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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)


Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2009.
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
to
.
Commission File Number: 1-31950
MONEYGRAM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
16-1690064
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1550 Utica Avenue South, Suite 100,
Minneapolis, Minnesota
(Zip Code)
55416
(Address of principal executive offices)
Registrant’s telephone number, including area code
(952) 591-3000
Securities registered pursuant to Section 12(b) of the Act:
Title
of
each
class
Name of
each
exchange on
which
registered
Common stock, $0.01 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes 
No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes 
No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes 
No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes 
No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer 
Accelerated
filer 
Non-accelerated filer 
(Do not check if a smaller reporting company)
Smaller reporting
company 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
No 
The market value of common stock held by non-affiliates of the registrant, computed by reference to the last sales price as reported on
the New York Stock Exchange as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal
quarter, was $146.2 million.
82,694,964 shares of common stock were outstanding as of March 8, 2010.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this report is incorporated by reference from the registrant’s proxy statement for the 2010
Annual Meeting.
TABLE OF CONTENTS
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
EX-3.1
EX-10.30
EX-10.41
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
PART I.
Business
History and Development
Our Business
Our Segments
Global Funds Transfer Segment
Financial Paper Products Segment
Product and Infrastructure Development and Enhancements
Sales and Marketing
Competition
Regulation
Clearing and Cash Management Bank Relationships
Intellectual Property
Employees
Executive Officers of the Registrant
Available Information
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
[Reserved]
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PART II.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
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PART III.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV.
Exhibits and Financial Statement Schedules
Signatures
Exhibit Index
63
63
63
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64
EX-32.1
EX-32.2
Table of Contents
PART I
Item 1.
BUSINESS
Overview
MoneyGram International, Inc. (together with our subsidiaries, “MoneyGram,” the “Company,” “we,” “us” and “our”) is a
leading global payment services company. Our major products include global money transfers, bill payment solutions and
money orders. We help people and businesses by providing affordable, reliable and convenient payment services.
The MoneyGram ® brand is recognized throughout the world. We offer more choices and more control for people separated
from friends and family by distance or those with limited bank relationships to meet their financial needs. Our payment
services are available at approximately 190,000 agent locations in approximately 190 countries and territories. Our services
enable consumers throughout the world to transfer money and pay bills, helping them meet the financial demands of their
daily lives. Our payment services also help businesses operate more efficiently and cost-effectively.
History and Development
We conduct our business primarily through our wholly owned subsidiary MoneyGram Payment Systems, Inc. (“MPSI”).
Through its predecessor, Travelers Express Company, Inc. (“Travelers Express”), MPSI has been in operation for nearly
70 years. Travelers Express acquired MPSI in 1998, adding the MoneyGram brand to our Company and adding international
money transfer services to our payment service offerings. In 2005, we consolidated the operations of Travelers Express with
MPSI to eliminate costs of operating the two businesses under separate corporate entities. This completed the transition of
our business from the Travelers Express brand to the MoneyGram brand, and we retired the Travelers Express brand.
In 2006, our subsidiary MoneyGram Payment Systems Italy, S.r.l. acquired the assets of Money Express S.r.l., our former
super-agent in Italy. We also developed a retail strategy in Western Europe to offer our services through Company-owned
retail stores and kiosks in addition to our typical agent model. Our subsidiary in France, MoneyGram France S.A., became a
licensed financial institution in September 2006. As of December 31, 2009, we operate 32 Company-owned retail stores or
kiosks in France and 33 in Germany. In 2007, we completed the acquisition of PropertyBridge, Inc. (“PropertyBridge”), a
provider of electronic payment processing services for the real estate management industry.
In March 2008, we completed a recapitalization pursuant to which we received an infusion of $1.5 billion of gross equity
and debt capital. The equity component of the recapitalization consisted of the sale to affiliates of Thomas H. Lee Partners,
L.P. (“THL”) and affiliates of Goldman, Sachs & Co. (“Goldman Sachs,” and collectively with THL, the “Investors”) in a
private placement of 760,000 shares of Series B Participating Convertible Preferred Stock of the Company (the “B Stock”)
and Series B-1 Participating Convertible Preferred Stock of the Company (the “B-1 Stock,” and collectively with the B
Stock, the “Series B Stock”) for an aggregate purchase price of $760.0 million. We also paid Goldman Sachs an investment
banking advisory fee equal to $7.5 million in the form of 7,500 shares of B-1 Stock.
As part of the recapitalization, our wholly owned subsidiary, MoneyGram Payment Systems Worldwide, Inc.
(“Worldwide”), issued Goldman Sachs $500.0 million of senior secured second lien notes with a 10-year maturity (the
“Notes”). We also entered into a senior secured amended and restated credit agreement with JPMorgan Chase Bank, N.A.
(“JPMorgan”) as agent for a group of lenders, bringing the total facility to $600.0 million (the “Senior Facility”). The
amended facility included $350.0 million in two term loan tranches and a $250.0 million revolving credit facility. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recapitalization” for further
information regarding the recapitalization.
In 2008, we completed the acquisition of MoneyCard World Express, S.A. (“MoneyCard”) and Cambios Sol, S.A., two
money transfer super-agents located in Spain. Thereafter, we merged Cambios Sol, S.A. into MoneyCard and now maintain
MoneyCard as our subsidiary. In 2009, we acquired the French assets of R. Raphaels & Sons PLC
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(“Raphaels Bank”). In January 2010, we acquired the assets of our agent in the Netherlands, Blue Dolphin Financial Services
N.V. Finally, we sold FSMC, Inc. and continued the exit of our ACH Commerce business in 2009.
Our Business
Our global money transfer and bill payment services are our primary revenue drivers. Money transfers are transfers of funds
between consumers from one location to another. The sender pays a fee based on the amount to be transferred and the
location at which the funds are to be received. The transferred funds are made available for payment in cash to the
designated recipient at any agent location. In select countries, the designated recipient may also receive the transferred funds
via a deposit to the recipient’s bank account, mobile phone account or prepaid card. We typically pay both our “send” and
“receive” agents a commission for the transaction.
We provide money transfer services through our worldwide network of agents and through Company-owned retail locations
in the United States and Western Europe. We also offer our money transfer services on the Internet via our MoneyGram
Online service. In Italy and the Philippines, we also offer our money transfer services via mobile phone and intend to expand
our mobile phone money transfer network.
Our primary bill payment service offering is our ExpressPayment ® service, which is offered at all of our money transfer
agent locations in the United States and at certain agent locations in select Caribbean countries. Our ExpressPayment service
enables a consumer to pay cash at an agent location for bills and obtain same-day notification of credit to the consumer’s
account with their biller. Our consumers can also use our ExpressPayment service to load and reload prepaid debit cards.
Our ExpressPayment bill payment service is also available for payments to select billers via the Internet at
www.moneygram.com .
We also derive revenue through our money order and official check services. We provide money orders through retail and
financial institutions located throughout the United States and Puerto Rico, and we provide official check outsourcing
services to financial institutions across the United States. Consumers use our money orders to make bill payments or in lieu
of cash or personal checks. Official checks are used by consumers where a payee requires a check drawn on a bank and by
financial institutions to pay their own obligations.
During 2009, 2008 and 2007, our 10 largest agents accounted for 48 percent, 44 percent and 36 percent, respectively, of our
total company fee and investment revenue and 53 percent, 53 percent and 53 percent, respectively, of the fee and investment
revenue of our Global Funds Transfer segment. Walmart Stores, Inc. (“Walmart”) is our only agent that accounts for more
than 10 percent of our total company fee and investment revenue. In 2009, 2008 and 2007, Walmart accounted for
29 percent, 26 percent and 20 percent, respectively, of our total company fee and investment revenue, and 32 percent,
31 percent and 29 percent, respectively, of the fee and investment revenue of our Global Funds Transfer segment. Our
contract with Walmart in the United States provides for Walmart’s sale of our money order and money transfer services, and
real-time, urgent bill payment services at its retail locations on an exclusive basis. The term of our agreement with Walmart
runs through January 2013.
Our Segments
During the fourth quarter of 2009, we revised our segment reporting to reflect changes in how we manage our business,
review operating performance and allocate resources. We now manage our business primarily through two segments: Global
Funds Transfer and Financial Paper Products. Following is a description of each segment.
Global Funds Transfer Segment
The Global Funds Transfer segment is our primary segment, providing money transfer and bill payment services to
consumers, who are often “unbanked” or “underbanked.” “Unbanked consumers” are those consumers who do not have a
traditional relationship with a financial institution. “Underbanked consumers” are consumers who, while they may have a
savings account with a financial institution, do not have a checking account. Other consumers who use our services are
“convenience users” and “emergency users” who may have a checking account with a financial institution, but prefer to use
our services on the basis of convenience or to make emergency payments. We primarily offer services to consumers through
third-party agents, including retail chains, independent retailers and financial institutions.
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In 2009, our Global Funds Transfer segment had total fee and investment revenue of $1,027.9 million. We continue to focus
on the growth of our Global Funds Transfer segment outside of the United States. During 2009, 2008 and 2007, operations
outside of the United States generated 27 percent, 25 percent and 21 percent, respectively, of our total company fee and
investment revenue, and 31 percent of our Global Funds Transfer segment fee and investment revenue in all three years.
The Global Funds Transfer segment is managed as two geographical regions, the Americas and EMEAAP, to coordinate
sales, agent management and marketing activities. The Americas region includes the United States, Canada, Mexico and
Latin America (including the Caribbean). The EMEAAP region includes Europe, the Middle East, Africa and the Asia
Pacific region. In 2009, we added 14,000 net locations to our global agent network.
As of December 31, 2009, we had 66,000 agent locations in the Americas. We added 3,200 Canada Post locations to our
network, making our money transfer services available coast to coast across Canada. The addition of agent locations in the
United States and Canada were more than offset by numerous agent closures during the year. In Brazil, we added 1,000 Itau
Unibanco locations, bringing money transfer services to the bank’s network of nearly 5,000 locations. We also added nearly
1,200 locations in Mexico, Ecuador, Colombia and the Dominican Republic.
In the EMEAAP region, we added 16,600 agent locations in several key markets. Through our agreement with M. Lhuillier
Financial Services, Inc., we added 1,200 agent locations in the Philippines. In India, we have relationships with 18 banks and
now have more than 22,000 agent locations. The Bank of China offers our services at all of its 200-plus locations in Beijing
and is expanding its offering of our services into its full network of 10,000 locations across the mainland. In Saudi Arabia,
National Commerce Bank now offers our money transfer services at its 1,400 ATM locations, creating one of the largest
money transfer networks in Saudi Arabia. We also significantly expanded our agent locations in Kenya, Ethiopia, Angola,
Morocco, Thailand, South Korea, Romania, Cyprus, Sweden and Serbia. As of December 31, 2009, we had 124,000 agent
locations in the EMEAAP region, representing a 16 percent increase from December 31, 2008.
We provide Global Funds Transfer products and services utilizing a variety of proprietary point-of-sale platforms. Our
platforms include AgentConnect ® , which is integrated into an agent’s point-of-sale system, and DeltaWorks ® and Delta
T3 ® , which are separate software and stand-alone device platforms. Through our FormFree ® service, customers may
contact our call center and a representative will collect transaction information over the telephone, entering it directly into
our central data processing system. We also operate two customer care centers in the United States, and we contract for
additional call center services in Bulgaria and the Dominican Republic. We provide call center services 24 hours per day,
365 days per year and provide customer service in over 30 languages.
Money Transfers. We derive our money transfer revenues primarily from consumer transaction fees and the management
of currency exchange spreads on money transfer transactions involving different “send” and “receive” currencies. We have
corridor pricing capabilities that enable us to establish different consumer fees and foreign exchange rates for our money
transfer services by location, for a broader segment such as defined ZIP code regions or for a widespread direct marketing
area. We strive to maintain our money transfer consumer fees at a price point below our primary competitor and above the
niche players in the market.
As of December 31, 2009, we offer money transfers to consumers in a choice of local currency, United States dollars or
euros in 136 countries (“multi-currency”). Our multi-currency technology allows us to execute our money transfers directly
between and among several different currencies. Where implemented, these capabilities allow our agents to settle with us in
local currency and allow consumers to know the amount that will be received in the local currency of the receiving country,
or in United States dollars or euros in certain countries.
As of December 31, 2009, our agent network consisted of approximately 190,000 money transfer agent locations in
approximately 190 countries and territories worldwide. These agent locations are in the following geographic regions:
43,700 locations in Western Europe and the Middle East; 39,500 locations in North America; 26,700 locations in the Indian
subcontinent; 26,500 locations in Latin America (including Mexico, which represents 12,900 locations); 25,800 locations in
Eastern Europe; 19,800 locations in Asia Pacific; and 8,000 locations in Africa.
Bill Payment Services. We derive our bill payment revenues primarily from transaction fees charged to consumers for each
bill payment transaction completed. Our bill payment services allow consumers to make urgent payments or pay routine bills
through our network to certain creditors (“billers”). We maintain relationships with billers in key
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industries (also referred to as “verticals”). These industries include the credit card, mortgage, auto finance,
telecommunications, corrections, satellite, property management, prepaid card and collections industries.
Our bill payment services also enable consumers to load and reload prepaid debit cards. Consumers with any Visa
ReadyLink ® -enabled prepaid card or any NetSpend ® prepaid debit card can add funds to their cards at any of our United
States agent locations. We also offer our MoneyGram AccountNow ® Prepaid Visa card, which participates in the Visa
ReadyLink, Interlink ® and Plus ® networks. The card can be used everywhere Visa is accepted and can be reloaded at any
of our United States agent locations.
Our bill payment service also allows customers to make low-cost, in-person payments of non-urgent utility bills for credit to
a biller, typically within two to three days. Through our PropertyBridge service, we offer a complete bill payment solution to
the property rental industry, including the ability to electronically accept security deposits and rent payments.
Financial Paper Products Segment
Our Financial Paper Products segment provides money orders to consumers through our retail and financial institution agent
locations in the United States and Puerto Rico, and provides official check services for financial institutions in the United
States.
In 2009, our Financial Paper Products segment posted revenues of $122.8 million. Since early 2008, our investment portfolio
has consisted of lower risk, highly liquid, short-term securities that produce a lower rate of return, which has resulted in
lower revenues and profit margins in our Financial Paper Products segment.
Money Orders. We generate revenue from money orders by charging per item and other fees, as well as from the
investment of funds underlying outstanding money orders, which generally remain outstanding for fewer than 10 days. We
sell money orders under the MoneyGram brand and on a private label or co-branded basis with certain of our large retail and
financial institution agents in the United States.
In 2009, we issued approximately 204.7 million money orders through our network of 61,092 agent and financial institution
locations in the United States and Puerto Rico. In 2008, we issued approximately 245.1 million money orders through our
network of 73,030 agent and financial institution locations in the United States and Puerto Rico.
Official Check Outsourcing Services. As with money orders, we generate revenue from our official check outsourcing
services from per item and other fees and from the investment of funds underlying outstanding official checks, which
generally remain outstanding for fewer than 3.5 days. In 2009, we restructured our official check business model by reducing
the commissions we pay our financial institution customers and increasing per item and other fees. As of December 31,
2009, we provide official check outsourcing services at approximately 14,000 branch locations of more than 1,600 financial
institutions. We issued 35.9 million and 42.4 million of official checks in 2009 and 2008, respectively.
Product and Infrastructure Development and Enhancements
We focus our product development and enhancements on innovative ways to transfer money and pay bills. We continually
seek to provide our customers with added flexibility and convenience to help them meet the financial demands of their daily
lives. We also invest in our infrastructure to increase efficiencies and support our strategic initiatives.
In 2009, we began reaching new customers through alternate money transfer delivery channels. We now offer mobile phone
money transfers through key agents in the Philippines and Italy. In January 2010, we launched the MoneyGram iPhone TM
application, Mobile Companion, allowing consumers to search for agent locations, including the agent’s address, phone
numbers and hours of operation. Mobile Companion also includes the convenience of a fee estimator that allows consumers
to determine the fee for a transaction in advance.
