laws, the HSR Act, and filing and recordation of
appropriate merger documents as required by Delaware Law, (ii) requirements of
state and foreign banking currency or other regulatory authorities (all of which
requirements are set forth in Schedule 3.05(b)) and (iii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate, have a
material adverse effect on the ability of Parent or Purchaser to perform their
obligations hereunder, or prevent or materially delay the consummation of the
Transactions.
Section 4.04. Financing. Parent has existing commitments from responsible
financial institutions (true and correct copies of which have been provided to
the Company), to enable it to borrow sufficient funds to permit Purchaser to
acquire all the outstanding Shares in the Offer and the Merger.
Section 4.05. Offer Documents; Proxy Statement. The Offer Documents will
not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the
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case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading. The information supplied by Parent for inclusion in
the Proxy Statement will not, on the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, at the
time of the Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the foregoing
documents or the Offer Documents. The Offer Documents shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
Section 4.06. Brokers. No broker, finder or investment banker (other than
Salomon Smith Barney) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Parent or Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01. Conduct of Business by the Company Pending the
Merger. Except as contemplated by this Agreement, neither the Company nor any
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose to do, any of the following without the
prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except for the issuance of a maximum of
1,180,266 Shares issuable pursuant to employee stock options outstanding on
the date hereof) or (ii) any assets of the Company or any Subsidiary except
in the ordinary course of business consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) form any new Subsidiaries or implement the formation of a holding
company or expend any funds in preparation for or implement any corporate
restructuring, including, but not limited to the formation of a holding
company or the merger of any Subsidiary with and into the Company;
(f) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets; (ii) except for borrowings under existing credit
facilities in the ordinary course of business, incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or (iii) except as permitted pursuant to
paragraph (j) below or the posting of letters of credit required by
licensing or regulatory authorities in the ordinary course of business,
make any loans or advances;
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(g) authorize or make capital expenditures in excess of the amounts
set forth on Schedule 5.01(g); provided, however, that (i) before making
any expenditures for the Coleman Bennet Multi-Currency Project, the Company
will involve Purchaser in the selection of a consultant and will not expend
in excess of $5,500,000 for a systems software package or $150,000 in
consulting fees payable to Coleman Bennett, without the consent of
Purchaser, which consent will not be unreasonably withheld or delayed, (ii)
the Company will not make any expenditures for new software or hardware for
the Future System/Year 2000 Project prior to June 1, 1998, but the Company
may incur consulting and similar fees not to exceed $500,000 in aggregate
prior to such date, and (iii) the Company will not make any capital
expenditures other than as set forth in clauses (i) and (ii) above in
excess of $4,000,000 in the aggregate without the prior consent of the
Purchaser, which consent will not be unreasonably withheld or delayed;
(h) other than as set forth in Annex B, increase the compensation
payable or to become payable to its officers or employees, except for
increases in accordance with past practices in salaries or wages of
employees of the Company or any Subsidiary who are not officers of the
Company, or, other than in accordance with existing policies, grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or
any Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(i) other than as required by generally accepted accounting
principles, and except for the reclassification of the financial paper
outstanding from fiduciary liability to operating liability on the balance
sheet, make any change to its accounting policies or procedures;
(j) (i) make any advances to agents or enter into any agreement with
any agent that guarantees or assures payment of minimum aggregate
commissions or which grants any signing or other bonus in an amount in
excess of $1,500,000 in the aggregate; or (ii) enter into any agreement
which would increase the period of time during which any agent retains the
proceeds of money order or wire transfer sales prior to remitting such
proceeds to the Company; provided, however, notwithstanding any other
provision of this Section 5.01, the Company may enter into a contract with
American Express Travel Related Services, Inc. ("American Express")
containing terms substantially similar to those in the draft contract,
version 8, previously provided to the Purchaser if such contract does not
contain any provision that would confer upon American Express any right of
termination, amendment, acceleration, cancellation or withholding of
services or payments upon the consummation of the Offer, the Merger or any
other Transaction;
(k) enter into or amend any agreement with any agent, with respect to
which the credit exposure (measured as actual agent remittances due on any
one Business Day) is greater than $500,000;
(l) establish any new lines of credit or other credit facilities or
replace existing credit facilities with facilities that have terms that are
less favorable to the Company;
(m) pay, settle, discharge or enter into any agreement for the
settlement or compromise of any pending or threatened litigation requiring
payment(s) by the Company or any Subsidiary in excess of $1,000,000 in the
aggregate;
(n) agree in writing, or otherwise, to take any of the foregoing
actions or to take any other action which would make any representation or
warranty of the Company in this Agreement untrue or incorrect in any
material respect; or
(o) make any tax election or settle or compromise any material
federal, state local or foreign income tax liability.
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Section 5.02. Additional Covenants. After the date hereof and prior to the
Effective Time or the earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company covenants and agrees that it shall, and
cause each of its Subsidiaries to:
(a) Conduct their respective businesses in the ordinary and usual
course of business consistent with past practice;
(b) Confer with Parent's designated representatives on a regular and
frequent basis regarding operational matters of a material nature and the
general status of the ongoing business of the Company;
(c) Promptly notify Parent of any significant changes in the business,
financial condition or results of operation of the Company or its
Subsidiaries taken as a whole;
(d) Promptly notify Parent of any judgment, decree, injunction, rule,
notice or order of any Governmental Authority which is reasonably likely to
materially restrict the business of the Company and its Subsidiaries as
currently conducted or is reasonably likely to have a Material Adverse
Effect;
(e) Maintain or renew with financially responsible insurance
companies, (i) insurance on its tangible assets and its business in such
amounts and against such risks and losses as are consistent with past
practice (ii) the Company's existing directors and officers indemnification
insurance; and
(f) Use all reasonable best efforts to preserve the business,
reputation and prospects of the Company and its Subsidiaries and preserve
the current relationships of the Company and its Subsidiaries with
customers, employees, agents, suppliers and other persons with which the
company or any Subsidiary has business relations.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Stockholders' Meeting. (a) If required by applicable law in
order to consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable law and the Company's Certificate of Incorporation
and By-laws, (i) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
this Agreement and the transactions contemplated hereby (the "Stockholders'
Meeting") and (ii) subject to its fiduciary duties under applicable law after
receiving the advice of independent counsel, (A) include in the Proxy Statement
the recommendation of the Board that the stockholders of the Company approve and
adopt this Agreement and the transactions contemplated hereby and (B) use all
reasonable efforts to obtain such approval and adoption. At the Stockholders'
Meeting, Parent and Purchaser shall cause all Shares then owned by them and
their Subsidiaries to be voted in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VII, to take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as soon as reasonably practicable
after such acquisition, without a meeting of the stockholders of the Company.
Section 6.02. Proxy Statement. If required by applicable law, as soon as
practicable following consummation of the Offer, the Company shall file the
Proxy Statement with the SEC under the Exchange Act, and shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC. Parent,
Purchaser and the Company shall cooperate with each other in the preparation of
the Proxy Statement, and the Company shall notify Parent of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Parent promptly copies of all correspondence between the
Company or any representative of the Company and the SEC. The Company shall (i)
give Parent and its counsel the opportunity to review the Proxy Statement prior
to its being filed with the SEC; (ii) give Parent and its counsel the
opportunity to
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review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC; and (iii) consider in good faith the
comments and information provided by Parent, Purchaser and their counsel with
respect thereto. Each of the Company, Parent and Purchaser agrees to use all
reasonable efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Stockholders' Meeting at the
earliest practicable time.
Section 6.03. Company Board Representation; Section 14(f). (a) Promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, in addition to its rights under applicable law and the
Company's Certificate of Incorporation and By-Laws, Purchaser shall be entitled
to designate up to such number of directors, rounded up to the next whole
number, on the Board and the boards of each of its Subsidiaries as shall give
Purchaser representation on the Board and the boards of each of its Subsidiaries
equal to the product of the total number of directors on the Board and the
boards of each of its Subsidiaries (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Purchaser or any Affiliate of Purchaser
following such purchase bears to the total number of Shares then outstanding,
and the Company shall, at such time, promptly take all actions necessary to
cause Purchaser's designees to be elected as directors of the Company and each
of its Subsidiaries, including increasing the size of the Board and the boards
of each of its Subsidiaries or securing the resignations of incumbent directors
or both. At such times, the Company shall use all reasonable efforts to cause
persons designated by Purchaser to constitute the same percentage as persons
designated by Purchaser shall constitute of the Board of each committee of the
Board to the extent permitted by applicable law.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and Affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or By-laws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
waiver of any of the Company's rights hereunder shall require the concurrence of
a majority of the directors of the Company then in office who neither were
designated by Purchaser nor are employees of the Company.
Section 6.04. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents of
Parent and Purchaser and persons providing or committing to provide Parent or
Purchaser with financing for the Transactions reasonable access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company and each Subsidiary, and
shall furnish Parent and Purchaser and persons providing or committing to
provide Parent or Purchaser with financing for the Transactions with all
financial, operating and other data and information as Parent or Purchaser,
through its officers, employees or agents, may reasonably request.
(b) The Company, Parent and Purchaser each agree to promptly advise each
other of any information required to update or correct any documents filed,
published or issued by such parties pursuant to the Offer or pursuant to Section
6.01 or 6.02
(c) All information obtained by Parent or Purchaser pursuant to this
Section 6.04 shall be kept confidential in accordance with the confidentiality
agreement, dated February 11, 1998 (the "Confidentiality Agreement"), between
Parent and the Company.
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Section 6.05. No Solicitation of Transactions. (a) The Company shall, and
shall direct and use reasonable efforts to cause its officers, directors,
employees, representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (as hereinafter defined). The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
or reasonably likely to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal or (ii) participate in any discussions or negotiations regarding any
Acquisition Proposal; provided, however, that if, at any time prior to the
consummation of the Offer, the Board determines in good faith, after receipt of
advice from its outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to an Acquisition Proposal which was not
solicited by or on behalf of the Company subsequent to the date hereof, and
subject to compliance with Section 6.05(b) and (c), (x) furnish information with
respect to the Company to any person pursuant to a customary confidentiality
agreement (as determined by the Company after receipt of advice from its outside
counsel) and (y) participate in negotiations regarding such Acquisition
Proposal. "Acquisition Proposal" means (i) any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of 15% or
more of the assets of the Company and its Subsidiaries or 15% or more of any
class of equity securities of the Company or any of its Subsidiaries, (ii) any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of the Company
or any of its Subsidiaries, (iii) any merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries, other than the
Transactions, or (iv) any other transaction that could reasonably be expected to
prevent or materially delay the consummation of the Offer or the Merger.
(b) Except as set forth in this Section 6.05, neither the Board nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in any manner adverse to Parent or Purchaser, the approval or
recommendation by such Board or committee of the Offer, the Merger, the other
Transactions or this Agreement, (ii) approve or recommend, or propose publicly
to approve or recommend, any Acquisition Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Acquisition Proposal with any Person
other than Parent or its Affiliates. Notwithstanding the foregoing, in the event
that prior to the Offer, the Board determines in good faith, after receipt of
advice from outside counsel, that it is necessary to do in order to comply with
its fiduciary duties to the Company's stockholders under applicable law, the
Board may (A) withdraw or modify its approval or recommendation of the Offer,
the Merger, the other Transactions or this Agreement, or (B) approve or
recommend a Superior Proposal (as hereinafter defined ) or terminate this
Agreement and, if it so chooses, cause the Company to enter into any agreement
with respect to a Superior Proposal. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of the Company's Common
Stock then outstanding or all or substantially all of the assets of the Company
and its Affiliates on terms which the Board determines in its good faith
judgment to be more favorable to the Company's stockholders than the Offer and
the Merger and for which financing is committed or, in the good faith judgment
of the Board, is reasonably likely to be timely obtained, and also taking into
account the likelihood of any prohibition of, or delay in closing, such Superior
Proposal under applicable antitrust law.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.05, if the Company intends to withdraw or amend
its recommendation of the Offer in accordance with this Section 6.05, it shall
give the Purchaser 48 hours advance written notice, such notice to specify the
identity of any third party that has made an Acquisition Proposal and the
material terms of such Acquisition Proposal. Following the delivery of such
notice, the Company will promptly inform the Purchaser of material developments
with respect to such Acquisition Proposal.
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(d) Nothing contained in this Section 6.05 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders.
Section 6.06. Employee Benefits Matters. Annex B hereto sets forth certain
agreements among the parties hereto with respect to the Plans and other employee
benefits matters.
Section 6.07. Directors' and Officers' Indemnification and Insurance. (a)
The Certificate of Incorporation of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article 8, of the Certificate of Incorporation of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would materially and
adversely affect the rights thereunder of individuals who at the Effective Time
were directors, officers, employees, fiduciaries or agents of the Company,
unless such modification shall be required by law.
(b) Regardless of whether the Merger becomes effective, the Company shall
indemnify and hold harmless, and, after the Effective Time, the Surviving
Corporation shall, indemnify and hold harmless, each present and former
director, officer, employee, fiduciary and agent of the Company and each
Subsidiary (collectively, the "Indemnified Parties") to the fullest extent
permitted under the Certificate of Incorporation and the By-laws of the Company
for a period of six years after the date hereof.
(c) Company, Parent and the Surviving Corporation shall use their
respective reasonable best efforts to maintain in effect for six years from the
Effective Time, if available, the current directors' and officers' liability
insurance policies maintained by the Company (provided that Parent and the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that if the existing policies expire, are terminated or
canceled during such period Parent or the Surviving Corporation will use its
reasonable best efforts to obtain substantially similar policies.
Notwithstanding the foregoing, in no event shall Parent or the Surviving
Corporation be required to expend pursuant to this Section 6.07(c) more than an
amount per year equal to 200% of current annual premiums paid by the Company for
such insurance (which premiums the Company represents and warrants to be
$183,352 in the aggregate).
Section 6.08. Further Action; Reasonable Best Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using all reasonable efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and the Subsidiaries as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
Section 6.09. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement, any Transaction or the Company's
earnings for the first quarter of 1998, and shall not issue any such press
release or make any such public statement without the prior consent of the other
parties, except and until as may be required by law or any listing agreement
with a national securities exchange to which Parent or the Company is a party.
Section 6.10. Confidentiality Agreement. The Company hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the consummation of each Transaction. Upon the acceptance for payment of
Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed to
have terminated without further action by the parties thereto.
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Section 6.11. SEC and Stockholder Filings. The Company shall deliver to
Parent in accordance with Section 9.02 a copy of all material public reports and
materials as and when it sends the same to its stockholders, the SEC or any
state or foreign securities commission.
Section 6.12. Takeover Statutes. If any "fair price" "moratorium,"
"control share acquisition" or other similar antitakeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute"), including, without limitation, Section 203 of the Delaware Code, is
or may become applicable to the Offer, the Merger, this Agreement, or any
Transactions, the Company and the members of its Board of Directors (or any
required and duly constituted Committee thereof) will grant such approvals, and
take such actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on any of the transactions contemplated hereby.