We also introduced the convenience of cash-to-card services through key agents in the Philippines, which allows their
customers to collect remittances on a card, which can then be used to pay for purchases at participating stores.
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We have made enhancements to our MoneyGram Online service and will continue to make further enhancements to provide
a better consumer experience and efficiency in completing a transaction for our online customers, as well as more
cost-effective transaction processing. We also enhanced our MoneyGram rewards program and now offer members the
ability to receive a text message on their mobile phones informing them that the funds they transferred have been picked up
by their receiver. We expanded our MoneyGram Rewards program to Canada, Italy, France, Germany and Spain in 2009,
and will continue its international expansion during 2010 and beyond. Total MoneyGram Rewards membership grew
30 percent from 2008.
We continue to invest in our infrastructure to provide a better overall consumer and agent experience, reduce our costs and
create efficiencies. We have made important infrastructure enhancements to our settlement and commission processing, data
management, financial systems and regulatory and compliance reporting. We are continuing our efforts to enhance our agent
on-boarding process, improving our speed to market for new agents.
Sales and Marketing
We market our products and services through a number of dedicated sales and marketing teams, and we continually assess
the effectiveness of our sales and marketing efforts. In the United States, a dedicated sales and marketing team markets our
money transfer, money order and bill payment services. Dedicated sales and marketing teams also market our bill payment
services directly to billers, including those in key verticals, and market our official check and money order services to
financial institutions. In addition, we have sales and marketing teams that focus on strategic alliances and partnerships.
Internationally, we have sales and marketing teams located in or near the following regions: Western Europe; Eastern
Europe; Asia; Australia; the Middle East; Africa; Canada; Mexico; and Latin America.
Our sales and marketing efforts continue to be supported by a wide range of consumer advertising methods. A key
component of our advertising and marketing is our global branding. Our global branding is a result of significant research
and differentiates MoneyGram from other payment services providers. Signage continues to be a key method by which we
build global awareness of our brand. We strive to ensure that our signs are displayed prominently at our agent locations and
that our signage displays our brand consistently across the markets we serve. We also use traditional media methods to reach
our consumers, including television, radio and print advertising, as well as advertising our services at community and
cultural events throughout the world.
Our MoneyGram Rewards program continues to build loyalty and repeat usage with consumers around the world. The
program includes features such as a discount structure based on a consumer’s use of our services, e-mail and/or text message
notifications to the sender when the funds are picked up, and a more streamlined customer service experience.
Competition
While we are the second largest money transfer company in the world, the market for our money transfer and bill payment
services remains very competitive. The market consists of a small number of large competitors and a large number of small,
niche competitors. Our competitors include other large money transfer and electronic bill payment providers, banks and
niche person-to-person money transfer service providers that serve select regions. As new technologies for money transfer
and bill payment services emerge that allow consumers to send and receive money and to pay bills in a variety of ways, we
face increasing competition. These emerging technologies include online payment services, card-based services such as
ATM cards and stored-value cards, bank-to-bank money transfers and mobile telephone payment services.
We generally compete for money transfer agents on the basis of value, service, quality, technical and operational differences,
price and commission. We compete for money transfer consumers on the basis of number and location of outlets, price,
convenience, technology and brand recognition.
Regulation
Compliance with legal requirements and government regulations is a highly complex and integral part of our day-to-day
operations. Our operations are subject to a wide range of laws and regulations that include international,
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federal and state anti-money laundering laws and regulations; money transfer and payment instrument licensing laws;
escheatment laws; privacy laws; data protection and information security laws; and consumer disclosure and consumer
protection laws. Failure to comply with any applicable laws and regulations could result in restrictions on our ability to
provide our products and services, as well as the potential imposition of civil fines and possibly criminal penalties. See “Risk
Factors” for additional discussion regarding potential impacts of failure to comply. We continually monitor and enhance our
global compliance program to stay current with the most recent legal and regulatory changes. During 2009, we increased our
compliance personnel headcount and made investments in our compliance-related technology and infrastructure.
Anti-Money Laundering Compliance. Our money transfer services are subject to anti-money laundering laws and
regulations of the United States, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, as well as the
anti-money laundering laws and regulations in many of the countries in which we operate, particularly in the European
Union. Countries in which we operate may require one or more of the following:
• reporting of large cash transactions and suspicious activity;
• screening of transactions against the government’s watch-lists, including but not limited to, the watch list maintained
by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”);
• prohibition of transactions in, to or from certain countries, governments, individuals and entities;
• limitations on amounts that may be transferred by a consumer or from a jurisdiction at any one time or over specified
periods of time, which require the aggregation of information over multiple transactions;
• consumer information gathering and reporting requirements;
• consumer disclosure requirements, including language requirements and foreign currency restrictions;
• notification requirements as to the identity of contracting agents, governmental approval of contracting agents or
requirements and limitations on contract terms with our agents;
• registration or licensing of the Company or our agents with a state or federal agency in the United States or with the
central bank or other proper authority in a foreign country; and
• minimum capital or capital adequacy requirements.
Anti-money laundering regulations are constantly evolving and vary from country to country. We continuously monitor our
compliance with anti-money laundering regulations and implement policies and procedures to make our business practices
flexible, so we can comply with the most current legal requirements.
We offer our money transfer services through third-party agents with whom we contract and do not directly control. As a
money services business, the Company and its agents are required to establish anti-money laundering compliance programs
that include: (i) internal policies and controls; (ii) designation of a compliance officer; (iii) ongoing employee training and
(iv) an independent review function. We have developed an anti-money laundering training manual available in multiple
languages and a program to assist with the education of our agents on the various rules and regulations. We also offer
in-person and online training as part of our agent compliance training program and engage in various agent oversight
activities.
Money Transfer and Payment Instrument Licensing. The majority of United States states, the District of Columbia, Puerto
Rico and the United States Virgin Islands and Guam require us to be licensed to conduct business within their jurisdictions.
In November 2009, our primary overseas operating subsidiary, MoneyGram International Ltd, became a licensed payment
institution under the European Union Payment Services Directive. Licensing requirements generally include minimum net
worth, provision of surety bonds, compliance with operational procedures, agent oversight and the maintenance of reserves
or “permissible investments” in an amount equivalent to outstanding payment obligations, as defined by our various
regulators. The types of securities that are considered “permissible investments” vary from state to state, but generally
include cash and cash equivalents, United States government securities and other highly rated debt instruments. Most states
and our other regulators require us to file reports on a quarterly or more frequent basis to verify our compliance with their
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requirements. Many states and other regulators also subject us to periodic examinations and require us and our agents to
comply with anti-money laundering and other laws and regulations.
Escheatment Regulations. Unclaimed property laws of every state, the District of Columbia, Puerto Rico and the United
States Virgin Islands require that we track certain information on all of our payment instruments and money transfers and, if
they are unclaimed at the end of an applicable statutory abandonment period, that we remit the proceeds of the unclaimed
property to the appropriate jurisdiction. Statutory abandonment periods for payment instruments and money transfers range
from three to seven years. Certain foreign jurisdictions also may have unclaimed property laws, though we do not have
material amounts subject to any such law.
Privacy Regulations. In the ordinary course of our business, we collect certain types of data which subjects us to certain
privacy laws in the United States and abroad. In the United States, we are subject to the Gramm-Leach-Bliley Act of 1999
(the “GLB Act”), which requires that financial institutions have in place policies regarding the collection, processing, storage
and disclosure of information considered nonpublic personal information. We are also subject to privacy laws of various
states. In addition, we are subject to the European Union Privacy Directive (the “Privacy Directive”). We abide by the
United States Department of Commerce’s Safe Harbor framework principles to assist in compliance with the Privacy
Directive. In some cases, the privacy laws of a European Union member state may be more restrictive than the Privacy
Directive and may impose additional duties with which we must comply. We also have confidentiality/information security
standards and procedures in place for our business activities and with our third-party vendors and service providers. Privacy
and information security laws, both domestically and internationally, evolve regularly and conflicting laws in the various
jurisdictions where we do business pose challenges.
Banking Regulations. We were recently informed by Goldman Sachs that the Company may be deemed a controlled
subsidiary of a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank Holding
Company Act”), as a result of Goldman Sachs’ status as a bank holding company and its equity interest in the Company.
Affiliates of Goldman Sachs beneficially own all of the Company’s Series B-1 Preferred Stock, and may convert the B-1
stock into non-voting Series D Preferred Stock (the “D Stock”). While not convertible into common stock of the Company
while beneficially owned by Goldman Sachs, the D Stock may be sold or transferred to a third party who may then convert
the D Stock into common stock. As a result, Goldman Sachs has informed us that the Company may be considered a
controlled non-bank subsidiary of Goldman Sachs for U.S. bank regulatory purposes. Companies that are deemed to be
subsidiaries of a bank holding company are subject to the Bank Holding Company Act, and are thus subject to reporting to,
and examination and supervision by, the Federal Reserve Board.
Bank holding companies may engage in the business of banking, managing and controlling banks, as well as closely related
activities. Bank holding companies that are well-capitalized, well-managed and meet certain other conditions (referred to as
“financial holding companies”) are allowed greater operational flexibility. The Federal Reserve Board has approved
Goldman Sachs as a financial holding company, and Goldman Sachs may engage in additional activities that are deemed
financial in nature, such as securities and insurance activities and certain merchant banking activities. The Federal Reserve
Board, together with the U.S. Treasury Department, may periodically announce additional permissible activities for financial
holding companies.
The businesses that we conduct are permissible activities for subsidiaries of financial holding companies under U.S. law, and
we do not expect the limitations described above to adversely affect our current operations. It is possible, however, that these
restrictions might limit our ability to enter other businesses that we may wish to engage in at some time in the future. It is
also possible that these laws may be amended in the future, or new laws or regulations adopted, that adversely affect our
ability to engage in our current or additional businesses.
In addition, a financial holding company that falls out of compliance with the well-managed, well-capitalized and other
requirements applicable to financial holding companies must enter into an agreement with the Federal Reserve Board to
rectify the situation. The Federal Reserve Board may refuse to allow the financial holding company, including its
subsidiaries, to engage in activities that are permissible for financial holding companies but not permissible for bank holding
companies. Consequently, Goldman Sachs’ non-compliance with the requirements applicable to financial holding companies
could have an impact on the Company.
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We have been in discussions with Goldman Sachs regarding this matter, and Goldman Sachs and the Company are each
evaluating various alternatives pursuant to which the Company would not be deemed to be a subsidiary of a bank holding
company and thus not subject to the Bank Holding Company Act. There can be no assurance of any particular outcome of
such evaluations.
Other. We sell our MoneyGram-branded prepaid card in the United States, in addition to loading prepaid cards of other
card issuers through our ExpressPayment system. Prepaid card services are generally subject to federal and state laws and
regulations, including laws related to consumer protection, licensing, escheat, anti-money laundering and the payment of
wages. These laws are evolving, unclear and sometimes inconsistent. The extent to which these laws are applicable to us is
uncertain and we are currently unable to determine the impact that any future clarification, changes or interpretation of these
laws will have on our services.
Clearing and Cash Management Bank Relationships
Our business involves the movement of money. On average, we move over $1.0 billion daily to settle our payment
instruments and make related settlements with our agents and financial institutions. We generally receive a similar amount
on a daily basis from our agents and financial institutions in connection with our payment service obligations. We move
money through a network of clearing and cash management banks, and our relationships with these clearing banks and cash
management banks are a critical component of our ability to move funds on a global and timely basis.
We maintain contractual relationships with a variety of domestic and international cash management banks for automated
clearing house (“ACH”) and wire transfer services for the movement of consumer funds and agent settlements. There are a
limited number of international cash management banks with a network large enough to manage cash settlements for our
entire agent base. During 2009, we converted to a new primary international cash management banking relationship. This
relationship and our other banking relationships provide us with cash management services that are sufficient for our needs.
We rely on two banks to clear our retail money orders. We entered into a new five-year agreement with our secondary
money order clearing bank in early 2009, and are in the process of negotiating a new agreement with our primary money
order clearing bank. We currently have five official check clearing banks. We believe these relationships provide sufficient
capacity for our money order and official check outsourcing services.
Intellectual Property
The MoneyGram brand is important to our business. We have registered our MoneyGram trademark in the United States and
a majority of the other countries where we do business. We maintain a portfolio of other trademarks that are also important
to our business, including our ExpressPayment, globe with arrows logo, MoneyGram Rewards, The Power is in Your Hands
® , The Power to Change the Way You Send Money ® , FormFree and AgentConnect marks. In addition, we maintain a
portfolio of MoneyGram branded domain names.
We rely on a combination of patent, trademark and copyright laws, and trade secret protection and confidentiality or license
agreements to protect our proprietary rights in products, services, know-how and information. Intellectual property rights in
processing equipment, computer systems, software and business processes held by us and our subsidiaries provide us with a
competitive advantage. Even though not all of these assets are protectable, we take appropriate measures to protect our
intellectual property.
We own United States and foreign patents related to our money order and money transfer technology. Our United States
patents have in the past given us competitive advantages in the marketplace, including a number of patents for automated
money order dispensing systems and printing techniques, many of which have expired. We also have patent applications
pending in the United States that relate to our money transfer, money order, PrimeLink and bill payment technologies and
business methods. We anticipate that these applications, if granted, could give us continued competitive advantages in the
marketplace. However, our competitors also actively patent their technology and business processes.
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Employees
As of December 31, 2009, we had approximately 1,806 full-time employees in the United States and 591 full-time
employees outside of the United States. In addition, we engage contractors to support various aspects of our business. None
of our employees in the United States are represented by a labor union. We consider our employee relations to be good.
Executive Officers of the Registrant
In September 2009, the Board of Directors announced that Pamela H. Patsley assumed the role of Chief Executive Officer,
succeeding Anthony P. Ryan, who had assumed the role in January 2009. Ms. Patsley will continue her role as the Chairman
of the Board as appointed in January 2009. In December 2009, we announced the January 2010 departure of Jeffrey R.
Woods, who assumed the role of Executive Vice President and Chief Financial Officer following the departure of David J.
Parrin in the first quarter of 2009. Steven Piano was named as Executive Vice President of Human Resources in August
2009, following the departure of Cindy Stemper in May 2009. Timothy C. Everett assumed the role of Executive Vice
President, General Counsel and Corporate Secretary in January 2010, following the retirement of Teresa H. Johnson in
September 2009. In September 2009, Mary A. Dutra departed from her role as Executive Vice President, Global Payment
Processing and Settlement. Mubashar Hameed, Chief Information Officer, departed in January 2010. The Company is in the
process of identifying a Chief Financial Officer and a Head of Operations and Technology. Following is information
regarding our executive officers:
Pamela H. Patsley , age 53, has served as Chairman and Chief Executive Officer since September 2009. Ms. Patsley was
appointed Executive Chairman in January 2009. Ms. Patsley also serves on the boards of directors of Texas Instruments, Inc.
and Dr. Pepper Snapple Group, Inc. Ms. Patsley previously served as Senior Executive Vice President of First Data
Corporation, a global payment processing company, from March 2000 to October 2007, and President of First Data
International from May 2002 to October 2007. From 1991 to 2000, Ms. Patsley served as President and Chief Executive
Officer of Paymentech, Inc., prior to its acquisition by First Data Corporation. Ms. Patsley also served as Chief Financial
Officer of First USA, Inc.
Jean C. Benson , age 42, has served as Senior Vice President, Controller since May 2007. Ms. Benson previously served as
Vice President, Controller from August 2001 to May 2007. From 1994 to 2001, Ms. Benson was with Metris Companies,
Inc., a financial products and services company, serving as Corporate Controller and Executive Vice President of Finance
from 1996 to 2001. From 1990 to 1994, Ms. Benson was an auditor with the accounting firm Deloitte & Touche LLP.