Section 6.13. Certain Actions. Following the consummation of the Offer but
prior to the Effective Time, (i) the Company agrees, if requested by the
Purchaser, to issue Shares to the Purchaser representing a maximum of 19.9% of
the Shares outstanding immediately prior to such issuance and (ii) the Company
shall terminate the Credit Agreement between the Company and Northern Trust.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01. Conditions to the Merger. The respective obligations of each
party to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the stockholders of the Company to the extent required by Delaware
Law;
(b) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the
acquisition of Shares by Parent or Purchaser or any Affiliate of either of
them illegal or otherwise preventing consummation of the Transactions; and
(c) Offer. Purchaser or its permitted assignee shall have purchased
all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition shall not be applicable to the
obligations of Parent or Purchaser if Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer in breach
of this Agreement or the terms of the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i) the Offer is not
completed on or before August 30, 1998; provided, however, that the right
to terminate this Agreement under this clause (i) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure to complete the Offer on or
before such date; (ii) the Effective Time shall not have occurred on or
before October 30, 1998; provided, however, that the right to terminate
this
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Agreement under this clause (ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before
such date; or (iii) any Governmental Authority shall have enacted or
promulgated any law, rule or regulation or shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Offer or the Merger or making the acquisition of
Shares by Parent or Purchaser, or any Affiliate thereof, illegal, and such
law, rule, regulation, order, decree, ruling or other action shall remain
in effect or have become final and nonappealable;
(c) By Parent if (i) due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A hereto or
the continuing existence of those conditions set forth in clauses (a)
through (i) in Annex A hereto, Purchaser shall have (A) failed to commence
the Offer within five Business Days following the date of this Agreement,
(B) terminated the Offer without having accepted any Shares for payment
thereunder or (C) failed to pay for Shares pursuant to the Offer within 75
calendar days following the commencement of the Offer, unless such failure
to pay for Shares shall have been caused by or resulted from the failure of
Parent or Purchaser to perform in any material respect any material
covenant or agreement of either of them contained in this Agreement or the
material breach by Parent or Purchaser of any material representation or
warranty of either of them contained in this Agreement; or (ii) prior to
the purchase of Shares pursuant to the Offer, the Board or any committee
thereof shall have withdrawn or modified in a manner adverse to Purchaser
or Parent its approval or recommendation of the Offer, this Agreement, the
Merger or any other Transaction or shall have taken any action to
facilitate (other than as contemplated by this Agreement), approve or
recommend any Acquisition Proposal; or
(d) By the Company, upon approval of the Board, if (i) Purchaser shall
have (A) failed to commence the Offer within five Business Days following
the date of this Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 75 calendar days following the commencement of
the Offer, unless such failure to pay for Shares shall have been caused by
or resulted from the failure of the Company to perform in any material
respect any material covenant or agreement of it contained in this
Agreement or the material breach by the Company of any material
representation or warranty of it contained in this Agreement; or (ii) prior
to the purchase of Shares pursuant to the Offer, the Board shall have
withdrawn or modified in a manner adverse to Purchaser or Parent its
approval or recommendation of the Offer, this Agreement, the Merger or any
other Transaction in order to enter into an agreement for any Acquisition
Proposal.
Section 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(i) as set forth in Sections 6.04, 8.03 and 9.01 and (ii) nothing herein
(including the expiration of representations and warranties in accordance with
Section 9.01) shall relieve any party from liability for any breach hereof.
Section 8.03. Fees. (a) In the event that (x) this Agreement is terminated
pursuant to Section 8.01(c)(ii) or Section 8.01(d)(ii), or (y) this Agreement is
terminated pursuant to Section 8.01(b) and (A) an Acquisition Proposal shall
have been publicly disclosed prior to the date of such termination and (B) a
Superior Proposal shall have been consummated on or prior to the first
anniversary of such termination; then the Company shall pay Parent promptly (but
in no event later than three Business Days after such termination shall have
occurred or such Superior Proposal shall have been consummated, as the case may
be) a fee of $10 million (the "Fee"), which amount shall be payable in
immediately available funds.
(b) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(c) In the event that the Company shall fail to pay the Fee when due, the
Company shall reimburse Parent and the Purchaser for the costs and expenses
actually incurred or accrued by Parent and Purchaser (including, without
limitation, fees and expenses of counsel) in connection with the collection
under and
21
<PAGE> 28
enforcement of this Section 8.03, together with interest on such unpaid Fee,
commencing on the date that the Fee became due, at a rate equal to the rate of
interest publicly announced by Citibank, N.A., from time to time, in the City of
New York, as such bank's Base Rate plus 2%.
Section 8.04. Amendment. Subject to Section 6.03, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that after the approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid only if expressly set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article II and Sections 6.06 and 6.07 shall survive the Effective Time
indefinitely and those set forth in Sections 6.04 and 8.03 shall survive
termination indefinitely.
Section 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent or Purchaser:
Viad Corp
1850 North Central Avenue
Phoenix, Arizona 85077-2212
Attention: Vice President, General Counsel
Fax: (602) 207-5480
with copies to:
Travelers Express Company, Inc.
1550 Utica Avenue South
Minneapolis, Minnesota 55402
Fax: (612) ( 591-3870
Attention: President
Bryan Cave LLP
2800 North Central Avenue
Phoenix, Arizona 85004
Fax: (602) 266-5938
Attention: Frank M. Placenti, Esq.
22
<PAGE> 29
if to the Company:
MoneyGram Payment Systems, Inc.
Park 80 West Plaza 1
Saddle Brook, NJ 07663
Fax: (201) 291-3626
Attention: John Fowler
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax: (212) 848-7179
Attention: Peter D. Lyons
Section 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "Beneficial Owner" with respect to any Shares means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its Affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
Affiliates or associates or person with whom such person or any of its
Affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "Business Day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations, revenue rulings, revenue procedures and announcements
promulgated thereunder. All citations to the Code or to the regulations
promulgated thereunder shall include any amendments or any substitute or
successor provisions thereto.
(e) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(f) "Environmental Laws" means any federal, state or local law, as in
effect on the date hereof, relating to (A) releases or threatened releases
of Hazardous Substances or materials containing Hazardous Substances; (B)
the manufacture, handling, transport, use, treatment, storage or disposal
of Hazardous Substances or materials containing Hazardous Substances; or
(C) otherwise relating to pollution of the environment or the protection of
human health.
23
<PAGE> 30
(g) "Government Authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic and whether national, federal, state, provincial or
local.
(h) "Hazardous Substances" means (A) those substances defined in or
regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder; the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (B) petroleum and petroleum products
including crude oil and any fractions thereof; (C) natural gas, synthetic
gas and any mixtures thereof; (D) radon; (E) any substance with respect to
which a federal, state or local agency requires environmental
investigation, monitoring, reporting or remediation.
(i) "Material Adverse Effect" means any change, effect, condition,
event or circumstance that is or is reasonably likely to be materially
adverse to the business, financial condition, assets, properties or results
of operations of the Company and the Subsidiaries, taken as a whole,
including, (x) termination of the Company's Agency Agreement with Banamex
or (y) termination of the Company's agency agreements with agents (other
than American Express Travel Related Services Company, Inc. and Safeway,
Inc.), representing ten percent or more of the aggregate send or receive
transaction volume either sent or received by the Company and its
Subsidiaries during 1997; provided, however, that "Material Adverse Effect"
shall not include any change, effect, condition, event or circumstance
arising out of or attributable to (i) any decrease in the market price of
the Shares (but not any change, effect, condition, event or circumstance
underlying such decrease to the extent that it would otherwise constitute a
Material Adverse Effect), (ii) changes, effects, conditions, events or
circumstances that generally affect the industries in which the Company
operates (including legal and regulatory changes), (iii) general economic
conditions or change, effects, conditions or circumstances affecting the
securities markets generally, (iv) changes arising from the consummation of
the Transactions or the announcement of the execution of this Agreement,
(v) any reduction in the price of services or products offered by the
Company in response to the reduction in price of comparable services or
products offered by a competitor, (vi) any of the items set forth in
Schedule 9.03(e).
(j) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
(k) "Returns" shall mean all returns, declarations, reports,
statements, and other documents required to be filed with any government or
taxing authority in respect of Taxes, and the term "Return" shall mean any
one of the foregoing Returns.
(l) "SEC" means the U.S. Securities and Exchange Commission.
(m) "SEC Rules" means any rules, regulations or interpretations of the
SEC or the staff thereof.