Daniel J. Collins , age 46, has served as Senior Vice President, Treasurer since August 2008. Mr. Collins previously served
as Vice President, Audit from June 2004 to August 2008. From 2000 to 2004, Mr. Collins served as Controller of the
investment firm of RBC Wealth Management. From 1997 to 2000, Mr. Collins served as Division CFO, Consumer Products
for U.S. Bank. Prior to that, Mr. Collins spent four years with the accounting firm PricewaterhouseCoopers LLP and six
years with the accounting firm Ernst & Young, LLP, most recently as senior manager.
Timothy C. Everett, age 47 , has served as Executive Vice President, General Counsel and Corporate Secretary since January
2010. Mr. Everett previously served as Vice President and Secretary of Kimberly-Clark Corporation, a multi-national
consumer product company, from 2003 to 2009. Prior to that, Mr. Everett served in various roles of increasing responsibility
at Kimberly-Clark from 1993 to 2003. From 1990 to 1993, Mr. Everett was with the global law firm, Akin, Gump, Strauss,
Hauer & Feld, LLP. From 1984 to 1987, Mr. Everett was an auditor with the accounting firm Ernst & Young, LLP.
John Hempsey , age 57, has served as Executive Vice President of EMEAAP since December 2009. From May 2003 to
December 2009, Mr. Hempsey served as Chief Executive Officer of the Company’s subsidiary, MoneyGram International
Ltd. From 2001 to 2003, Mr. Hempsey served as a non-executive board member of Travelex Group Limited, a payment
services company. From 1982 to 2001, Mr. Hempsey was with Thomas Cook Global Financial Services prior its acquisition
by Travelex Group, serving most recently as Chief Executive Officer. From 1974 to 1982, Mr. Hempsey was with the
accounting firms KPMG LLP and Ernst & Young LLP.
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Theodore L. Hill , age 47, has served as Senior Vice President, Global Services and General Manager, Financial Paper
Products since February 2010. From 2008 to February 2010, Mr. Hill served as Vice President, Global Services and General
Manager, Financial Paper Products. From 2007 to 2008, Mr. Hill served as Vice President, Global Services and from 2000 to
2007 served as Vice President, Customer Setup and Support. Mr. Hill had served as Senior Director, Customer Setup and
Support from 1999 to 2000, Director, Global Client Services from 1995 to 1999 and Manager, Control Operations from 1989
to 1995. From 1984 to 1989, Mr. Hill was with Sears, Roebuck & Co.
Daniel J. O’Malley , age 45, has served as Executive Vice President of the Americas since December 2009. From April 2007
to December 2009, Mr. O’Malley served as Senior Vice President, Global Payment Systems/President Americas.
Mr. O’Malley previously served as Vice President, Global Payment Systems/Americas from April 2003 to April 2007, Vice
President, Customer Service from June 1999 to April 2003, Director, Operations from 1996 to 1999, Regulatory Project
Manager from 1995 to 1996, Manager of the Southeast Processing Center from 1989 to 1995 and Coordinator of the
Southeast Processing Center from 1988 to 1989. Prior to joining the Company, Mr. O’Malley held various operations
positions at NCNB National Bank and Southeast Bank N.A. from 1983 to 1988.
Steven Piano , age 44, has served as Executive Vice President, Human Resources since August 2009. From January 2008 to
August 2009, Mr. Piano served as Global Lead Human Resource Partner with National Grid, a multi-national utility
company. From 1996 to January 2008, Mr. Piano held a variety of human resources positions with First Data Corporation, a
global electronic payment processing company, serving most recently as Senior Vice President — First Data International.
From 1987 to 1996, Mr. Piano held human resources positions with Citibank, Dun & Bradstreet — Nielsen Media Research
and Lehman Brothers.
Available Information
Our principal executive offices are located at 1550 Utica Avenue South, Minneapolis, Minnesota 55416 and our telephone
number is (952) 591-3000. Our website address is www.moneygram.com. We make our reports on Forms 10-K, 10-Q and
8-K, Section 16 reports on Forms 3, 4 and 5, and all amendments to those reports, available electronically free of charge in
the Investor Relations section of our website as soon as reasonably practicable after they are filed with or furnished to the
Securities and Exchange Commission (the “SEC”).
Item 1A. RISK FACTORS
Various risks and uncertainties could affect our business. Any of the risks described below or elsewhere in this Annual
Report on Form 10-K or our other filings with the SEC could have a material impact on our business, financial condition or
results of operations.
RISK FACTORS
Our increased debt service, significant debt covenant requirements and our credit rating could impair our financial
condition and adversely affect our ability to operate and grow our business.
We have substantial debt service obligations. Our indebtedness could adversely affect our ability to operate our business and
could have an adverse impact on our stockholders, including:
• our ability to obtain additional financing in the future may be impaired;
• a significant portion of our cash flow from operations must be dedicated to the payment of interest and principal on our
debt, which reduces the funds available to us for our operations, acquisitions, product development or other corporate
initiatives;
• our debt agreements contain financial and restrictive covenants which could significantly impact our ability to operate
our business and any failure to comply with them may result in an event of default, which could have a material
adverse effect on us;
• our level of indebtedness increases our vulnerability to general economic downturns and adverse industry conditions;
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• our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the
industry;
• our debt service obligations could place us at a competitive disadvantage to our competitors who have less leverage
relative to their overall capital structures;
• our debt service obligations may affect our ability to attract or retain agents on favorable terms;
• our ability to pay cash dividends to the holders of our common stock is significantly restricted, and no such dividends
are contemplated for at least the next 12 months; and
• payment of cash dividends to the holders of the preferred stock in the future could reduce the funds available to us for
our operations, acquisitions, product development or other corporate initiatives.
Our credit rating is non-investment grade. Together with our leverage, this rating adversely affects our ability to obtain
additional financing and increases our cost of borrowing. A non-investment grade rating may also affect our ability to attract
and retain certain customers.
Our recapitalization significantly diluted the interests of the common stockholders and grants other important rights to
the Investors.
The Series B Stock issued to the Investors is convertible into shares of common stock or common equivalent stock at the
price of $2.50 per common share (subject to anti-dilution rights), giving the Investors an initial equity interest in us of
approximately 79 percent. Dividends payable on the Series B Stock have been accrued since inception. If we continue to
accrue dividends in lieu of paying in cash, the ownership interest of the Investors will substantially increase and continue to
dilute the interests of the common stockholders. With the accrual of dividends, the Investors had an equity interest of
82 percent as of December 31, 2009.
The holders of the B Stock vote as a class with the common stock and have a number of votes equal to the number of shares
of common stock issuable if all outstanding shares of B Stock were converted into common stock plus the number of shares
of common stock issuable if all outstanding shares of B-1 Stock were converted into Series D Participating Convertible
Preferred Stock and subsequently converted into common stock. As a result, holders of the B Stock are able to determine the
outcome of matters put to a stockholder vote, including the ability to elect our directors, determine our corporate and
management policies, including compensation of our executives, and determine, without the consent of our other
stockholders, the outcome of any corporate action submitted to our stockholders for approval, including potential mergers,
acquisitions, asset sales and other significant corporate transactions. This concentration of ownership may discourage, delay
or prevent a change in control of our Company, which could deprive our stockholders of an opportunity to receive a
premium for their common stock as part of a sale of our Company and might reduce our share price. THL also has sufficient
voting power to amend our organizational documents. We cannot provide assurance that the interests of the Investors will
coincide with the interests of other holders of our common stock.
In view of their significant ownership stake in the Company, THL, as holders of the B Stock, has appointed four members to
our Board of Directors and Goldman Sachs, as holders of the B-1 Stock, has appointed two observers to our Board of
Directors. The size of our Board has been set at nine directors, three of which are independent. Our Certificate of
Incorporation provides that, as long as the Investors have a right to designate directors to our Board, Goldman Sachs shall
have the right to designate one director who shall have one vote and THL shall have the right to designate two to four
directors who shall each have equal votes and who shall have such number of votes equal to the number of directors as is
proportionate to the Investors’ common stock ownership, calculated on a fully converted basis assuming the conversion of
all shares of Series B Stock into common stock, minus the one vote of the director designated by Goldman Sachs. Therefore,
each director designated by THL will have multiple votes and each other director will have one vote.
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Sustained financial market illiquidity could adversely affect our business, financial condition and results of operations.
The global capital and credit markets continue to experience illiquidity. As a result, we may face certain risks. In particular:
• We may be unable to liquidate short-term investments, including those held in money market funds that we need to
settle our payment instruments, pay money transfers and make related settlements to agents. Any resulting need to
access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to settle our
payment instruments, pay money transfers or make related settlements with our agents could adversely impact our
business, financial condition and results of operations.
• Banks upon which we rely to conduct our official check, money order and money transfer businesses could fail. This
could lead to our inability to access funds and/or to credit losses for us and could adversely impact our ability to
conduct our official check, money order and money transfer businesses.
• Our revolving credit facility with a consortium of banks is one source of funding for corporate transactions and
liquidity needs. If any of the banks participating in our credit facility were unable or unwilling to fulfill its lending
commitment to us, our short-term liquidity and ability to engage in corporate transactions such as acquisitions could be
adversely affected.
• We may be unable to borrow from financial institutions or institutional investors on favorable terms which could
adversely impact our ability to pursue our growth strategy and fund key strategic initiatives, such as product
development and acquisitions.
If current levels of market illiquidity worsen, there can be no assurance we will not experience an adverse effect, which may
be material, on our ability to access capital and on our business, financial condition and results of operations.
Continued weakness in economic conditions, in both the United States and global markets, could adversely affect our
business, financial condition and results of operations.
Our money transfer business relies in part on the overall strength of global economic conditions as well as international
migration patterns. Consumer money transfer transactions and migration patterns are affected by, among other things,
employment opportunities and overall economic conditions. Our customers tend to have employment in industries such as
construction, manufacturing and retail that tend to be more significantly impacted by weak economic conditions than other
industries. This may result in reduced job opportunities for our customers in the United States or other countries that are
important to our business which could adversely affect our results of operations. In addition, increases in employment
opportunities may lag other elements of any economic recovery.
Our agents or billers may have reduced sales or business as a result of weak economic conditions. As a result, our agents
could reduce their numbers of locations or hours of operation, or cease doing business altogether. Our billers may have fewer
customers making payments to them, particularly billers in those industries that may be more affected by an economic
downturn such as the automobile, mortgage and retail industries.
If general market softness in the United States or other national economies important to the Company’s business were to
continue for an extended period of time or deteriorate further, the Company’s results of operations could be adversely
impacted. Additionally, if our consumer transactions decline or migration patterns shift due to deteriorating economic
conditions, we may be unable to timely and effectively reduce our operating costs or take other actions in response which
could adversely affect our results of operations.
A material slow down or complete disruption in international migration patterns could adversely affect our business,
financial condition and results of operations.
The money transfer business relies in part on migration patterns, as individuals move from their native countries to countries
with greater economic opportunities or a more stable political environment. A significant portion of money transfer
transactions are initiated by immigrants or refugees sending money back to their native countries. Changes in immigration
laws that discourage international migration and political or other events (such as war,
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terrorism or health emergencies) that make it more difficult for individuals to migrate or work abroad could adversely affect
our money transfer remittance volume or growth rate. Sustained weakness in global economic conditions could reduce
economic opportunities for migrant workers and result in reduced or disrupted international migration patterns. Reduced or
disrupted international migration patterns, particularly in the United States or Europe, are likely to reduce money transfer
transaction volumes and therefore have an adverse effect on our results of operations.
If we lose key agents or are unable to maintain our Global Funds Transfer agent or biller networks, our business and
results of operations could be adversely affected.
Revenue from our money transfer and urgent bill payment services is derived from transactions conducted through our retail
agent and biller networks. Many of our high volume agents are in the check cashing industry. There are risks associated with
the check cashing industry that could cause this agent base to decline. We may not be able to retain all of our current retail
agents or billers for other reasons, as the competition for retail agents and billers is intense. If agents or billers decide to
leave our agent network, or if we are unable to add new agents or billers to our network, our revenue would decline.
Larger agents and billers in our Global Funds Transfer segment are increasingly demanding financial concessions and more
information technology customization. The development, equipment and capital necessary to meet these demands could
require substantial expenditures and there can be no assurance that we will have the available capital after paying dividends
to the Investors and servicing our debt, or that we will be allowed to make such expenditures under the terms of our debt
agreements. If we were unable to meet these demands, we could lose customers and our business and results of operations
would be adversely affected.
A substantial portion of our transaction volume is generated by a limited number of key agents. During 2009 and 2008, our
10 largest agents accounted for 48 percent and 44 percent, respectively, of our total company fee and investment revenue and
53 percent and 53 percent, respectively, of the fee and investment revenue of our Global Funds Transfer segment. In 2009
and 2008, our largest agent, Walmart, accounted for 29 percent and 26 percent, respectively, of our total company fee and
investment revenue and 32 percent and 31 percent, respectively, of the fee and investment revenue of our Global Funds
Transfer segment. The term of our agreement with Walmart runs through January 2013. If any of our key agents were not to
renew their contracts with us, or if such agents were to reduce the number of their locations, or cease doing business, we
might not be able to replace the volume of business conducted through these agents, and our business and results of
operations would be adversely affected.
Litigation or investigations involving MoneyGram or our agents, which could result in material settlements, fines or
penalties, may adversely affect our business, financial condition and results of operations.
We are currently the subject of an informal SEC inquiry and stockholder litigation, including a securities class action lawsuit
and one lawsuit under ERISA. While we believe the suits are without merit and intend to vigorously defend against such
claims, the outcome of the lawsuits cannot be predicted at this time. The cost to defend the stockholder and ERISA litigation
could be substantial, regardless of the outcome. In addition, we have been, and in the future may be, subject to allegations
and complaints that individuals or entities have used our money transfer services for fraud-induced money transfers which
may result in fines, settlements and litigation expenses.
Regulatory and judicial proceedings and potential adverse developments in connection with ongoing stockholder litigation
may adversely affect our business, financial condition and results of operations. There may also be adverse publicity
associated with lawsuits and investigations that could decrease agent and customer acceptance of our services. Additionally,
our business has been in the past, and may be in the future, the subject of class action lawsuits, regulatory actions and
investigations and other general litigation. The outcome of class action lawsuits, regulatory actions and investigations is
difficult to assess or quantify. Plaintiffs or regulatory agencies in these lawsuits, actions or investigations may seek recovery
of very large or indeterminate amounts, and the magnitude of these actions may remain unknown for substantial periods of
time. The cost to defend or settle future lawsuits or investigations may be significant.
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We face credit risks from our retail agents and official check financial institution customers.
The vast majority of our Global Funds Transfer segment is conducted through independent agents that provide our products
and services to consumers at their business locations. Our agents receive the proceeds from the sale of our payment
instruments and money transfers and we must then collect these funds from the agents. If an agent becomes insolvent, files
for bankruptcy, commits fraud or otherwise fails to remit money order or money transfer proceeds to us, we must
nonetheless pay the money order or complete the money transfer on behalf of the consumer. Moreover, we have made, and
may make in the future, secured or unsecured loans to retail agents under limited circumstances or allow agents to retain our
funds for a period of time before remitting them to us. As of December 31, 2009, we had credit exposure to our agents of
approximately $436.4 million in the aggregate spread across over 14,000 agents, of which five owed us in excess of
$15.0 million.
Our official checks outsourcing business is conducted through financial institutions. Our official check financial institution
customers issue official checks and money orders and remit to us the face amounts of those instruments the day after they are
issued. MoneyGram is liable for payment on all of those instruments except cashier’s checks. As of December 31, 2009, we
had credit exposure to our official check financial institution customers of approximately $482.0 million in the aggregate
spread across 1,700 financial institutions, of which one owed us in excess of $15.0 million.