(n) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an Affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
(o) "Tax" or "Taxes" shall mean (A) all federal, state and local and
foreign taxes and assessments of any nature whatsoever, based on the laws
and regulations in effect from time to time through the Closing Date,
including, without limitation, all income, profits, franchise, gross
receipts, capital, sales, use, withholding, value added, ad valorem,
transfer, employment, social security, disability, occupation, property,
severance, production, exercise, environmental and other taxes, duties and
other similar governmental charges and assessments imposed by or on behalf
of any government or taxing authority, including all interest, penalties
and additions imposed with respect to such amounts, and (B) any obligations
under any agreements or arrangements with respect to any Taxes described in
clause (A) above.
24
<PAGE> 31
Section 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
Section 9.05. Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes, except as set forth in Sections 6.04 and 6.10, all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Purchaser may assign all
or any of their rights and obligations hereunder to any wholly-owned Subsidiary
of Parent provided that no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not perform such obligations.
Section 9.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.06 and 6.07 (which is intended to be for
the benefit of the persons covered thereby and may be enforced by such persons).
Section 9.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Delaware state court.
Section 9.08. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 9.09. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
25
<PAGE> 32
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
VIAD CORP
A Delaware Corporation
By /s/ PHILIP W. MILNE
----------------------------------
Name: Philip W. Milne
Title: Authorized Agent; President
and CEO of Travelers Express
Company, Inc.
PINE VALLEY ACQUISITION
CORPORATION
A Delaware Corporation
By /s/ PHILIP W. MILNE
----------------------------------
Name: Philip W. Milne
Title: President and CEO
MONEYGRAM PAYMENT
SYSTEMS, INC.
A Delaware Corporation
By /s/ JAMES F. CALVANO
----------------------------------
Name: James F. Calvano
Title: Chairman and CEO
26
<PAGE> 33
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (w) the Minimum Condition shall
not have been satisfied, (x) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer,
(y) any Pre-Offer Approval shall not have been obtained, (z) at any time on or
after the date of this Agreement, and prior to the acceptance for payment of
Shares, any of the following conditions shall exist:
(a) there shall be pending before any court any action or proceeding
instituted by any Governmental Authority (i) that is reasonably likely to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their Subsidiaries, of all or any material portion of the
business or assets of the Company and the Subsidiaries, taken as a whole,
or any material portion of the business or assets of Parent and its
Subsidiaries, taken as a whole, or to compel the Company, Parent or any of
their Subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company and the Subsidiaries,
taken as a whole, or Parent and its Subsidiaries taken as a whole, as a
result of the Transactions; (ii) reasonably likely to impose or confirm
limitations on the ability of Parent or Purchaser to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's Stockholders
including, without limitation, the approval and adoption of this Agreement
and the transactions contemplated hereby; or (iii) seeking to require
divestiture by Parent or Purchaser of any Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued and deemed
applicable to (i) Parent, the Company or any Subsidiary or Affiliate of
Parent or the Company or (ii) any Transaction, by any Governmental
Authority, domestic or foreign, which is reasonably likely to result,
directly or indirectly in any of the consequences referred to in clauses
(i) through (iii) of paragraph (a) above;
(c) there shall have occurred, and be continuing, any change,
condition, event or other development that, individually or in the
aggregate, has a Material Adverse Effect;
(d) any representation or warranty of the Company in this Agreement,
that is qualified by materiality or Material Adverse Effect shall not be
true and correct or, without regard to such qualification, any such
representations or warranties shall not be true and correct so as to in
aggregate have a Material Adverse Effect, or any representation or warranty
not so qualified shall not be true and correct in all material respects, in
each case as if such representation or warranty was made as of such time on
or after the date of this Agreement (except for representations and
warranties made as of a specific date which shall be true and correct as of
such date) or the Company shall not have delivered to Parent a certificate
of the Company to such effect signed by a duly authorized officer thereof
and dated as of the date on which Parent shall first accept Shares for
payment.
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(f) this Agreement shall have been terminated in accordance with its
terms; or
(g) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by
A-1
<PAGE> 34
Purchaser or Parent in whole or in part at any time and from time to time in
their sole discretion. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-2
<PAGE> 35
ANNEX B
AGREEMENT RESPECTING THE PLANS
AND OTHER EMPLOYEE BENEFIT MATTERS
1. IN GENERAL
Parent hereby agrees that for a period of two years immediately following
the Effective Time, it shall, or shall cause the Surviving Corporation and its
Subsidiaries to, continue to maintain employee benefit and welfare plans,
programs, contracts, agreements, severance plans and policies (each referred to,
for purposes of this paragraph, as a "plan"), for the benefit of active
employees of the Company and its Subsidiaries which in the aggregate provide
benefits that are comparable to, and no less favorable than, the benefits
provided to such active employees pursuant to the plans set forth in Sections A,
B and F of Schedule 3.10(a) Part I on the date hereof, or to provide during such
period benefits equivalent to those provided under corresponding plans of
Travelers Group or its Subsidiaries if such benefits are greater. Parent hereby
guarantees the Surviving Corporation's performance of the obligations under this
paragraph.
2. CERTAIN CONTRACTS
Parent and Purchaser hereby agree to honor, without modification, and after
the purchase of Shares pursuant to the Offer, Parent agrees to cause the Company
and its Subsidiaries to honor, all contracts, agreements, arrangements,
policies, plans and commitments of the Company (or any of its Subsidiaries) in
effect as of the date hereof which are applicable to any employee or former
employee or any director or former director of the Company (or any of its
Subsidiaries), including, without limitation, the Company Executive Retention
Plan dated May 13, 1997, as amended on July 8, 1997 and July 21, 1997.
3. CERTAIN PLANS
Parent and Purchaser hereby agree to allow active employees of the Company
to be eligible to participate in incentive compensation plans and stock option
plans of Travelers Group or its Subsidiaries on terms comparable to the terms on
which employees of comparable status and seniority at other comparable
Subsidiaries of Parent participate.
B-1
<PAGE> 1
Exhibit 2
[MoneyGram Logo]
April 10, 1998
Dear Stockholder:
I am pleased to report that, on April 14, 1998, MoneyGram Payment Systems,
Inc. entered into a merger agreement with Viad Corp and its wholly owned
subsidiary that provides for the acquisition of MoneyGram by Viad at a price of
$17.00 per share in cash. Under the terms of the proposed transaction, a Viad
subsidiary is today commencing a cash tender offer for all outstanding shares of
MoneyGram common stock at $17.00 per share. Following the successful completion
of the Viad tender offer, the Viad subsidiary will be merged into MoneyGram and
all shares not purchased in the Viad tender offer will be converted into the
right to receive $17.00 per share in cash in the merger.
YOUR BOARD OF DIRECTORS, HAS UNANIMOUSLY APPROVED THE VIAD TENDER OFFER AND
DETERMINED THAT THE TERMS OF EACH OF THE TENDER OFFER AND THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, MONEYGRAM AND ITS STOCKHOLDERS. ACCORDINGLY, THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL MONEYGRAM STOCKHOLDERS ACCEPT
THE VIAD TENDER OFFER AND TENDER THEIR SHARES TO VIAD.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission. These
factors included the opinion of Morgan Stanley & Co. Incorporated, financial
advisors to MoneyGram, that the cash consideration of $17.00 per share to be
received by MoneyGram stockholders pursuant to the Viad tender offer and the
merger is fair from a financial point of view to such stockholders.
Enclosed is MoneyGram's Solicitation/Recommendation Statement on Schedule
14D-9 and Viad's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to carefully read the
enclosed materials, including Morgan Stanley's fairness opinion which is
attached to the Schedule 14D-9.
The management and directors of MoneyGram thank you for the support you
have given the Company.