We monitor the creditworthiness of our agents and official check financial institution customers on an ongoing basis. There
can be no assurance that the models and approaches we use to assess and monitor agent and official check financial
institution customer creditworthiness will be sufficiently predictive, and we may be unable to detect and take steps to timely
mitigate an increased credit risk.
In the event of an agent bankruptcy, we would generally be in the position of creditor, possibly with limited security or
financial guarantees of performance, and we would therefore be at risk of a reduced recovery. We are not insured against
credit losses, except in circumstances of agent theft or fraud. Significant credit losses could have a material adverse effect on
our business, results of operations and financial condition.
We face fraud risks that could adversely affect our business, financial condition and results of operations.
Criminals are using increasingly sophisticated methods to engage in illegal activities such as paper instrument counterfeiting,
fraud and identity theft. As we make more of our services available over the Internet and other unmanned media, we subject
ourselves to new types of consumer fraud risk because requirements relating to customer authentication are more complex
with Internet services. Certain former retail agents have also engaged in fraud against consumers or us, and existing agents
could engage in fraud against consumers or us. We use a variety of tools to protect against fraud; however, these tools may
not always be successful. Allegations of fraud may result in fines, settlements and litigation expenses.
Negative economic conditions may result in increased agent or consumer fraud. If consumer fraud levels involving our
services were to rise, it could lead to regulatory intervention and reputational and financial damage. This, in turn, could
reduce the use and acceptance of our services or increase our compliance costs and thereby have a material adverse impact
on our business, financial condition and results of operations.
An inability of the Company or its agents to maintain adequate banking relationships may adversely affect our business,
financial condition and results of operations.
We rely on domestic and international banks for international cash management, ACH and wire transfer services to pay
money transfers and settle with our agents. We also rely on domestic banks to provide clearing, processing and settlement
functions for our paper-based instruments, including official checks and money orders. The Company’s relationships with
these banks are a critical component of our ability to conduct our official check, money order and money transfer businesses.
An inability on our part to maintain existing or establish new banking relationships sufficient to enable us to conduct our
official check, money order and money transfer businesses could adversely affect our business, results of operations and
financial condition. There can be no assurance that the Company will be able to establish and maintain adequate banking
relationships.
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We rely on a primary international banking relationship for cash management, ACH and wire transfer services. Should we
not be successful in maintaining a sufficient relationship with one of the limited number of large international banks that
provide these services, we would be required to establish a global network of banks to provide us with these services. This
could alter the pattern of settlement with our agents and result in our agent receivables and agent payables being outstanding
for longer periods than the current remittance schedule thereby adversely impacting our cash flow and revenue. Maintaining
a global network of banks, if necessary, may also increase our overall costs for banking services.
We and our agents are considered Money Service Businesses in the United States under the Bank Secrecy Act. The federal
banking regulators are increasingly taking the stance that Money Service Businesses, as a class, are high risk. As a result,
several financial institutions, which look to the federal regulators for guidance, have terminated their banking relationships
with some of our agents. If our agents are unable to maintain existing or establish new banking relationships, they may not
be able to continue to offer our services which could adversely affect our results of operations.
We may be unable to operate our official check and money order businesses profitably as a result of historically low
interest rates and our revised pricing strategies.
Our revenues in the official check business are generated primarily by the investment of funds we receive from the sale of
official checks. In turn, we pay commissions to our official check financial institution customers based on the outstanding
balance produced by that customer’s sale of official checks, calculated at a rate based on short-term variable financial
indices, such as the federal funds rate. Fluctuations in interest rates affect the revenue produced by our investment portfolio
and the commissions that we pay our official check financial institution customers. There can be no assurance that interest
rate fluctuations in our investments will align with the commission rates we pay to our official check financial institution
customers. Both our investment revenue and the commissions we pay decrease when interest rates decline and increase when
interest rates rise. However, because our commission rates reset more frequently than the rates earned on our investments,
changes in investment revenue will lag changes in commission rates. A rising interest rate environment typically has a
negative impact on our investment margin. In the past our investments included long-term and medium-term fixed income
securities, a portion of which were asset-backed securities. Our investment portfolio now focuses on highly liquid,
short-term securities that produce a lower rate of return. As a result, we have reduced the commissions we pay to our official
check financial institution customers and have implemented and/or increased per-item and other fees for our official check
services. Despite these changes, there can be no assurance that our official check business will operate profitably. Further,
our official check financial institution customers have a right to terminate their agreements with us if they do not accept
these pricing changes, and we have numerous agreements with these customers that will expire in 2010 and may not be
renewed. There can be no assurance that we will retain those official check financial institution customers that we wish to
retain.
Earnings in our money order business are generated in part by the investment of funds we receive from the sale of money
orders. As a result of the composition of our investment portfolio, we earn a lower rate of return on the investment of funds
we receive from the sale of money orders. The continued success of our money order business is dependent on our ability to
increase money order fees paid to us by our agents.
Failure to maintain sufficient capital could adversely affect our business, financial condition and results of operations.
If we do not have sufficient capital, we may not be able to pursue our growth strategy and fund key strategic initiatives, such
as product development and acquisitions. We may not be able to meet new capital requirements introduced or required by
our regulators. Given the leveraged nature of the Company and the significant restrictive covenants in our debt agreements,
there can be no assurance that we will have access to sufficient capital. Failure to have such access could materially impact
our business, financial condition and results of operations.
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Failure to attract and retain key employees could have a material adverse effect on our business, financial condition and
results of operations.
Our success depends to a large extent upon our ability to attract and retain key employees. We are in a period of significant
change in our executive management team, including vacancies of key positions, and we may face uncertainties in
implementing our business strategies and goals as a result. A failure to attract and retain key personnel could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
If we fail to successfully develop and timely introduce new and enhanced products and services or we make substantial
investments in an unsuccessful new product, service or infrastructure change, our business, prospects, financial
condition and results of operations could be adversely affected.
Our future growth will depend, in part, on our ability to continue to develop and successfully introduce new and enhanced
methods of providing money transfer, money order, official check, bill payment and related services that keep pace with
competitive introductions, technological changes and the demands and preferences of our agents, financial institution
customers and consumers. Many of our competitors offer electronic payment mechanisms, including Internet-based and
cellular phone payment services, that could be substituted for traditional forms of payment, such as the money order, bill
payment and money transfer services that we offer. If these alternative payment mechanisms become widely substituted for
our products and services, and we do not develop and offer similar alternative payment mechanisms successfully and on a
timely basis, our business and prospects could be adversely affected. Additionally, we may make future investments or enter
into strategic alliances to develop new technologies and services or to implement infrastructure change to further our
strategic objectives, strengthen our existing businesses and remain competitive. Such investments and strategic alliances are
inherently risky and we cannot guarantee that such investments or strategic alliances will be successful and if not successful,
will not have a material adverse effect on our business, financial condition and results of operations.
If we are unable to adequately protect our brand and the intellectual property rights related to our existing and any new
or enhanced products and services, or if we are unable to avoid infringing on the rights of others, our business, prospects,
financial condition and results of operations could be adversely affected.
The MoneyGram ® brand is important to our business. We utilize trademark registrations in various countries and other tools
to protect our brand. Our business would be harmed if we were unable to adequately protect our brand, and the value of our
brand were to decrease as a result.
We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license
agreements to protect the intellectual property rights related to our products and services. We also investigate the intellectual
property rights of third parties to prevent our infringement of those rights. We may be subject to claims of third parties that
we infringe their intellectual property rights or have misappropriated other proprietary rights. We may be required to spend
resources to defend any such claims or to protect and police our own rights. Some of our intellectual property rights may not
be protected by intellectual property laws, particularly in foreign jurisdictions. The loss of our intellectual property
protection, the inability to secure or enforce intellectual property protection or to successfully defend against claims of
intellectual property infringement could harm our business and prospects.
We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition
and results of operations would be adversely affected.
The markets in which we compete are highly competitive, and we face a variety of competitors across our businesses, in
particular our largest competitor, The Western Union Company. In addition, new competitors or alliances among established
companies may emerge. With respect to our money transfer, urgent bill payment and money order businesses, our primary
competition comes from our largest competitor. We cannot anticipate every effect that actions taken by our competitors will
have on our business, or the money transfer and bill payment industry in general.
Money transfer, money order and bill payment services within our Global Funds Transfer segment compete in a
concentrated industry, with a small number of large competitors and a large number of small, niche competitors. We also
compete with banks and niche person-to-person money transfer service providers. The electronic bill payment services
within our Global Funds Transfer segment compete in a highly fragmented consumer-to-business payment
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industry. Competitors in the electronic payments area include financial institutions, third parties that host financial institution
and bill payment services, third parties that offer payment services directly to consumers and billers offering their own bill
payment services.
Our official check business competes primarily with financial institutions that have developed internal processing
capabilities or services similar to ours and do not outsource official check services. Financial institutions could also offer
competing official check outsourcing services to our existing and prospective official check customers.
There can be no assurance that growth in consumer money transfer transactions, bill payment transactions and other payment
products will continue. In addition, consolidation among payment services companies has occurred and could continue. If we
are unable to continue to grow our existing products, while also growing newly developed and acquired products, we will be
unable to compete effectively in the changing marketplace, and our business, financial condition and results of operations
would be adversely affected.
MoneyGram and our agents are subject to a number of risks relating to United States and international regulatory
requirements which could result in material settlements, fines or penalties or changes in our or their business operations
that may adversely affect our business, financial condition and results of operations.
Our business is subject to a wide range of laws and regulations which vary from country to country. The money transfer
business is subject to a variety of regulations aimed at the prevention of money laundering and terrorism. We are subject to
United States federal anti-money laundering laws, including the Bank Secrecy Act and the requirements of the OFAC, which
prohibit us from transmitting money to specified countries or on behalf of prohibited individuals. Additionally, we are
subject to the anti-money laundering laws in many countries where we operate, particularly in the European Union. We are
also subject to financial services regulations, money transfer and payment instrument licensing regulations, consumer
protection laws, currency control regulations, escheat laws, as well as privacy and data protection laws. Many of the laws to
which we are subject are evolving, unclear and inconsistent across various jurisdictions, making compliance challenging.
Changes in laws, regulations or other industry practices and standards may increase our costs of operations and may disrupt
our business as we develop new business and compliance models. For example, the European Union’s Payment Services
Directive (“PSD”) has created a new framework of licensing and other regulations for our business operations in the
European Union and imposes a number of new requirements on our business, including greater potential liability on us for
the conduct of our agents and the commission of third party fraud utilizing our services. We have modified our business
operations in the European Union in light of PSD and will likely experience increased costs of operating in the European
Union. In the event we fail to comply with the PSD, our business, financial position and results of operations may be
adversely impacted. Additionally, the United States and other countries periodically consider initiatives designed to lower
costs of international remittances which, if implemented, may adversely impact our business, financial position and results of
operations.
Changes in laws, regulations or other industry practices and standards, or interpretations of legal or regulatory requirements
may reduce the market for or value of our products or services or render our products or services less profitable or obsolete
and have an adverse effect on our results of operations. Changes in the laws affecting the kinds of entities that are permitted
to act as money transfer agents (such as changes in requirements for capitalization or ownership) could adversely effect our
ability to distribute our services and the cost of providing such services, both by us and our agents. Many of our high volume
agents are in the check cashing industry. Any regulatory action that adversely affects check cashers could also cause this
portion of our agent base to decline. If onerous regulatory requirements were imposed on our agents, the requirements could
lead to a loss of agents, which, in turn, could lead to a loss of retail business.
Any intentional or negligent violation by us of the laws and regulations set forth above could lead to significant fines or
penalties and could limit our ability to conduct business in some jurisdictions. Regulators in the United States and other
jurisdictions are showing a greater inclination than they have in the past to hold money services businesses like ours to
higher standards of agent training and monitoring for possible violations of laws and regulations by agents. Our systems,
employees and processes may not be sufficient to detect and prevent an intentional or negligent violation of the laws and
regulations set forth above by our agents, which could also lead to us being subject to significant fines or penalties. In
addition to those direct costs, a failure by us or our agents to comply with applicable
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laws and regulations also could seriously damage our reputation and brands and result in diminished revenue and profit and
increased operating costs.
Failure by us or our agents to comply with the laws and regulatory requirements of applicable regulatory authorities could
result in, among other things, revocation of required licenses or registrations, loss of approved status, termination of
contracts with banks or retail representatives, administrative enforcement actions and fines, class action lawsuits, cease and
desist orders and civil and criminal liability. The occurrence of one or more of these events could have a material adverse
effect on our business, financial condition and results of operations.
We conduct money transfer transactions through agents in some regions that are politically volatile or, in a limited
number of cases, are subject to certain OFAC restrictions.
We conduct money transfer transactions through agents in some regions that are politically volatile or, in a limited number
of cases, are subject to certain OFAC restrictions. While we have instituted policies and procedures to protect against
violations of law, it is possible that our money transfer service or other products could be used by wrong-doers in
contravention of United States law or regulations. In addition to monetary fines or penalties that we could incur, we could be
subject to reputational harm that could have a material adverse effect on our business, financial condition and results of
operations.
A material breach of security of our systems could adversely affect our business.
We obtain, transmit and store confidential customer information in connection with certain of our services. Any significant
security breaches in our computer networks, databases or facilities could harm our business and reputation, cause inquiries
and fines or penalties from regulatory or governmental authorities and cause a loss of customers. We rely on a variety of
technologies to provide security for our systems. Advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments, including improper acts by third parties, may result in a compromise or
breach of the security measures we use to protect our systems. We may be required to expend significant capital and other
resources to protect against these security breaches or to alleviate problems caused by these breaches. Third-party
contractors also may experience security breaches involving the storage and transmission of our data. If users gain improper
access to our or our contractor’s systems or databases, they may be able to steal, publish, delete or modify confidential
customer information. A security breach could expose us to monetary liability, lead to reputational harm and make our
customers less confident in our services.
Our business is particularly dependent on the efficient and uninterrupted operation of our computer network systems and
data centers.
Our ability to provide reliable service largely depends on the efficient and uninterrupted operation of our computer network
systems and data centers. Our business involves the movement of large sums of money and the management of data
necessary to do so. The success of our business particularly depends upon the efficient and error-free handling of
transactions and data. We rely on the ability of our employees and our internal systems and processes to process these
transactions in an efficient, uninterrupted and error-free manner.
In the event of a breakdown, catastrophic event (such as fire, natural disaster, power loss, telecommunications failure or
physical break-in), security breach, improper operation, improper action by our employees, agents, customer financial
institutions or third party vendors or any other event impacting our systems or processes or our vendors’ systems or
processes, we could suffer financial loss, loss of customers, regulatory sanctions and damage to our reputation. The measures
we have enacted, such as the implementation of disaster recovery plans and redundant computer systems, may not be
successful. We may also experience problems other than system failures, including software defects, development delays
and installation difficulties, which would harm our business and reputation and expose us to potential liability and increased
operating expenses. Certain of our agent contracts, including our contract with Walmart, contain service level standards
pertaining to the operation of our system, and give the agent a right to collect damages and in extreme situations a right of
termination for system downtime exceeding agreed upon service levels. If we experience significant system interruptions or
system failures, our business interruption insurance may not be adequate to compensate us for all losses or damages that we
may incur.
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If we are unable to effectively operate and scale our technology to match our business growth, our business, financial
condition and results of operations could be adversely affected.
Our ability to continue to provide our services to a growing number of agents and consumers, as well as to enhance our
existing services and offer new services, is dependent on our information technology systems. If we are unable to effectively
manage the technology associated with our business, we could experience increased costs, reductions in system availability
and loss of agents or consumers. Any failure of our systems in scalability, reliability and functionality could adversely
impact our business, financial condition and results of operations.
The operation of retail locations and acquisition or start-up of businesses create risks and may adversely affect our
operating results.