Sincerely,
/s/ JAMES F. CALVANO
JAMES F. CALVANO
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 3
[VIAD CORP LETTERHEAD]
NEWS
FOR IMMEDIATE RELEASE
CONTACT: William Peltier
(602) 207-5812
[email protected]
April 6, 1998
VIAD CORP TO ACQUIRE MONEYGRAM PAYMENT SYSTEMS, INC.
------------------------
MONEYGRAM TO BE COMBINED WITH TRAVELERS EXPRESS COMPANY
PHOENIX, Ariz., April 6, 1998 -- Viad Corp (NYSE:VVI), and MoneyGram Payment
Systems, Inc. (NYSE:MNE), announced today that they have signed a definitive
agreement in which Viad will acquire MoneyGram, one of the nation's leading
money wire transfer companies. Viad will commence a cash tender offer no later
than April 10th for all outstanding MoneyGram shares at a purchase price of $17
per share. MoneyGram's 1997 revenues were $141 million. The offer is subject to
customary conditions, including regulatory approvals and the valid tender of a
majority of MoneyGram's outstanding shares.
The transaction will be non-dilutive to Viad's 1998 income from continuing
operations and is expected to be accretive to Viad's 1999 earnings per share.
Viad's cost of the acquisition is expected to be $287 million, excluding
transaction costs. The board of directors of MoneyGram has recommended approval
of the transaction.
The MoneyGram business is intended to be part of Viad's Travelers Express
Company of Minneapolis, the nation's largest money order and second largest
electronic bill payment services company.
"We are very pleased to be bringing together MoneyGram and Travelers
Express," said Robert H. Bohannon, Viad's chairman, president, and chief
executive officer. "The acquisition is a big move toward accelerating growth in
one of our leading core businesses -- financial payment systems. It allows us to
quickly enter the billion dollar global wire transfer market while providing
cross-marketing opportunities for both money order and money wire transfer
products."
Headquartered in Lakewood, Colo., MoneyGram was formed in 1988 by American
Express and became a separate publicly traded company in 1996 following its FTC
mandated divestiture by First Data Corporation, a former subsidiary of American
Express.
"We are excited about the combination of these complimentary businesses,"
said James F. Calvano, MoneyGram's chairman and chief executive officer. "This
transaction addresses many of the strategic challenges MoneyGram has faced in
the marketplace, particularly in distribution and technology, and presents an
outstanding opportunity to grow our business."
The wire transfer market has been growing 20 to 30 percent per year for the
last ten years. MoneyGram is operating in more than 100 countries, with its
strongest presence in the wire transfer of money from the U.S. to Mexico. The
company's agent network in Latin America is increasing, and the company recently
added agents in the U.K., Spain, Germany, Switzerland, Belgium, Norway and
Ireland.
Philip W. Milne, president and chief executive officer of Travelers
Express, said, "MoneyGram's strong brand awareness and consumer recognition
provides a great fit with our Travelers Express money order and retail
electronic bill payment businesses. Combining our 47,000 retail locations with
22,000 MoneyGram locations, gives us a tremendous opportunity for cross-selling
our products. This is a further step in our long-term strategy to put together a
comprehensive package of financial services for consumers and financial
institutions."
<PAGE> 2
Travelers Express has completed six acquisitions since 1996, including
Financial Services Management Corp., the nation's leading processor of rebate
checks, and Game Financial Corporation, a company providing casinos with cash
access services for patrons through the use of credit card cash advances, check
cashing and automated teller machines.
In addition to money wire transfer, MoneyGram provides express bill payment
services, phone card sales and money orders through a number of its agent
locations in the U.S., all of which complement and add to Travelers Express'
product lines.
Established in 1940, Travelers Express sells 275 million money orders
annually, and also provides official check, share draft processing, and
electronic bill payment services for financial institutions. Its payment systems
group serves more than 5,000 banks, credit unions and other financial
institutions. Travelers Express annually processes about 750 million payment
transactions valued at approximately $100 billion.
Salomon Smith Barney advised Viad Corp on the transaction, and Morgan
Stanley Dean Witter advised MoneyGram.
Viad Corp is a $2.5 billion S&P MidCap 400 services company with interests
in payment services, airline catering, convention services and travel and
leisure. Headquarters are in Phoenix, Ariz.
# # # #
2
<PAGE> 1
VIAD CORP
EXHIBIT 4
CONTACT: William Peltier
(602) 207-5812
[email protected]
PRESS RELEASE
------------------------
VIAD COMMENCES CASH TENDER OFFER
FOR ALL OUTSTANDING SHARES OF MONEYGRAM PAYMENT
SYSTEMS, INC. AT $17.00 PER SHARE
PHOENIX, Ariz., April 10, 1998 -- Viad Corp (NYSE:VVI), today announced
that Pine Valley Acquisition, Viad's newly formed wholly owned subsidiary has
commenced a cash tender offer for all outstanding shares of the common stock of
MoneyGram Payment Systems, Inc. at $17.00 a share.
The offer is being made pursuant to the previously announced merger
agreement among Viad Pine Valley Acquisition Corporation and MoneyGram. The
offer is conditioned upon, among other things, the tender of a majority of the
outstanding shares of MoneyGram on a fully diluted basis, the expiration or
termination of the HSR Act waiting period and receipt of regulatory approvals.
The tender offer and withdrawal rights are scheduled to expire at 12:00
noon, New York City time, on Friday, May 8, 1998.
Salomon Smith Barney is acting as the Dealer Manager and MacKenzie
Partners, Inc. is acting as the Information Agent in connection with the offer.
The information filed with the Securities and Exchange Commission in connection
with the tender offer may be obtained by calling MacKenzie Partners, Inc.
collect at (212) 929-5500 or toll free at (800) 322-2885.
Viad Corp is a $2.5 billion S&P MidCap 400 services company with interests
in payment services, airline catering, convention services and travel and
leisure.
<PAGE> 1
Exhibit 6
February 11, 1998
Mr. Robert Bohannon
Chief Executive Officer
Viad Corp
1850 North Central Ave.
Phoenix, AZ 85077
CONFIDENTIALITY AGREEMENT
Dear Mr. Bohannon:
In connection with your interest in a potential acquisition transaction
(the "Transaction") involving MoneyGram Payment Systems, Inc. (the "Company"),
you have requested that we or our representatives furnish you or your
representatives with certain information relating to the Company or the
Transaction. All such information (whether written or oral) furnished after the
date hereof by us or our directors, officers, employees, affiliates,
representatives (including, without limitation, financial advisors, attorneys
and accountants) or agents (collectively, "our Representatives") to you or your
directors, officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents or your
potential sources of financing for the Transaction (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, the Transaction which contain or reflect
any such information is hereinafter referred to as the "Information." The term
Information does not, however, include information which (i) is or becomes
publicly available other than as a result of a disclosure by you or your
Representatives; (ii) is in the possession of you or your Representative prior
to the date hereof, and was obtained from a source, or becomes available to you
or your Representatives from a source (other than us or our Representatives)
which is in either case, to the best of your knowledge or your Representatives'
knowledge, is, or was at the time, not prohibited from disclosing such
information to you or your Representative, as the case may be, by a legal,
contractual or fiduciary obligation to us; or (iii) is independently developed
by you or your Representatives.
Accordingly, you hereby agree that:
1. You and your Representatives (i) will keep the Information confidential
and will not (except as otherwise required by law, regulation or legal process,
and only after compliance with paragraph 3 below, or except as expressly
permitted by a definitive acquisition agreement entered into with respect to the
Transaction), without our prior written consent, disclose any Information in any
manner whatsoever, and (ii) will not use any Information other than in
connection with the Transaction; provided, however, that you may reveal the
Information to your Representatives (a) who need to know the Information for the
purpose of evaluating the Transaction, (b) who are informed by you of the
confidential nature of the Information, and (c) who agree to act in accordance
with the terms of this letter agreement. You will cause your Representatives to
observe the terms of this letter agreement, and by any of your Representatives.
2. You and your Representatives will not (except as otherwise required by
law, regulation or legal process, and only after compliance with paragraph 3
below, or except as expressly permitted by a definitive acquisition agreement
entered into with respect to the Transaction), without our prior written
consent, disclose to any person the fact that the Information exists or has been
made available, that you are considering the Transaction or any other
transaction involving the Company, or that discussions or negotiations are
taking or have taken place concerning the Transaction or involving the Company
or any term, condition or other fact relating to the Transaction or such
discussions or negotiations, including, without limitation, the status thereof,
3. In the event that you or any of your Representatives are requested
pursuant to, or required by, law, regulation or legal process to disclose any of
the Information, you will notify us promptly so that we may seek a
<PAGE> 2
protective order or other appropriate remedy or, in our sole discretion, waive
compliance with the terms of this letter agreement. In the event that no such
protective order or other remedy is obtained, or that the Company waives
compliance with the terms of this letter agreement, you will furnish only that
portion of the Information which you are advise by your counsel is legally
required.
4. If you determine not to proceed with the Transaction, you will promptly
inform our Representative, Morgan Stanley & Co. Incorporated ("Morgan Stanley"),
of that decision and, in that case, and at any time upon the request of the
Company or any of our Representatives, you will either (i) promptly destroy, or
cause to be destroyed in connection with your Representatives, all copies of the
written Information in your or your Representatives' possession and confirm such
destruction to us writing, or (ii) promptly deliver, or cause to be delivered in
connection with your Representatives, to the Company at your own expense all
copies of the written Information in your or your Representatives' possession.
Any oral Information will continue to be subject to the terms of this letter
agreement.
5. You acknowledge that neither we, nor Morgan Stanley or its affiliates,
nor our other Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended, makes any express
or implied representation of (sic) warranty as to the accuracy or completeness
of the Information, and you agree that no such person will have any liability
relating to the Information or for any errors therein or omissions therefrom.
You further agree that you are not entitled to rely on the accuracy or
completeness of the Information and that you will be entitled to rely solely on
such representations and warranties as may be included in any definitive
agreement with respect to the Transaction, subject to such limitations and
restrictions as may be contained therein.
6. You are aware, and you will advise your Representatives who are
informed of the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase or
sale of securities by any person who has received material, nonpublic
information from the issuer of such securities and on the communication of such
information to any other person when it is reasonably foreseeable that such
other person is likely to purchase or sell such securities in reliance upon such
information.
7. In consideration of receiving material nonpublic information as
described in the first paragraph of this agreement, and subject to the immediate
paragraph below, you agree that, for a period of one year from the date of this
letter agreement, neither you nor any of your affiliates will, without the prior
written consent of the Company or its Board of Directors: (i) acquire, offer to
acquire, or agree to acquire, directly or indirectly, by purchase or otherwise,
any voting securities or direct or indirect rights to acquire any voting
securities of the Company or any subsidiary thereof, or any assets of the
Company or any subsidiary or division thereof; (ii) make, or in any way
participate in, directly or indirectly, any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities Exchange Commission) to vote, or
seek to advise or influence any person or entity with respect to the voting of,
any voting securities of the Company; (iii) make any public announcement with
respect to, or submit a proposal for, or offer of (with or without conditions)
any extraordinary transaction involving the Company or its securities or assets;
(iv) form, join or in any way participate in a "group" (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) in connection with
any of the foregoing; or (v) request the Company or any of our Representatives,
directly or indirectly, to amend or waive any provision of this paragraph.
In the event that any other person or entity not affiliated or otherwise
acting with you (i) makes an unsolicited public announcement of its desire to
enter into an Acquisition Transaction (as defined below), setting forth a
proposed purchase price and other material terms and conditions of such proposed
transaction, or (ii) enters into an agreement with the Company providing for an
Acquisition Transaction, you may then make any proposal (or request permission
to make any proposal) to engage in an Acquisition Transaction. For purposes of
this Agreement, an "Acquisition Transaction" shall mean any merger or other
business combination or acquisition of any substantial part of the assets or
greater than 25% of the voting stock of the Company.
2
<PAGE> 3
8. You agree that, for a period of eighteen (18) months from the date of
this letter agreement, you will not, directly or indirectly, solicit for
employment any employee of the Company or any of its subsidiaries with whom you
have had contact, or who became known to you, after the date of this letter
agreement in connection with your consideration of the Transaction so long as
they are employed by the Company or any of its subsidiaries and for a period of
three months thereafter. Provided, however, the foregoing restriction on
solicitation of employees does not apply (i) general solicitations for
employment, (ii) to situations in which you have not knowingly solicited for
hire, or assisted in the hiring of, any person presently employed by or for the
Company or any of its subsidiaries, or (iii) individuals who have already
interviewed with you concerning an employment opportunity prior to the date
hereof.
9. You agree that all (i) communications regarding the Transaction, (ii)
requests for additional information, facility tours or management meetings, and
(iii) discussions or questions regarding procedures with respect to the
Transaction, will be first submitted or directed to Morgan Stanley and not to
the Company. You acknowledge and agree that (a) we and our Representatives are
free to conduct the process leading up to a possible Transaction as we and our
Representatives, in our sole discretion, determine (including, without
limitation, by negotiating with any prospective buyer and entering into a
preliminary or definitive agreement without prior notice to you or any other
person), (b) we reserve the right, in our sole discretion, to change the
procedures relating to our consideration of the Transaction at any time without
prior notice to you or any other person, to reject any and all proposals made by
you or any of your Representatives with regard to the Transaction, and to
terminate discussions and negotiations with you at any time and for any reason,
and (c) unless and until a written definitive agreement concerning the
Transaction has been executed, neither of us, our Representatives or your
Representatives will have any liability, other than as set forth herein, with
respect to the Transaction.
10. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by you or by
your Representatives, and, without prejudice to any other rights and remedies
otherwise available to us, you agree that Company shall have the right to
petition for injunctive relief from a court of competent jurisdiction as may be
necessary and appropriate to prevent any unauthorized use of Information by you
or your Representatives, and that you will not oppose such injunction on the
grounds that an adequate remedy is available at law. In the event of litigation
relating to this letter agreement, if a court of competent jurisdiction
determines in a final, nonappealable order that this letter agreement has been
breached by you or by your Representatives, then you will reimburse the Company
for its reasonable costs and expenses (including, without limitation, legal fees
and expenses) incurred in connection with all such litigation.
11. You agree that no failure or delay by us in exercising any right,
power or privilege hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other further exercise thereof
or the exercise of any right, power or privilege hereunder.
Accordingly, Company hereby agrees that:
12. Company and our Representatives will not (except as otherwise required
by law, regulation or legal process), without your prior written consent,
disclose to any person the fact that you are considering the Transaction or any
other transaction involving the Company, or that discussions or negotiations are
taking or have taken place concerning the Transaction or involving you and your
Representatives or any term, condition or other fact relating to the Transaction
or such discussions or negotiations, including, without limitation, the status
thereof.
13. In the event that you are the prevailing party in litigation relating
to this letter agreement, then Company will reimburse you for your costs and
expenses (including, without limitation, legal fees and expenses) incurred in
connection with all such litigation.
Accordingly, the parties hereto hereby agree that:
14. This letter agreement will be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts between residents
of that State and executed in and to be performed in that State.
3
<PAGE> 4
15. All obligations under this letter agreement shall terminate upon the
consummation of a Transaction with you, or one year after the date hereof,
except in connection with paragraph 8 above, which is eighteen (18) months after
the date hereof, whichever shall occur sooner.
16. This letter agreement contains the entire agreement between you and us
concerning the confidentiality of the Information, and no modifications of this
letter agreement or waiver of the terms and conditions hereof will be binding
upon you or us, unless approved in writing by each of you and us.
Please confirm your understanding and agreement with the foregoing by
signing and returning to the undersigned the duplicate copy of this letter
enclosed herewith.