We operate Company-owned retail locations for the sale of our products and services. After substantial capital investment to
open retail locations, it is uncertain whether these locations will be profitable. We may be subject to additional laws and
regulations that are triggered by our ownership of retail locations and our employment of individuals who staff our retail
locations. There are also certain risks inherent in operating any retail location, including theft, personal injury and property
damage and long-term lease obligations.
We may, from time to time, acquire or start up businesses both inside and outside of the United States. The acquisition and
integration of businesses, involve a number of risks. We may not be able to successfully integrate businesses that we acquire
or open, including their facilities, personnel, financial systems, distribution, operations and general operating procedures. If
we fail to successfully integrate acquisitions, we could experience increased costs and other operating inefficiencies, which
could have an adverse effect on our results of operations. The diversion of capital and management’s attention from our core
business that results from acquiring or opening new businesses could adversely affect our business, financial condition and
results of operations.
There are a number of risks associated with our international sales and operations that could adversely affect our
business.
We provide money transfer services between and among approximately 190 countries and territories and continue to expand
in various international markets. Our ability to grow in international markets and our future results could be harmed by a
number of factors, including:
• changes in political and economic conditions and potential instability in certain regions;
• changes in regulatory requirements or in foreign policy, including the adoption of foreign laws detrimental to our
business;
• possible increased costs and additional regulatory burdens imposed on our business;
• burdens of complying with a wide variety of laws and regulations;
• possible fraud of theft losses, and lack of compliance by international representatives in foreign legal jurisdictions
where collection and legal enforcement may be difficult or costly;
• reduced protection for our intellectual property rights;
• unfavorable tax rules or trade barriers;
• inability to secure, train or monitor international agents; and
• failure to successfully manage our exposure to foreign currency exchange rates, in particular with respect to the euro.
Unfavorable outcomes of tax positions we take could adversely affect our tax expense.
We file tax returns and take positions with respect to federal, state, local and international taxation, including positions that
relate to our 2007 and 2008 net security losses, and our tax returns and tax positions are subject to review and audit by taxing
authorities. An unfavorable outcome of a tax review or audit could result in higher tax expense, which could adversely affect
our results of operations and cash flows. We establish reserves for material,
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known tax exposures. While we believe our reserves are adequate to cover material, known tax exposures, there can be no
assurance that an actual taxation event would not exceed our reserves.
Because we may be deemed to be a subsidiary of a financial holding company under the Bank Holding Company Act, we
may be limited in our ability to engage in other businesses.
Because Goldman Sachs is a registered bank holding company, the Federal Reserve Board has the authority to examine and
supervise its operations, including the operations of its controlled subsidiaries. We may be deemed a controlled subsidiary of
Goldman Sachs. As Goldman Sachs has been approved by the Federal Reserve Board as a financial holding company and
because we may be deemed to be an indirect subsidiary of Goldman Sachs, our ability to engage in other businesses may be
limited to those permissible for a financial holding company.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a
material adverse effect on our business.
We are required to certify and report on our compliance with the requirements of Section 404 of the Sarbanes-Oxley Act,
which requires annual management assessments of the effectiveness of our internal control over financial reporting and a
report by our independent registered public accounting firm addressing the effectiveness of our internal control over
financial reporting. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented
or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with Section 404. In order to achieve effective internal controls we
may need to enhance our accounting systems or processes which could increase our cost of doing business. Any failure to
achieve and maintain an effective internal control environment could have a material adverse effect on our business.
We have significant overhang of salable convertible preferred stock relative to float.
The trading market for our common stock was first established in June 2004. The float in that market now consists of
approximately 82,300,000 shares out of a total of 82,515,119 shares issued and outstanding as of December 31, 2009. The
Series B Stock issued to the Investors is convertible into shares of common stock or common equivalent stock at the price of
$2.50 per common share, subject to anti-dilution rights. Under the Registration Rights Agreement entered into between the
Company and the Investors at the closing of the recapitalization, the Investors and other parties may require us to register for
sale publicly (at times largely of their choosing) all of the Series B Stock that they hold, as well as any common stock or
Series D Participating Convertible Preferred Stock into which the B-1 Stock may be converted. Sales of a substantial number
of shares of our common stock, or the perception that significant sales could occur (particularly if sales are concentrated in
time or amount), may depress the trading price of our common stock.
An agreement among the Investors and Walmart could prevent an acquisition of the Company.
Effective through March 17, 2010, the Investors and Walmart have an agreement that, among other things, prevents the
Investors, without the prior written consent of Walmart, from voting in favor of, consenting to or selling or transferring their
equity securities in a manner that would result in a change of control of the Company. The Investors collectively have a
majority of the voting stock of the Company and Walmart, whose interests may differ from our stockholders’ interests, could
prevent the Investors from agreeing to a sale of the Company under certain circumstances.
Our capital structure, charter documents, and Delaware law could delay or prevent an acquisition of the Company, which
could inhibit your ability to receive a premium on your investment from a possible sale of the Company.
Our current capital structure and certain provisions of our charter documents may discourage third parties from seeking to
acquire the Company. The holders of the B Stock would vote as a class with the common stockholders on any proposed
business combination and would control the outcome. These matters and certain provisions of Delaware law relating to
business combinations with interested stockholders may have the effect of delaying, deterring or
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preventing a merger or change in control of the Company. Some of these matters may discourage a future acquisition of the
Company even if common stockholders would receive an attractive value for their shares or if a significant number of our
common stockholders believed such a proposed transaction to be in their best interests. As a result, stockholders who desire
to participate in such a transaction may not have the opportunity to do so.
If we cannot meet the New York Stock Exchange (“NYSE”) continued listing requirements, the NYSE may delist our
common stock.
Our common stock is currently listed on the NYSE. The NYSE requires us to maintain an average closing price of our
common stock of $1.00 per share or higher over 30 consecutive trading days as well as to maintain average market
capitalization and stockholders’ equity of at least $75 million.
If we are unable to maintain compliance with the NYSE criteria for continued listing, our common stock would be subject to
delisting. A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and
market price of our common stock; reducing the number of investors willing to hold or acquire our common stock, which
could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage for the
Company; and limiting our ability to issue additional securities or obtain additional financing in the future.
Item 1B.
UNRESOLVED SEC COMMENTS
None.
Item 2.
PROPERTIES
Location
Use
Brooklyn Center, MN
Corporate
Headquarters
Global Operations
Center
Global Operations
Center
Lakewood, CO
Call Center
Minneapolis, MN
Brooklyn Center, MN
Segment(s) Using
Space
Square Feet
Lease Expiration
Both
168,211
12/31/2015
Both
75,000
1/31/2012
Both
Global Funds
Transfer
44,026
1/31/2012
114,240
3/31/2012
Information concerning our material properties, all of which are leased, including location, use, approximate area in square
feet and lease terms, is set forth above. We also have a number of other smaller office locations in Arkansas, California,
Florida, New York, France, Germany, Italy, Spain and the United Kingdom, as well as small sales and marketing offices in
Australia, China, Greece, Hong Kong, India, Italy, the Netherlands, Nigeria, Russia, South Africa, Spain, Ukraine and
United Arab Emirates. We believe that our properties are sufficient to meet our current and projected needs.
Item 3.
LEGAL PROCEEDINGS
We are involved in various claims, litigations and government inquiries that arise from time to time in the ordinary course of
our business. All of these matters are subject to uncertainties and outcomes that are not predictable with certainty. We accrue
for these matters as any resulting losses become probable and can be reasonably estimated. Further, we maintain insurance
coverage for many claims and litigations alleged. Management does not believe that after final disposition any of these
matters is likely to have a material adverse impact on our financial position.
Federal Securities Class Actions — The Company and certain of its present and former officers and directors are defendants
in a consolidated class action case in the United States District Court for the District of Minnesota captioned In re
MoneyGram International, Inc. Securities Litigation . The Consolidated Complaint was filed on October 3, 2008, and alleges
against each defendant violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and Rule 10b-5 under the Exchange Act and alleges against Company officers violations of Section 20(a) of the Exchange
Act. The Consolidated Complaint alleges failure to adequately disclose, in a timely manner, the nature and risks of the
Company’s investments, as well as unrealized losses and
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other-than-temporary impairments related to certain of the Company’s investments. The Consolidated Complaint seeks
recovery of losses incurred by stockholder class members in connection with their purchases of the Company’s securities.
On February 24, 2010, the parties entered into a non-binding Memorandum of Understanding pursuant to which the parties
agreed, subject to final approval of the parties and the court, to settle this action for a cash payment of $80 million, all but
$20 million of which would be paid by the Company’s insurance carriers. On March 9, 2010, the parties entered into a
Settlement Agreement to settle the case on terms consistent with the Memorandum of Understanding. On March 10, 2010,
the Court issued an Order that preliminarily approved the settlement. The parties will seek final approval of the settlement at
a hearing currently set for June 18, 2010.
Minnesota Stockholder Derivative Claims — Certain of the Company’s present and former officers and directors are
defendants in a consolidated shareholder derivative action in the United States District Court for the District of Minnesota
captioned In re MoneyGram International, Inc. Derivative Litigation . The Consolidated Complaint in this Action, which
was filed on November 18, 2009 and arises out of the same matters at issue in the securities class action, alleges claims on
behalf of the Company for, among other things, breach of fiduciary duties, unjust enrichment, abuse of control, and gross
mismanagement. On February 24, 2010, the parties entered into a non-binding Memorandum of Understanding pursuant to
which they agreed, subject to final approval of the parties and the court, to settle this action. The Memorandum of
Understanding provides for changes to MoneyGram’s business, corporate governance and internal controls, some of which
have already been implemented in whole or in part in connection with MoneyGram’s recent recapitalization. The Company
also agreed to pay attorney fees and expenses to the plaintiff’s counsel in the amount of $1.3 million, with $1.0 million to be
paid by the Company’s insurance carriers. The Memorandum of Understanding is subject to negotiation and execution of
definitive settlement documents containing usual and customary settlement terms, notice to shareholders, and approval of the
Court.
ERISA Class Action — On April 22, 2008, Delilah Morrison, on behalf of herself and all other MoneyGram 401(k) Plan
participants, brought an action in the United States District Court for the District of Minnesota. The complaint alleges claims
under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including claims that the defendants
breached fiduciary duties by failing to manage the plan’s investment in Company stock, and by continuing to offer Company
stock as an investment option when the stock was no longer a prudent investment. The complaint also alleges that defendants
failed to provide complete and accurate information regarding Company stock sufficient to advise plan participants of the
risks involved with investing in Company stock and breached fiduciary duties by failing to avoid conflicts of interests and to
properly monitor the performance of plan fiduciaries and fiduciary appointees. Finally, the complaint alleges that to the
extent that the Company is not a fiduciary, it is liable for knowingly participating in the fiduciary breaches as alleged. On
August 7, 2008, plaintiff amended the complaint to add an additional plaintiff, name additional defendants and additional
allegations. For relief, the complaint seeks damages based on what the most profitable alternatives to Company stock would
have yielded, unspecified equitable relief, costs and attorneys’ fees. On March 25, 2009, the Court granted in part and denied
in part defendants’ motion to dismiss.
California Action — On January 22, 2008, Russell L. Berney filed a complaint in Los Angeles Superior Court against the
Company and its officers and directors, Thomas H. Lee Partners, L.P., and PropertyBridge, Inc. and two of its officers,
alleging false and negligent misrepresentation, violations of California securities laws and unfair business practices with
regard to disclosure of the Company’s investments. The complaint also alleges derivative claims against the Company’s
Board of Directors relating to the Board’s oversight of disclosure of the Company’s investments and with regard to the
Company’s negotiations with Thomas H. Lee Partners, L.P. and Euronet Worldwide, Inc. The complaint seeks monetary
damages, disgorgement, restitution or rescission of stock purchases, rescission of agreements with third parties, constructive
trust and declaratory and injunctive relief, as well as attorneys’ fees and costs. In July 2008, an amended complaint was filed
asserting an additional claim for declaratory relief. In September 2009, an amended complaint was filed alleging additional
facts and naming additional defendants.
SEC Inquiry — By letter dated February 4, 2008, the Company received notice from the Securities and Exchange
Commission (“SEC”) that it is conducting an informal, non-public inquiry relating to the Company’s financial statements,
reporting and disclosures related to the Company’s investment portfolio and offers and negotiations to sell the Company or
its assets. The SEC’s notice states that it has not determined that any violations of the securities
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laws have occurred. On February 11, 2008 and November 5, 2008, the Company received additional letters from the SEC
requesting certain information. The Company cooperated with the SEC on a voluntary basis.
Other Matters — On September 25, 2009, the United States District Court for the Western District of Texas, Austin
returned a jury verdict in a patent suit brought against the Company by Western Union, awarding $16.5 million to Western
Union. The Company has appealed the verdict. In connection with its agreement with the Federal Trade Commission
(“FTC”), the Company is making enhancements to its consumer anti-fraud program and has paid $18.0 million into an
FTC-administered fund to refund consumers who have been victimized through third-party fraud. The Company is
continuing to cooperate with a government entity in a separate matter involving complaints that certain individuals or entities
may have used our money transfer services for fraud-induced money transfers.
Item 4.
[RESERVED]
PART II
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the New York Stock Exchange under the symbol MGI. No dividends on our common stock
were declared by our Board of Directors in 2009 or 2008. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Mezzanine Equity and Stockholders’ Deficit” and Note 13 — Stockholders’ Deficit
of the Notes to Consolidated Financial Statements. As of March 8, 2010, there were 13,919 stockholders of record of our
common stock.
The high and low sales prices for our common stock for fiscal 2009 and 2008 were as follows:
2009
Fiscal Quarter
2008
High
First
Second
Third
Fourth
$
$
$
$
1.55
1.78
3.29
3.25
Low
$
$
$
$
1.00
1.08
1.83
2.19
High
$ 14.27
$ 2.03
$ 1.94
$ 1.60
Low
$
$
$
$
1.57
0.90
0.98
0.85
The Board of Directors has authorized the repurchase of a total of 12,000,000 shares. These authorizations were announced
publicly in our press releases issued on November 18, 2004, August 18, 2005 and May 9, 2007. The repurchase
authorization is effective until such time as the Company has repurchased 12,000,000 common shares. MoneyGram common
stock tendered to the Company in connection with the exercise of stock options or vesting of restricted stock are not
considered repurchased shares under the terms of the repurchase authorization. As of December 31, 2009, we have
repurchased 6,795,000 shares of our common stock under this authorization and have remaining authorization to repurchase
up to 5,205,000 shares. The Company has not repurchased any shares since July 2007, other than in connection with
employees’ exercise of stock options. However, the Company may consider repurchasing shares from time-to-time, subject
to limitations in our debt agreements.
We completed a recapitalization on March 25, 2008, as described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, as well as Note 2 — Recapitalization of the Notes to Consolidated Financial
Statements. The terms of our debt agreements place significant limitations on the amount of restricted payments we may
make, including dividends on our common stock. With certain exceptions, we may only make restricted payments in an
aggregate amount not to exceed $25.0 million, subject to an incremental build-up based on our consolidated net income in
future periods. As a result, our ability to declare or pay dividends or distributions to the stockholders of the Company’s
common stock is materially limited at this time.
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STOCKHOLDER RETURN PERFORMANCE
The following graph compares the cumulative total return from December 31, 2004 to December 31, 2009 for our common
stock, our peer group index of payment services companies and the S&P 500 Index. The peer group index of payment
services companies consists of: Euronet Worldwide Inc., Fidelity National Information Services, Inc., Fiserv, Inc., Global
Payments Inc., MasterCard, Inc., Online Resources Corporation, Total System Services, Inc., Visa, Inc. and The Western
Union Company (the “Peer Group Index”). We changed our peer group in 2009 to delete CSG Systems International, Inc.,
DST Systems, Inc. and Jack Henry & Associates, Inc. and to add MasterCard, Inc. and Visa, Inc. We believe the new peer
group represents a more relevant group of companies in the global remittance market that we participate in. The graph
assumes the investment of $100 in each of our common stock, our peer group indexes and the S&P 500 Index on
December 31, 2004, and the reinvestment of all dividends as and when distributed.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG MONEYGRAM INTERNATIONAL, INC.,
S&P 500 INDEX AND PEER GROUP INDEX
12/2004
MONEYGRAM INTERNATIONAL, INC.
S&P 500 INDEX
OLD PEER GROUP INDEX
NEW PEER GROUP INDEX
100
100
100
100
24
12/2005
12/2006
12/2007
12/2008
12/2009
123.73
104.91
109.24
108.57
149.60
121.48
125.51
127.08
74.01
128.16
136.30
158.25
4.91
80.74
83.68
99.61
13.87
102.11
112.65
157.65
Table of Contents
Item 6.
SELECTED FINANCIAL DATA
The following table presents our selected consolidated financial data for the periods indicated. The information set forth
below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our Consolidated Financial Statements and Notes thereto. For the basis of presentation of the information
set forth below, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of
Presentation.”
YEAR ENDED DECEMBER 31,
(Dollars and shares in thousands, except
per share data)
Operating Results
Revenue
Global Funds Transfer segment
Financial Paper Products segment
Other
2009
$
Total revenue
Commissions expense
Net revenue (losses) (1)
Expenses
(Loss) income from continuing
operations before income taxes (2)
Income tax (benefit) expense
Net (loss) income from continuing
operations
(Loss) earnings per common share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
Financial Position
Excess (shortfall) of assets over
payment service obligations (3)
Substantially restricted assets (3)
Total assets
Payment service obligations
Long-term debt
Mezzanine equity (4)
Stockholders’ (deficit) equity
Other Selected Data
Capital expenditures
Depreciation and amortization
Cash dividends declared per share
Average investable balances (5)
Net investment margin (6)
Approximate number of countries and
territories served
Number of money order locations (7)
Number of money transfer
locations (7)
(1)
1,027,850
122,783
21,269
2008
$
1,013,154
238,192
(324,228 )
2007
$
858,702
470,126
(1,171,291 )
2006
$
2005
671,459
472,239
15,861
$
507,359
447,674
16,203
1,171,902
(498,467 )
927,118
(604,609 )
157,537
(663,908 )
1,159,559
(563,659 )
971,236
(470,472 )
673,435
322,509
(506,371 )
595,900
500,764
(695,757 )
(659,700 )
(486,896 )
(419,127 )
(354,388 )
(22,322 )
(20,416 )
(337,191 )
(75,806 )
(993,267 )
78,481
176,773
52,719
146,376
34,170
$
(1,906 )
$
(261,385 )
$
(1,071,748 )
$
124,054
$
112,206
$
(1.48 )
(1.48 )
$
(4.19 )
(4.19 )
$
(12.94 )
(12.94 )
$
1.47
1.45
$
1.32
1.30
82,499
82,499
82,456
82,456
82,818
82,818
84,294
85,818
84,675
85,970
$
313,335
5,156,789
5,929,663
4,843,454
796,791
864,328
(883,013 )
$
391,031
5,829,030
6,642,296
5,437,999
978,881
742,212
(781,736 )
$
(551,812 )
7,210,658
7,935,011
7,762,470
345,000
—
(488,517 )
$
358,924
8,568,713
9,276,137
8,209,789
150,000
—
669,063
$
366,037
8,525,346
9,175,164
8,159,309
150,000
—
624,129
$
$
$
$
38,258
57,091
—
4,246,507
0.75 %
$
$
$
$
40,357
56,672
—
4,866,339
1.23 %
$
$
$
$
71,142
51,979
0.20
6,346,442
2.28 %
$
$
$
$
81,033
38,978
0.17
6,333,115
2.31 %
$
$
$
$
47,359
32,465
0.07
6,726,790
1.91 %
190
49,000
190
59,000
180
59,000
170
55,000
170
53,000
190,000
176,000
143,000
110,000
89,000
Net revenue for 2008 includes net securities losses of $340.7 million from the realignment of the investment portfolio
in the first quarter of 2008, other-than-temporary impairments and declines in the value of our trading investments. Net
losses for 2007 of $1.2 billion relates to other-than-temporary impairments in the Company’s investment portfolio.
25
Table of Contents
(2)
Loss from continuing operations before income taxes for 2009 includes $54.8 million of legal reserves relating to
securities litigation, stockholder derivative claims, a patent lawsuit and a settlement with the FTC; $18.3 million of
goodwill, intangible asset and corporate airplane impairments and a $14.3 million net curtailment gain on our benefit
plans. Loss from continuing operations before income taxes for 2008 includes a $29.7 million net loss on the
termination of swaps, a $26.5 million gain from put options on our trading investments, a $16.0 million non-cash
valuation loss from changes in the fair value of embedded derivatives on our Series B Stock and a goodwill
impairment of $8.8 million related to a component of our Other results for segment reporting purposes. Loss from
continuing operations before income taxes for 2007 includes a goodwill impairment of $6.4 million related to a
component of our Other results for segment reporting purposes.
(3) Assets in excess of payment service obligations are substantially restricted assets less payment service obligations as
calculated in Note 3 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.
Substantially restricted assets are composed of cash and cash equivalents, receivables and investments.
(4) Mezzanine Equity relates to our Series B Stock issued in the recapitalization described in Note 2 — Recapitalization of
the Notes to Consolidated Financial Statements. See Note 12 — Mezzanine Equity of the Notes to Consolidated
Financial Statements for the terms of the Series B Stock.
(5) Investable balances are composed of cash and cash equivalents and investments.
(6) Net investment margin is determined as net investment revenue (investment revenue less investment commissions)
divided by daily average investable balances.
(7) Includes 28,000, 30,000, 18,000, 16,000, and 16,000 locations in 2009, 2008, 2007, 2006 and 2005, respectively, that
offer both money order and money transfer services.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes. This
discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ
materially from those anticipated due to various factors discussed below under “Cautionary Statements Regarding
Forward-Looking Statements,” in Part I, Item 1A under the caption “Risk Factors” and elsewhere in this Annual Report on
Form 10-K.
Basis of Presentation
The financial statements in this Annual Report on Form 10-K are presented on a consolidated basis and include the accounts
of the Company and our subsidiaries. See Note 3 — Summary of Significant Accounting Policies of the Notes to the
Consolidated Financial Statements for further information regarding consolidation. References to “MoneyGram,” the
“Company,” “we,” “us” and “our” are to MoneyGram International, Inc. and its subsidiaries and consolidated entities. Our
Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United
States of America (“GAAP”).
Components of Net Revenue — Our net revenue consists of fee and other revenue, investment revenue and net securities
gains and losses, less fee and investment commissions expense. We generate net revenue primarily by charging transaction
fees in excess of third-party agent commissions, managing foreign currency exchange and managing our investments to
provide returns in excess of commissions paid to financial institution customers.
We derive revenue primarily through service fees charged to consumers and through our investments. Fee and other revenue
consists of transaction fees, foreign exchange and miscellaneous revenue. Transaction fees are fees earned on money
transfer, money order, bill payment and official check transactions. Money transfer transaction fees vary based on the
principal amount of the transaction, the originating location and the receiving location. Money order and bill payment
transaction fees are fixed per transaction. Foreign exchange revenue is derived from the management of currency exchange
spreads on money transfer transactions involving different “send” and “receive” currencies. Miscellaneous revenue primarily
consists of processing fees on rebate checks and controlled disbursements, service charges on aged outstanding money
orders and money order dispenser fees.
26
Table of Contents
Investment revenue consists of interest and dividends generated through the investment of cash balances received from the
sale of official checks, money orders and other payment instruments. These cash balances are available to us for investment
until the payment instrument is presented for payment. Investment revenue varies depending on the level of investment
balances and the yield on our investments. Investment balances vary based on the number of payment instruments sold, the
principal amount of those payment instruments and the length of time that passes until the instruments are presented for
payment.
Net securities gains and losses consist of realized gains and losses from the sale, call or maturity of investments,
other-than-temporary impairments of investments and unrealized gains and losses on trading investments and related put
options.
We incur fee commissions on our money transfer products. In a money transfer transaction, both the agent initiating the
transaction and the agent disbursing the funds receive a commission that is generally based on a percentage of the fee
charged to the consumer. We generally do not pay commissions to agents on the sale of money orders. In certain limited
circumstances for large agents, we may pay a fixed commission amount based on money order volumes transacted by that
agent. Fee commissions expense also includes the amortization of capitalized agent signing bonus payments.
Investment commissions consist of amounts paid to financial institution customers based on short-term interest rate indices
times the average outstanding cash balances of official checks sold by that financial institution. Through the second quarter
of 2008, investment commissions expense included costs associated with interest rate swaps and the sale of receivables
program. We historically used interest rate swaps to convert a portion of our variable rate commission payments to fixed rate
payments, which hedged the interest rate risk associated with the variable rate commissions paid to our financial institution
customers. In connection with the interest rate swaps, we paid a fixed amount to a counterparty and received a variable rate
payment in return. To the extent that the fixed rate exceeded the variable rate, we incurred an expense related to the swap; if
the variable rate exceeded the fixed rate, we recognized income related to the swap. In connection with the restructuring of
the official check business in 2008, we terminated certain financial institution customer relationships. As a result, we
terminated the swaps related to commission payments in June 2008. See further discussion of the termination of these swaps
in Note 7 — Derivative Financial Instruments of the Notes to Consolidated Financial Statements. Under our sale of
receivables program, we historically sold certain of our agent receivables at a discount to accelerate our cash flow, with the
discount recorded in investment commissions. In January 2008, we terminated our sale of receivables program and ceased
selling receivables by March 2008. See further discussion on our sale of receivables program in Note 3 — Summary of
Significant Accounting Policies — Sale of Receivables of the Notes to Consolidated Financial Statements.
Discontinued Operations — During 2007, we paid $3.3 million in connection with the settlement of a contingency arising
from the Sale and Purchase Agreement related to the continued operations of Game Financial Corporation with one casino.
We recognized a loss from discontinued operations of $0.3 million in 2007 in the Consolidated Statements of Loss,
representing the recognition of a deferred tax asset valuation allowance partially offset by the reversal of the remaining
liability for contingencies that expired. The following discussion of our results of operations is focused on our continuing
businesses.
Segment Reporting Changes — During the fourth quarter of 2009, we revised our segment reporting to reflect changes in
how we manage our business, review operating performance and allocate resources. We now manage our business primarily
through two reporting segments: Global Funds Transfer, which is composed of the money transfer and bill payment
products, and Financial Paper Products, which is composed of the official check and money order products. Prior year results
have been revised for comparative purposes. See the Segment Performance section for further discussion of our reporting
segments.
27
Table of Contents
RESULTS OF OPERATIONS
Table 1 — Results of Operations
YEAR ENDED
DECEMBER 31,
2009
2008
2007
2009
vs.
2008
vs.
2009
vs.
2008
vs.
2008
2007
2008
2007
($)
($)
(%)
(%)
(Amounts in thousands)
Revenue:
Fee and other revenue $
Investment revenue
Net securities gains
(losses)
Total revenue
Fee commissions
expense
Investment
commissions
expense
1,130,893
$
1,105,676
33,219
162,130
7,790
(340,688 )
$
949,059
$
398,234
(1,189,756 )
25,217
(236,104 )
348,478
849,068
244,784
769,581
927,118
157,537
497,105
502,317
410,301
(5,212 )
1,362
102,292
253,607
Total commissions
expense
498,467
604,609
Net revenue
(losses)
673,435
Total expenses
Loss from continuing
operations before
income taxes
Income tax (benefit)
expense
Loss from continuing
operations
$
156,617
(128,911 )
1,171,902
Expenses:
Compensation and
benefits
Transaction and
operations support
Occupancy,
equipment and
supplies
Interest expense
Depreciation and
amortization
Valuation loss on
embedded
derivatives
Debt extinguishment
loss
$
2%
)
(80 %
17 %
)
(59 %
NM
NM
489 %
92,016
26 %
)
(1 %
(100,930 )
(151,315 )
)
(99 %
)
(60 %
663,908
(106,142 )
(59,299 )
)
(18 %
)
(9 %
322,509
(506,371 )
350,926
828,880
109 %
199,053
224,580
188,092
(25,527 )
36,488
)
(11 %
19 %
284,277
219,905
191,066
64,372
28,839
29 %
15 %
47,425
107,911
45,994
95,020
44,704
11,055
1,431
12,891
1,290
83,965
3%
14 %
3%
760 %
57,091
56,672
51,979
419
4,693
1%
9%
—
16,030
—
(16,030 )
16,030
NM
NM
—
1,499
—
(1,499 )
1,499
NM
NM
695,757
659,700
486,896
36,057
172,804
5%
35 %
(22,322 )
(337,191 )
(993,267 )
314,869
656,076
93 %
66 %
(20,416 )
(75,806 )
78,481
55,390
(154,287 )
73 %
810,363
99 %
(1,906 )
$
(261,385 )
$
(1,071,748 )
$
259,479
$
22 %
NM
NM
76 %
NM = Not meaningful
Following is a summary of our operating results from continuing operations in 2009:
• Fee and other revenue increased 2 percent to $1,130.9 million in 2009 from $1,105.7 million in 2008, driven primarily
by money transfer transaction volume growth of 6 percent. As compared to growth of 18 percent in 2008, money
transfer transaction volume growth was lower in 2009 due primarily to the economic recession and our growing
volume base.
• Investment revenue decreased $128.9 million, or 80 percent, in 2009 due to lower yields earned on our investment
portfolio and a decline in average investable balances from the termination of certain official check financial
institution customers and money order agents.
• Net securities gains in 2009 reflect a $7.6 million net gain from the call of two trading investments and the reversal of
the related put options. Valuation gains of $4.3 million on the put option related to the remaining
28
Table of Contents
trading investment were partially offset by $4.1 million of other-than-temporary impairments of other asset-backed
securities. This is compared to net securities losses of $340.7 million recorded in 2008 from the realignment of the
portfolio, other-than-temporary impairments of other asset-backed securities and unrealized losses on our trading
investments, partially offset by valuation gains from the receipt of put options relating to our trading investments.
• Total commissions expense decreased $106.1 million, or 18 percent, in 2009. The decline in the federal funds rate and
lower average investable balances reduced investment commissions expense by $73.2 million. In addition, investment
commissions expense for 2008 included a $27.7 million net loss from the termination of interest rate swaps related to
the official check business. Fee commissions expense decreased $5.2 million from lower average commission rates,
the decline in the euro exchange rate and lower signing bonus amortization, partially offset by an increase in fee
commissions from money transfer transaction volume growth.
• Interest expense increased to $107.9 million in 2009 from $95.0 million in 2008 due to higher average outstanding
debt as a result of the recapitalization completed in the first quarter of 2008, partially offset by the repayment of
$186.9 million of debt in 2009.
• Expenses increased $36.1 million, or 5 percent, in 2009 compared to 2008, primarily driven by: $54.8 million of legal
reserves relating to securities litigation, stockholder derivative claims, a patent lawsuit and a settlement with the
Federal Trade Commission; a $12.9 million increase in interest expense; a $10.5 million increase in stock-based
compensation; and a $9.5 million increase in professional fees. These increases were offset by a $14.3 million net
curtailment gain on our benefit plans, a $12.3 million decrease in executive severance and related costs and a
$7.1 million decrease in incentive compensation. Expenses in 2009 also include $18.3 million of goodwill, intangible
asset and corporate airplane impairments, as compared to $8.8 million of goodwill impairments in 2008. In addition,
2008 included a $16.0 million non-cash valuation loss on embedded derivatives in our preferred stock and $9.5 million
of costs related to the recapitalization and restructuring of the official check business.