Very truly yours,
MONEYGRAM PAYMENT SYSTEMS, INC.
<TABLE>
<S> <C> <C>
By: /s/ JOHN FOWLER
--------------------------------------
Name: John Fowler
--------------------------------------
Title: Chief Financial Officer
--------------------------------------
</TABLE>
Accepted and Agreed as of the
date first written above.
VIAD CORP
<TABLE>
<S> <C> <C>
By: /s/ PHILIP W. MILNE
----------------------------------------------
Name: Philip W. Milne
----------------------------------------------
Title: President/CEO of Travelers Express Company, Inc.
----------------------------------------------
</TABLE>
4
<PAGE> 1
Exhibit 10
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------)
)
TAAM ASSOCIATES, INC. )
)
Plaintiff, )
)
v. ) C.A. No. 16305-NC
)
JAMES F. CALVANO, ROBBIN L. AYERS, )
JOHN M. FOWLER, BRIAN J. FITZPATRICK, )
WILLIAM D. GUTH, SANFORD MILLER, )
MONEYGRAM PAYMENT SYSTEMS, INC., )
AND VIAD CORP., )
)
Defendants. )
- ----------------------------------------
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of MoneyGram
Payment Systems, Inc., ("MoneyGram" or the "Company") since prior to the
transaction herein complained of and continuously to date.
2. MoneyGram is a corporation duly organized and existing under the
laws of the State of Delaware. The Company was founded by American Express in
1988 and became a separate publicly-traded company in 1996 following its
federally mandated divesture by First Data Corporation, a former subsidiary of
American Express. MoneyGram provides money wire transfer and express bill
payment services, phone card sales and money orders through agent locations
throughout the United States.
<PAGE> 2
3. Defendant Viad Corp. ("Viad") is a Delaware corporation based in
Phoenix, Arizona and provides payment services, airline catering, convention
services and travel and leisure services.
4. Defendant James F. Calvano is Chairman of the Board and Chief
Executive Officer of the Company.
5. Defendant Robbin L. Ayers is an Executive Vice President and
Director of the Company.
6. Defendant John M. Fowler is an Executive Vice President and
Director of the Company.
7. Defendants Brian J. Fitzpatrick, William D. Guth and Sanford
Miller are Directors of the Company.
8. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of MoneyGram and owe them the
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action on its own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
-2-
<PAGE> 3
10. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of April 10, 1997, there were approximately 16,625,000 shares
of MoneyGram common stock outstanding owned by hundreds, if not thousands, of
record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether defendants have breached their
fiduciary and other common law duties owned by them to plaintiff and the
members of the class; and (ii) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
(d) Defendants have acted in manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent
-3-
<PAGE> 4
or varying adjudications with respect to individual members of the Class, which
would establish incompatible standards of conduct for defendants, or
adjudications with respect to individual members of the Class which would, as
a practical matter, be dispositive of the interests of other members or
substantially impair or impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
11. On January 28, 1998, MoneyGram announced earnings for the fourth
quarter ending December 31, 1997 that were substantially below analysts'
estimates. The Company noted that the fourth-quarter results included charges
for impairment reserves on certain underperforming agent contacts, entered into
prior to 1996, with guaranteed minimum commission payments. Charges were also
recorded for non-recurring expenses of converting MoneyGram operations, which
had been conducted under licenses held by First Data Corporation in various
state jurisdictions, to licenses issued directly to MoneyGram. Additionally, the
Company also took reserves for miscellaneous asset write downs and other items.
As a result of this temporary earnings downturn, the price of MoneyGram stock
has declined and does not reflect the intrinsic value of the Company.
12. On April 6, 1998, MoneyGram and Viad announced that they had
entered into a definitive merger agreement whereby Viad will acquire MoneyGram
in a transaction valued at $287 million. Under the terms of the transaction
as presently proposed, Viad will commence a cash tender offer for all of
MoneyGram's
-4-
<PAGE> 5
outstanding common shares at a price of $17.00 per share. The tender offer will
be followed by a merger in which any untendered shares of MoneyGram will be
acquired for $17.00 per share in cash.
13. Defendants have attempted to portray the Viad offer as fair to the
Company's shareholders by claiming that the $17 per share offer represents 22.5
times analyst's projected earnings for 1998. However, this analysis is flawed
and significantly undervalues the Company because, under Generally Accepted
Accounting Principles ("GAAP"), the Company's projected earnings do not reflect
the value of the Company's $58 million deferred tax asset. Additionally,
analysts' projections of the Company's earnings for 1998 are far from uniform.
For example, James Marks of Credit Suisse First Boston estimates that the
Company will achieve earnings per share of $1.31, which would reduce the price
to earnings multiple on Viad's offer to 13.
14. The price to earnings multiple analysis is also flawed and
seriously undervalues the Company because, under GAAP, MoneyGram's earnings are
significantly reduced by contract amortization charges that are the result of
the Company's separation from First Data Corporation and are not indicative of
conditions under which new agent contracts are being signed. Furthermore, the
projections used by defendants to portray the offer as "fair" are significantly
lower than other estimates. Since, according to the joint press release "[t]he
wire transfer market has been growing 20 to 30 percent per year for the last
ten years," defendants' reliance
-5-
<PAGE> 6
on the price to earnings multiple analysis to justify the offer is seriously
flawed.
15. By entering into the agreement with Viad, the MoneyGram Board has
initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction were not the result of an auction
process or active market check; they were arrived at without a full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the MoneyGram shareholders.
16. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of MoneyGram's
highest transactional value.
17. The Individual Defendants have violated the fiduciary duties owed
to the public shareholders of MoneyGram. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the Company
and invite other bidders, and defendants' failure to provide a market check
demonstrate a clear absence of the exercise of due care and of loyalty to
MoneyGram's public shareholders.
18. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
-6-
<PAGE> 7
(a) Undertake an appropriate evaluation of MoneyGram's net
worth as a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an
attempt to obtain the best value for MoneyGram's public shareholders.
19. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Viad without making the requisite effort to obtain the
best offer possible.
20. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of MoneyGram's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of MoneyGram common stock.
21. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of MoneyGram common stock is
materially in excess of the amount offered for those securities in their merger
giving due consideration to the anticipated operating results, net asset value,
cash flow, and profitability of the Company;
(b) The merger price in not the result of an appropriate
consideration of the value of MoneyGram because the MoneyGram Board approved
the proposed merger without undertaking
-7-
<PAGE> 8
steps to accurately ascertain MoneyGram's value through open bidding or at
least a "market check mechanism"; and
(c) By entering into the agreement with Viad, the Individual Defendants
have allowed the price of MoneyGram stock to be capped, thereby depriving
plaintiff and the Class of the opportunity to realize any increase in the value
of MoneyGram stock.
22. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
23. Defendant Viad has knowingly aided and abetted the breaches of
fiduciary duty committed by the other defendants to the detriment of
MoneyGram's public shareholders. Indeed, the proposed merger could not take
place without the active participation of Viad. Furthermore, Viad and its
shareholders are the intended beneficiaries of the wrongs complained of and
would be unjustly enriched absent relief in this action.
24. Plaintiff and the other members of the Class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment against defendants as follows:
A. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
B. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under,
-8-
<PAGE> 9
in concert with, or for them, from proceeding with, consummating, or closing
the proposed transaction;
C. In the event that the proposed transaction is consummated, rescinding it
and setting it aside, or awarding rescissory damages to the Class;
D. Awarding compensatory damages against defendants, individually and
severally, in an amount to be determined at trial, together with pre-judgment
and post-judgment interest at the maximum rate allowable by law, arising from
the proposed transaction;
E. Awarding plaintiff its costs and disbursements and reasonable allowances
for fees of plaintiff's counsel and experts and reimbursement of expenses; and
F. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By /s/ ILLEGIBLE
--------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
-9-
<PAGE> 1
Exhibit 11
IN THE COURT CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------
HARBOR FINANCE PARTNERS,
Individually Case No. 16306NC
And On Behalf of All Others
Similarly Situated,
Plaintiff,
CLASS ACTION
-against- COMPLAINT
JAMES F. CALVANO, JOHN M.
FOWLER, ROBBIN L. AYERS,
WILLIAM D. GUTH, BRIAN J.
FITZPATRICK, SANFORD MILLER, and
MONEYGRAM PAYMENT SYSTEMS, INC.,
Defendants.
- ---------------------------------
Plaintiff, by its attorneys, alleges upon personal knowledge as to its own
acts and upon information and belief as to all other matters, as follows:
NATURE OF THE ACTION
1. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than defendants, who own the securities of
MoneyGram Payment Systems, Inc. ("MoneyGram" or the "Company"), who are
similarly situated, for injunctive and other appropriate relief in connection
with the proposed transaction (the "Proposed Transaction") announced by the
Company and Viad Corporation ("Viad") on April 6, 1998, pursuant to which Viad
will pay $17.00 for all of the outstanding MoneyGram
<PAGE> 2
common stock. The Proposed Transaction and the acts of the MoneyGram director
defendants, as more particularly alleged herein, constitute a breach of their
fiduciary duties to plaintiff and the class to take all necessary steps to
ensure that MoneyGram's stockholders will receive the maximum value realizable
for their shares in a sale of the Company. In the context of this action, the
board of directors, having manifested their willingness to sell MoneyGram, must
take all reasonable steps to assure the maximization of stockholder value
through appropriate market checks, including the implementation of a bidding
mechanism to foster a fair auction of the Company to the highest bidder or the
exploration of strategic alternatives which will return maximum value to
plaintiff and the class.
PARTIES
2. Plaintiff has been a continuous owner of shares of MoneyGram
common stock at all times relevant hereto.
3. MoneyGram is a corporation duly organized and existing under the
laws of the State of Delaware, with its principal offices located at 7401 West
Mansfield Avenue, Lakewood, Colorado. The Company has approximately 16,625,000
shares of common stock outstanding. MoneyGram's principal business is the
electronic transfer of money which allows its customers to quickly send money
worldwide.
4. Defendant James F. Calvano ("Calvano"), at all times material
hereto, has been the Chief Executive Officer and Chairman of the Board of
MoneyGram.
5. Defendant John M. Fowler ("Fowler"), at all times material
hereto has been an Executive Vice President, Chief Financial Officer, and a
Director of MoneyGram.
2
<PAGE> 3
6. Defendant Robbin L. Ayers ("Ayers"), at all times material
hereto has been an Executive Vice President, General Manager, and a Director of
MoneyGram.
7. William D. Guth, Brian J. Fitzpatrick, and Sanford Miller are
Directors of MoneyGram.
8. The Individual Defendants are fiduciaries to and for the
Company's shareholders, which fiduciary relationship requires them to exercise
their best judgment and to act in a prudent manner and in the best interests
of the Company's shareholders.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action individually on its own behalf and
as a class action, on behalf of all stockholders of the Company (except the
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants) and their successors in
interest, who are or will be threatened with injury arising from defendants'
actions as more fully described herein (the "Class").
10. This action is properly maintainable as a class action because:
(a) The Class is so numerous that joinder of all members is
impracticable. There are hundreds of shareholders who hold the approximately
16.6 million shares of MoneyGram common stock outstanding.
(b) There are questions of law and fact involved affecting the
members of the Class including, inter alia, the following:
(1) whether the Proposed Transaction is grossly unfair to
the stockholders of MoneyGram;
3
<PAGE> 4
(2) whether defendants have wrongfully failed to maximize
shareholder value through an adequate auction or market check process;
(3) whether defendants have breached the fiduciary and other common
law duties owed by them to plaintiff and the members of the Class; and
(4) whether plaintiff and other members of the Class would be
irreparably damaged were the transaction complained of herein consummated.
(c) Plaintiff is a member of the Class and is committed to prosecuting
this action. Plaintiff has retained competent counsel experienced in litigation
of this nature. The claims of plaintiff are typical of the claims of other
members of the Class, and plaintiff has the same interests as the other members
of the Class. Plaintiff does not have interests antagonistic to or in conflict
with those he seeks to represent. Plaintiff is an adequate representation of the
Class.
SUBSTANTIVE ALLEGATIONS
11. On April 6, 1998, the Bloomberg newswire reported that MoneyGram and
Viad had signed a definitive agreement whereby Viad would acquire all the
outstanding shares of MoneyGram in a transaction valued at $287 million.
12. Pursuant to the Proposed Transaction, stockholders of MoneyGram will
receive $17.00 per share in cash for each share of MoneyGram stock. This offer
constitutes a premium of 9.2% over the unaffected trading price of MoneyGram
stock on April 3, 1998, which is well-below the customary premium offered to
shareholders in similar transactions.
4
<PAGE> 5
13. On April 6, 1998, Gotham Partners, L.P., Gotham Partners II, L.P. and
Gotham International Advisors, L.L.C. (collectively "Gotham"), which
collectively control 31.03% of MoneyGram's outstanding stock, filed a Form 13D
with the Securities and Exchange Commission ("SEC") objecting to the Proposed
Transaction as being inadequate and valuing MoneyGram at a substantial discount
to the fair market value of the Company.
14. Gotham objected to the Proposed Transaction for the following
reasons:
(a) The Proposed Transaction does not properly account for the
Company's $58 million deferred tax asset;
(b) The Proposed Transaction does not reflect amortization charges
as a result of the Company's separation from First Data Corporation and are not
indicative of conditions under which new agent contracts are being signed; and
(c) The projections used by the Company are significantly lower than
projections used by analysts following the Company.
15. The Proposed Transaction further fails to account for the future
growth of the money-transfer business segment, which, by the Company's own
estimates, is projected to grow 20-30% per year.
16. Defendants have wrongfully, and in violation of their fiduciary
obligations to maximize stockholder value, failed to ascertain MoneyGram's true
value through an open bidding process or at least a "market check" mechanism.
Defendants
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have not adequately considered other potential purchasers of MoneyGram in a
manner designed to obtain the highest possible price for MoneyGram public
stockholders.
17. The consideration to be paid to the MoneyGram shareholders in the
merger is unfair, inadequate, and substantially below the fair or inherent
value of the Company. The intrinsic value of the equity of MoneyGram is
materially greater than the merger consideration, taking into account
MoneyGram's asset value, its expected growth, and the strength of its business
segment.
18. The Proposed Transaction will deny class members their right to
share proportionately in the true value of MoneyGram's valuable assets,
profitable business, and future growth in profits and earnings.
19. As a result of the action of defendants, plaintiff and the Class
have been and will be damaged in that they will not receive the fair value of
MoneyGram's assets and businesses.
20. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, to the irreparable harm
of the Class.
21. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. declaring that this lawsuit is properly maintainable as a class
action and certifying the plaintiff as proper representative of the Class;
B. preliminarily and permanently enjoining defendants and their counsel,
agents, employees, and all persons acting under, in concert with, or for them,
from proceeding with, consummating the Proposed Transaction;
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C. requiring defendants to place the Company up for auction and to
conduct a market-check prior to completion of any transaction for the sale of
the Company;
D. in the event the Proposed Transaction is consummated, rescinding it
and setting it aside;
E. awarding compensatory damages against the defendants, jointly and
severally, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
F. awarding plaintiff and the Class their costs and disbursements and
reasonable allowances for plaintiff's counsel and experts' fees and expenses;
and
G. granting such other and further relief as may be just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ [ILLEGIBLE]
-------------------------------
Suite 1401, Mellon Bank Center
919 Market Street
Wilmington, Delaware 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WECHSLER, HARWOOD
HALEBIAN & FEFFER LLP
488 Madison Avenue
New York, New York 10022
(212) 935-7400
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