• A significant amount of our internationally originated transactions and settlements with international agents are
conducted in the euro. In addition, operating expenses for most of our international subsidiaries are denominated in the
euro. During 2009, the average euro to United States dollar exchange rate decreased to 1.39 from 1.47 in 2008. The
decline in the euro exchange rate (net of hedging activities) reduced revenue by $10.9 million, commissions expense
by $7.6 million and expenses by $4.9 million, for a net benefit to our operating results of $1.6 million.
• In 2009, we recognized a tax benefit of $20.4 million on a pre-tax loss of $22.3 million, reflecting the net reversal of
valuation allowances on deferred tax assets relating to net securities losses in 2008 and 2007.
Following is a summary of significant actions taken by the Company and economic conditions during the year that impacted
our operating results in 2009:
Global Economic Conditions — Throughout 2009, worldwide economic conditions remained weak, as evidenced by
growing unemployment rates, government assistance to citizens and businesses on a global basis, continued declines in asset
values, restricted lending activity and low consumer confidence, among other factors. Historically, the money remittance
industry has generally been resilient during times of economic softness as money transfers are deemed essential to many,
with the funds used by the receiving party for food, housing and other basic needs. However, given the global reach and
extent of the current economic recession, the growth of money transfer volumes and the average principal of money transfers
were adversely impacted in 2009. In addition, bill payment products available in the United States are not as resilient as
money transfers given the more discretionary nature of some items paid for by consumers using these products. Accordingly,
the volume of bill payment transactions was adversely impacted in 2009, particularly in the auto and credit card sectors.
While there have been some indicators of moderation and improvement in December 2009 and early 2010, we continue to
have limited visibility into the future and believe growth rates will continue to be hampered in 2010.
Interest Rate Environment — Interest rates remained at historical lows through 2009. Interest rates affect our business in
several ways, but primarily through investment revenue, investment commission expense and interest expense. First, the
majority of our investment portfolio (including cash and cash equivalents) is floating rate, causing investment revenue to
decrease when rates decline and increase when rates rise. Second, the commissions
29
Table of Contents
we pay to our financial institution customers are variable rate and primarily based on the effective federal funds rate.
Accordingly, our investment commissions expense decreases when rates decline and increases when rates rise. As discussed
in “Results of Operations — Table 3 — Net Investment Revenue Analysis ,” our net investment margin is based on the
spread between the yield earned on our investment portfolio and the commission rates paid to our financial institution
customers. In a declining interest rate environment, our net investment margin will typically be benefited, while an
increasing interest rate environment will typically have a negative impact on our net investment margin. This is due to the
lag between when changes in interest rates impact the two components of the net investment margin, with commission rates
resetting faster than our investment portfolio. In the current environment, the federal funds rate is so low that most of our
financial institution customers are in a “negative” commission position, in that we do not owe any commissions to our
customers. While the vast majority of our contracts require the financial institution customers to pay us for the negative
commission amount, we have opted at this time to impose certain per-item and other fees rather than require payment. We
continue to monitor the negative commissions and may decide to pursue payment at a future date. Finally, our Senior
Facility is floating rate debt, and accordingly, our interest expense will decrease in a declining rate environment and increase
when rates rise.
Official Check Restructuring and Repricing — In the first quarter of 2008, we initiated the restructuring of our official
check business by changing the commission structure and exiting certain large customer relationships, particularly our top 10
financial institution customers. As of December 31, 2009, approximately $1.9 billion of balances for the top 10 customers
have run off, with the remaining balances expected to run off over the next 24 months as these customers cease issuing new
official checks and old issuances are presented to us for payment. Effective June 1, 2008 for most customers and July 1,
2008 for our remaining customers, we reduced the commission rate paid to the majority of our official check financial
institution customers. This repricing results in an average contractual payout rate of the effective federal funds rate less
approximately 85 basis points.
Money Order Repricing and Review — In the fourth quarter of 2008, we initiated the first phase of a repricing initiative for
our money order product sold through retail agent locations. This initiative increases the per-item fee we receive for our
money orders and reflects the impact of the realigned investment portfolio on the profitability of this product. A broader
second phase of repricing was initiated in the second quarter of 2009. In addition, we continue to review our credit exposure
to our agents and may terminate or otherwise revise our relationship with certain agents. As anticipated, money order
volumes in 2009 declined from these initiatives. As we continue our repricing and review efforts, we expect volumes to
further decline from the attrition of money order customers.
Table 2 — Fee Revenue and Fee Commissions Expense
YEAR ENDED DECEMBER 31,
2009
2008
2007
2009
vs.
2008
2008
vs.
2007
(Amounts in thousands)
Fee and other revenue
Fee commissions expense
Fee commissions expense as a % of fee
and other revenue
$
1,130,893
(497,105 )
44.0 %
$
1,105,676
(502,317 )
45.4 %
$
949,059
2%
(410,301 )
1%
17 %
)
(22 %
43.2 %
Fee and other revenue consists of fees on money transfer, bill payment, money order and official check transactions. In 2009,
fee and other revenue increased $25.2 million, or 2 percent, compared to 2008, driven by money transfer transaction volume
growth, partially offset by lower average money transfer fees, the decline in the euro exchange rate and a $6.6 million
reduction in bill payment revenue. Money transfer transaction volume increased 6 percent, generating incremental revenue
of $53.3 million. Average money transfer fees declined from lower average principal per transaction and corridor mix,
reducing revenue by $20.7 million. The decline in the euro exchange rate, net of hedging activities, reduced revenue by
$10.9 million in 2009. In addition, money order and official check fee and other revenue increased $9.3 million and
$5.6 million, respectively, primarily due to our repricing initiatives. Also, 2009 fee and other revenue declined $6.1 million
from 2008 due to discontinued businesses and products.
In 2008, fee and other revenue increased $156.6 million, or 17 percent, compared to 2007, primarily driven by growth in
money transfer. Money transfer fee and other revenue grew 19 percent in 2008, while money transfer transaction volume
increased 18 percent. Money transfer transaction volume growth resulted in incremental fee and
30
Table of Contents
other revenue of $131.8 million in 2008, while average money transfer fees declined from lower principal per transaction
and corridor mix, reducing revenue by $12.1 million in 2008. The increase in the euro exchange rate, net of hedging
activities, increased fee and other revenue by $20.7 million in 2008. Bill payment transaction volume growth of 13 percent
in 2008 increased fee and other revenue by $19.1 million.
Fee commissions expense consists primarily of fees paid to our third-party agents for the money transfer and bill payment
services. In 2009, fee commissions expense decreased $5.2 million, or 1 percent, from 2008 due to lower average money
transfer commission rates, the decline in the euro exchange rate, lower bill payment volumes and lower signing bonus
amortization, partially offset by money transfer volume growth. Incremental fee commissions of $16.1 million resulting
from money transfer transaction volume growth was significantly offset by a decrease of $7.7 million from lower average
commission rates and $7.6 million from the decline in the euro exchange rate, net of hedging activities. Bill payment volume
declines reduced commissions expense by $3.8 million and signing bonus amortization decreased by $2.0 million as certain
historical signing bonuses were fully amortized in the third quarter of 2009.
In 2008, fee commissions expense increased $92.0 million, or 22 percent, compared to 2007. Higher money transfer
transaction volumes increased fee commissions expense $54.4 million, while higher average commissions per transaction,
primarily from higher commissions paid to Walmart from new contract pricing, increased commissions $4.0 million.
Amortization of signing bonuses increased $11.4 million in 2008 from the signing of several large agents in 2007 and one
large agent in the first quarter of 2008. The change in the euro exchange rate, net of hedging activities, increased fee
commissions expense by $8.8 million. Bill payment fee commissions expense increased $11.3 million due to volume and
$3.2 million due to rate.
Table 3 — Net Investment Revenue Analysis
YEAR ENDED DECEMBER 31,
2009
2008
2009
vs.
2008
2007
2008
vs.
2007
(Amounts in thousands)
Investment revenue
Investment commissions expense (1)
Net investment revenue
$
33,219
(1,362 )
$
162,130
(102,292 )
$
398,234
(253,607 )
)
(80 %
99 %
)
(59 %
60 %
$
31,857
$
59,838
$
144,627
)
(47 %
)
(59 %
$
4,246,507
$
4,866,339
$
6,346,442
)
(13 %
)
(22 %
)
(23 %
)
(18 %
Average balances:
Cash equivalents and investments
Payment service obligations (2)
Average yields earned and rates paid (3) :
Investment yield
Investment commission rate
Net investment margin
3,048,100
0.78 %
0.04 %
0.75 %
3,923,989
3.33 %
2.61 %
1.23 %
4,796,257
6.27 %
5.29 %
2.28 %
(1)
Investment commissions expense includes payments made to financial institution customers based on short-term
interest rate indices times the outstanding balances of official checks sold by that financial institution. Through the
second quarter of 2008, investment commissions expense also included costs associated with swaps and the sale of
receivables program. See further discussion of the termination of swaps in Note 7 — Derivative Financial Instruments,
and the termination of the sale of receivables program in Note 3 — Summary of Significant Accounting Policies of the
Notes to Consolidated Financial Statements.
(2)
Commissions are paid to financial institution customers based on average outstanding balances generated by the sale of
official checks only. The average balance in the table reflects only the payment service obligations for which
commissions are paid and does not include the average balance of the sold receivables ($3.7 million and $349.9 million
for 2008 and 2007, respectively) as these are not recorded in the Consolidated Balance Sheets.
(3)
Average yields/rates are calculated by dividing the applicable amount of “Net investment revenue” by the applicable
amount shown in the “Average balances” section. The “Net investment margin” is calculated by dividing “Net
investment revenue” by the “Cash equivalents and investments” average balance.
31
Table of Contents
Investment revenue consists of interest and dividends generated through the investment of cash balances received from the
sale of official checks, money orders and other payment instruments. Investment revenue in 2009 decreased $128.9 million,
or 80 percent, compared to 2008 due to lower yields earned on our investment portfolio and a decline in average investable
balances from the termination of certain official check financial institution customers. Lower interest rates earned on cash
and cash equivalents resulted in a decrease of $110.0 million from 2008, while the decline in average investable balances
resulted in a decrease of $20.7 million. Investment revenue in 2008 also included a $10.0 million recovery of a security that
was fully impaired in 2007.
In 2008, investment revenue decreased $236.1 million, or 59 percent, compared to 2007 due to lower yields earned on our
realigned investment portfolio and the decrease in average investable balances from the termination of certain official check
financial institution customers and the termination of our sale of receivables program. With the realignment completed in the
first quarter of 2008, our portfolio now primarily consists of lower yielding cash equivalents and government securities.
Lower interest rates earned on cash and cash equivalents resulted in a decrease of $134.0 million from 2007, while the
decline in average investable balances resulted in a decrease of $92.9 million. Also negatively impacting investment revenue
in 2008 is the application of the cost recovery method of accounting for investments classified as “Other asset-backed
securities.” Under cost recovery, interest proceeds are deemed to be recoveries of principal, with no recognition as
investment revenue until the principal of the related security is fully recovered. See Note 6 — Investment Portfolio of the
Notes to the Consolidated Financial Statements for further information related to the investment portfolio and the application
of the cost recovery method. During 2008, we received interest proceeds of $26.9 million from our other asset-backed
securities, with $10.7 million applied to reduce the book value of the related securities. The remaining $16.2 million of
interest proceeds was recognized as investment revenue in 2008, including $10.0 million related to the recovery of a security
that was fully impaired in 2007.
Investment commissions expense includes payments made to financial institution customers based on their average
outstanding balances generated by the sale of official checks times short-term interest rate indices. Investment commission
expense decreased $100.9 million, or 99 percent, compared to 2008. The decline in the federal funds rate resulted in a
decrease of $49.7 million, while lower average investable balances resulted in a decrease of $23.4 million. In addition,
investment commissions expense for 2008 included a $27.7 million net loss from the termination of interest rate swaps as a
result of the termination of certain official check customers in 2008. See Note 7 — Derivative Financial Instruments of the
Notes to the Consolidated Financial Statements for further information regarding the interest rate swaps. The federal funds
rate has been so low during 2009 that most of our financial institution customers are in a “negative” commission position,
meaning we do not owe any commissions to our customers. While the majority of our contracts require that the financial
institution customers pay us for the negative commission amount, we have opted at this time to impose certain per-item and
other fees rather than require payment of the negative commission amount. We continue to monitor the negative
commissions and may decide to require payment of negative commissions at a future date.
In 2008, investment commissions expense decreased $151.3 million, or 60 percent, compared to 2007. Lower commission
rates from the official check repricing and the decline in the effective federal funds rate decreased commissions by
$120.0 million, while lower average investable balances decreased commissions by $35.8 million. In addition, the
termination of the sales of receivable program in the first quarter of 2008 reduced commissions expense by $20.2 million.
See Note 3 — Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further
information on the sale of receivables program. Partially offsetting these benefits is the $27.7 million loss from the
termination of interest rate swaps related to the official check business.
Net investment revenue decreased 47 percent in 2009 compared to 2008, reflecting the lower interest rate environment and
lower average investable balances discussed above. The net investment margin of 0.75 percent for 2009 decreased 48 basis
points from 1.23 percent in 2008, reflecting these same factors. Net investment revenue decreased 59 percent in 2008 as
compared to 2007, reflecting the lower yields from the realigned portfolio, lower average investable balances and the
termination loss on swaps, partially offset by the official check repricing initiative and the decline in the effective federal
funds rate. The net investment margin decreased 105 basis points from 2007 to 1.23 percent for 2008 as a result of the same
factors.
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Table 4 — Net Securities Gains (Losses)
YEAR ENDED DECEMBER 31,
2009
2008
2009
vs.
2008
2007
2008
vs.
2007
(Amounts in thousands)
Gross realized gains
Gross realized losses
Other-than-temporary impairments
$
Net securities losses from
available-for-sale investments
Unrealized gains (losses) from trading
investments and related put options
Realized gains from trading
investments and related put options
Net securities gains (losses)
—
(2 )
(4,069 )
$
$
5,611
(1,962 )
(1,193,210 )
$
(34,200 )
290,496
66,204
$
28,589
(288,536 )
1,122,936
(4,071 )
(326,572 )
(1,189,561 )
322,500
862,989
4,304
(14,116 )
(195 )
18,421
(13,921 )
—
7,557
—
7,557
$
34,200
(290,498 )
(70,274 )
7,790
$
(340,688 )
$
(1,189,756 )
$ 348,478
—
$
849,068
Net securities gains of $7.8 million for 2009 primarily reflects a $7.6 million net gain from the call of two trading
investments in 2009. We recorded a valuation gain of $4.3 million on the put option related to the remaining trading
investment, reflecting the passage of time. Other-than-temporary impairments on our other asset-backed securities were
$4.1 million from continued declines in the fair value.
Net securities losses for 2008 reflect $256.3 million of net realized losses from the realignment of the investment portfolio in
the first quarter of 2008, $70.3 million of other-than-temporary impairments on our other asset-backed securities and
$40.6 million of unrealized losses from our trading investments, partially offset by a $26.5 million unrealized gain from put
options received in the fourth quarter of 2008 related to the trading investments. The other-than-temporary impairments and
unrealized losses were the result of continued deterioration in the mortgage markets, as well as continued illiquidity and
uncertainty in the broader markets in 2008. The recapitalization completed on March 25, 2008 included funds to cover these
losses. In December 2008, two of our three auction rate securities classified as trading investments had the embedded
preferred put option exercised. As a result, one trading security converted to a perpetual preferred stock and the collateral of
the other security was replaced with perpetual preferred stock. These actions resulted in a decline in fair value as preferred
stock is viewed as less liquid and the discretionary income streams as more uncertain. In the fourth quarter of 2008, we opted
into a buy-back program sponsored by the trading firm that sold us all of our trading investments. Under this program, we
received the right to require the trading firm to redeem our trading investments at full par value beginning in June 2010 (the
“put options”). The initial fair value and subsequent remeasurements are recognized as unrealized gains (losses) from trading
investments. In general, the fair value of these put options should offset any realized and unrealized losses from our trading
securities as they provide a known cash flow stream in the future, subject to the creditworthiness of the broker issuing the
put options. See Note 6 — Investment Portfolio of the Notes to the Consolidated Financial Statements for further
information regarding these put options.
We had net securities losses of $1.2 billion in 2007, reflecting other-than-temporary impairments recorded in December
2007 as a result of the substantial market deterioration and our decision to realign the investment portfolio. See Note 6 —
Investment Portfolio of the Notes to the Consolidated Financial Statements for further discussion.
Expenses
The following discussion relates to operating expenses, excluding commissions expense, as presented in Table 1 — Results
of Operations .
Compensation and benefits — Compensation and benefits includes salaries and benefits, management incentive programs
and other employee related costs. Compensation and benefits decreased $25.5 million, or 11 percent, primarily from a
$14.3 million net curtailment gain on benefit plans, a $12.3 million decrease in executive severance and related costs, a
$7.1 million decrease in incentive compensation from accruing annual incentives at a
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lower tier and a $2.0 million decrease from the suspension of the discretionary profit sharing plan. Stock-based
compensation increased $10.5 million from 2009 grants, partially offset by lower expense from historical grants that vested
in the first quarter of 2009 and executive forfeitures. As reflected in each of the amounts discussed above, the change in the
euro exchange rate, net of hedging activities, decreased compensation and benefits by approximately $2.1 million in 2009.
Compensation and benefits increased $36.5 million, or 19 percent, in 2008 compared to 2007, primarily from a $19.5 million
increase in executive severance and related costs, an $8.5 million increase from a 2 percent increase in headcount supporting
the growth in the money transfer business and an $8.5 million increase in incentive compensation. Severance includes
$16.5 million of costs related to our former chief executive officer. Salaries and benefits increased $8.5 million due to higher
headcount. Incentive compensation increased $10.9 million from higher headcount and achieving a higher incentive tier than
the prior year, partially offset by a $2.4 million decrease in stock-based compensation expense as no long-term stock-based
incentives were offered during 2008 and several large stock-based awards were forfeited during the year due to terminations.
As reflected in each of the amounts discussed above, the change in the euro exchange rate, net of hedging activities,
increased compensation and benefits by approximately $2.7 million in 2008.
Transaction and operations support — Transaction and operations support expense includes marketing, professional fees
and other outside services, telecommunications and agent forms related to our products. Transaction and operations support
costs increased $64.4 million, or 29 percent, in 2009 compared to 2008. We recorded $54.8 million of legal reserves in 2009
relating to securities litigation, stockholder derivative claims, a patent lawsuit and a settlement with the Federal Trade
Commission. Asset impairments of $18.3 million were recorded in 2009, an increase of $9.5 million over 2008. The 2009
impairments include a $7.0 million impairment charge related to the decision to sell our airplane, a $5.2 million impairment
of goodwill and other assets from the decision to discontinue certain bill payment products and the sale of a non-core
business, a $3.6 million impairment of intangible assets and a $2.5 million impairment of goodwill related to our money
order product from continued declines in that business. Professional fees increased by $9.5 million in 2009, primarily due to
litigation fees and the implementation of the European Union Payment Services Directive. Our provision for agent
receivables increased by $9.0 million, primarily from the closure of an international agent during the year. As our agent base
and transaction volumes continue to grow, we expect that provision for loss will increase; however, we expect this growth to
be much slower than agent base and transaction growth due to our underwriting and credit monitoring processes. Marketing
costs decreased $12.7 million in 2009 from controlled spending, partially offset by higher costs from agent location growth.
In addition, $9.5 million of costs related to the recapitalization and restructuring of the official check business were recorded
in 2008. As reflected in each of the amounts discussed above, the change in the euro exchange rate, net of hedging activities,
decreased transaction and operations support by approximately $1.7 million in 2009.
Transaction and operations support expense increased $28.8 million, or 15 percent, in 2008 compared to 2007. The
recapitalization and restructuring of the official check business drove professional fees of $9.5 million in 2008. In addition,
professional fees increased $5.1 million in 2008 for costs relating to the growth of the business and various business analyses
initiated during the year. In the fourth quarter of 2008, we recognized a goodwill impairment charge of $8.8 million related
to our decision to wind down our external ACH Commerce business. Costs related to agent forms and supplies increased
$2.8 million from our transaction and agent base growth. Our provision for loss increased $4.6 million in 2008 due to
expected increases in uncollectible receivables from agent growth and the impact of current economic conditions. Marketing
costs decreased $3.6 million in 2008 from controlled spending, partially offset by higher costs from agent location growth
and a new marketing campaign to enhance our brand positioning. As reflected in each of the amounts discussed above, the
change in the euro exchange rate, net of hedging activities, increased transaction and operations support by approximately
$1.9 million in 2008.
Occupancy, equipment and supplies — Occupancy, equipment and supplies expense includes facilities rent and
maintenance costs, software and equipment maintenance costs, freight and delivery costs and supplies. Expenses increased
$1.4 million, or 3 percent, in 2009 compared to 2008. Software maintenance and office rent increased $2.3 million and
$1.5 million, respectively, to support the growth of the business. The timing of the roll out of new agent locations and
controlled spending resulted in a $2.8 million reduction of agent costs. As reflected in each of the amounts discussed above,
the change in the euro exchange rate, net of hedging activities, decreased occupancy, equipment and supplies expense by
approximately $0.4 million in 2009.
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Occupancy, equipment and supplies expense increased $1.3 million, or 3 percent, in 2008 compared to 2007 from higher
rent, software maintenance and building operating costs, partially offset by lower freight and supplies expense. Office rent
increased $1.3 million in 2008 due to the expansion of our retail locations and normal annual increases under our lease
agreements. Software maintenance expense increased $0.9 million in 2008 primarily from purchased licenses to support our
growth. Additionally, disposal of fixed assets, building operating costs, maintenance and higher property taxes increased our
expenses by $1.6 million. Partially offsetting these increases is a $2.2 million decline in freight and supplies expense due to
lower shipments from the timing of the roll out of new agents.
Interest expense — Interest expense increased to $107.9 million in 2009 from $95.0 million in 2008 due to higher average
outstanding debt as a result of the recapitalization completed in the first quarter of 2008, partially offset by the repayment of
$186.9 million of debt in 2009. In addition, interest expense in 2009 includes $2.7 million of expense from the write-off of a
pro-rata portion of deferred financing costs and unamortized discount on Tranche B of our Senior Facility in connection with
the repayment of debt in December 2009. Based on our outstanding debt balances and interest rates in effect at
December 31, 2009 and the expectation that we will continue to pay all interest in cash, our interest expense will be
approximately $87.0 million in 2010. This amount would be reduced by any prepayments of debt we may make in 2010.
Interest expense increased to $95.0 million in 2008 from $11.1 million in 2007 due to higher average outstanding debt
resulting from the recapitalization, amortization of additional deferred financing costs related to the new debt, amortization
of the debt discount on the Senior Facility and a $2.0 million net loss from the termination of interest rate swaps relating to
our floating rate debt in the second quarter of 2008. Interest expense on our variable rate Senior Facility benefited from the
declining interest rate environment.
Depreciation and amortization — Depreciation and amortization expense includes depreciation on point of sale equipment,
agent signage, computer hardware and software, capitalized software development costs, office furniture, equipment and
leasehold improvements and amortization of intangible assets. Depreciation and amortization was flat in 2009 compared to
2008 as a $3.2 million increase in depreciation from capital investments in point of sale equipment, purchased software and
other fixed assets to support the growth of the business was mostly offset by a $2.8 million decrease in amortization of
capitalized software, intangible assets and other assets. As reflected in each of the amounts discussed above, the change in
the euro exchange rate, net of hedging activities, decreased depreciation and amortization expense by approximately
$0.6 million in 2009.
Depreciation and amortization increased $4.7 million, or 9 percent, in 2008 compared to 2007. Our investment in agent
equipment and signage, in connection with network growth, increased depreciation expense by $3.3 million, while our
investment in computer hardware and capitalized software to enhance our support functions increased depreciation expense
by $0.3 million. Amortization of leasehold improvements increased by $0.9 million primarily from build-outs at our main
offices to support headcount additions and update aging facilities. As reflected in each of the amounts discussed above, the
change in the euro exchange rate, increased depreciation and amortization by approximately $0.7 million in 2008.
We are developing a new system to provide improved connections between our agents and our marketing, sales, customer
service and support functions. The new system and associated processes are intended to increase the flexibility of our back
office and improve operating efficiencies. In 2009 and 2008, we capitalized software costs of approximately $2.9 million
and $3.8 million, respectively, related to this project that will impact future depreciation and amortization.
Income taxes — We had a tax benefit of $20.4 million in 2009, primarily reflecting a release of $17.6 million of valuation
allowances on realized deferred tax assets. Our pre-tax net loss of $22.3 million, when adjusted for our estimated book to tax
differences, results in taxable income, allowing us to release some valuation allowances on our tax loss carryovers. The book
to tax differences included impairments on securities and other assets, as well as accruals related to separated employees,
litigation and unrealized foreign exchange losses.
In 2008, we had a $75.8 million tax benefit, primarily reflecting the recognition of a $90.5 million benefit in the fourth
quarter of 2008 upon the completion of an evaluation of the technical merits of tax positions with respect to part of the net
securities losses in 2008 and 2007. The $90.5 million benefit relates to the amount of tax carry-back we were able to utilize
to recover tax payments made for fiscal 2005 through 2007. We had tax expense of
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$78.5 million in 2007 on a pre-tax loss of $993.3 million, reflecting the tax treatment of the $1.2 billion of investment losses
incurred in 2007.
In 2007, we determined it was appropriate to establish a valuation allowance for the deferred tax assets relating to the full
basis difference on our asset-backed securities. In 2008 and 2009, we continued to believe that it was appropriate to maintain
a full valuation allowance for the deferred tax assets related to the full basis difference on these securities and our tax
attributes. Essentially all of our deferred tax assets relate to the U.S. jurisdiction, where we are in a net deferred tax liability
position, and we do not believe we have sufficient positive evidence to overcome the negative evidence. Changes in facts
and circumstances in the future may cause us to record additional tax benefits as further deferred tax valuation allowances
are released and carry-forwards are utilized. We continue to evaluate additional available tax positions related to the net
securities losses in prior years.
Segment Performance
Our reporting segments are primarily organized based on the nature of products and services offered and the type of
consumer served. During the fourth quarter of 2009, we revised our segment reporting to reflect changes in how we manage
our business, review operating performance and allocate resources. We now manage our business primarily through two
reporting segments, Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment provides
global money transfers and bill payment services to consumers through a network of agents and, in select markets,
company-operated locations. The Financial Paper Products segment provides money orders to consumers through our retail
and financial institution locations in the United States and Puerto Rico, and provides official check services to financial
institutions in the United States. Businesses which are not operated within these segments are categorized as “Other,” and
primarily relate to discontinued products and businesses. Prior year results have been revised for comparative purposes.
The Global Funds Transfer segment is managed as two geographical regions, the Americas and EMEAAP, to coordinate
sales, agent management and marketing activities. The Americas region includes the United States, Canada, Mexico and
Latin America (including the Caribbean). The EMEAAP region includes Europe, the Middle East, Africa and the Asia
Pacific region. We monitor performance and allocate resources at both a regional and reporting segment level. As the two
regions routinely interact in completing money transfer transactions and share systems, processes and licenses, we view the
Global Funds Transfer segment as one global network. The nature of the consumers and products offered is the same for
each region, and the regions utilize the same agent network, systems and support functions. In addition, the regions have
similar regulatory requirements and economic characteristics. Accordingly, we aggregate the two regions into one reporting
segment.
Segment accounting policies are the same as those described in Note 3 — Summary of Significant Accounting Policies in the
Notes to the Consolidated Financial Statements. We manage our investment portfolio on a consolidated level, with no
specific investment security assigned to a particular segment. However, investment revenue is allocated to each segment
based on the average investable balances generated by that segment’s sale of payment instruments during the period. Net
securities gains (losses) are not allocated to the segments as the investment portfolio is managed at a consolidated level.
While the derivatives portfolio is also managed on a consolidated level, each derivative instrument is utilized in a manner
that can be identified to a particular segment. Interest rate swaps historically used to hedge variable rate commissions were
identified with the official check product in the Financial Paper Products segment, while forward foreign exchange contracts
are identified with the money transfer product in the Global Funds Transfer segment. Any interest rate swaps related to our
credit agreements are not allocated to the segments.
Also excluded from operating income for Global Funds Transfer and Financial Paper Products are interest and other
expenses related to our credit agreements, items related to our preferred stock, operating income from businesses categorized
as “Other,” certain pension and benefit obligation expenses, director deferred compensation plan expenses, executive
severance and related costs, and certain legal and corporate costs not related to the performance of the segments. Unallocated
expenses in 2009 include $20.3 million of legal reserves related to securities litigation and stockholder derivative claims, a
net curtailment gain on benefit plans of $14.3 million, $7.0 million of asset impairments and $4.4 million of executive
severance and related costs in addition to other net corporate costs of $13.0 million not allocated to the segments.
Unallocated expenses in 2008 include $16.7 million of executive
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severance and related costs and $7.7 million of transaction costs related to the recapitalization in addition to other net
corporate costs of $9.3 million not allocated to the segments. Following is a reconciliation of segment operating income to
the consolidated operating results:
Table 5 — Segment Information
YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
Operating income:
Global Funds Transfer
Financial Paper Products
Other
$
Total segment operating income
Net securities gains (losses)
Interest expense
Debt extinguishment loss
Valuation loss on embedded derivatives
Other unallocated
85,047
27,372
(4,316 )
$
108,103
7,790
(107,911 )
—
—
(30,304 )
Loss from continuing operations before income taxes
$
139,428
30,169
(19,883 )
$
149,714
(340,688 )
(95,020 )
(1,499 )
(16,030 )
(33,668 )
(22,322 )
$
(337,191 )
127,308
93,283
(11,374 )
209,217
(1,189,756 )
(11,055 )
—
—
(1,673 )
$
(993,267 )
Table 6 — Global Funds Transfer Segment
YEAR ENDED DECEMBER 31,
2009
2008
2007
2009
vs.
2008
2008
vs.
2007
(Amounts in thousands)
Money transfer revenue:
Fee and other revenue
Investment revenue
Total money transfer revenue
Bill payment revenue:
Fee and other revenue
Investment revenue
Total bill payment revenue
Total Global Funds Transfer revenue:
Fee and other revenue
Investment revenue
Total Global Funds Transfer revenue
Commissions expense
$
893,076
163
1,873
5,190
3%
)
(91 %
893,239
871,947
736,580
2%
18 %
134,535
76
141,169
38
122,087
35
)
(5 %
100 %
16 %
9%
134,611
141,207
122,122
)
(5 %
16 %
1,027,611
1,011,243
853,477
239
1,911
5,225
2%
)
(87 %
18 %
)
(63 %
1,027,850
1,013,154
858,702
1%
18 %
(399,081 )
1%
)
(23 %
(488,116 )
$
870,074
(491,932 )
$
731,390
19 %
)
(64 %
Net revenue
$
Operating income
Operating margin
$
539,734
$
85,047
$
8.3 %
521,222
$
459,621
139,428
13.8 %
$
127,308
14.8 %
4%
13 %
)
(39 %
10 %
2009 Compared to 2008
Total revenue for the Global Funds Transfer segment consists primarily of fees on money transfers and bill payment
transactions. For 2009, Global Funds Transfer total revenue increased $14.7 million, or 1 percent, due primarily to money
transfer fee revenue growth, partially offset by lower bill payment revenue and lower investment revenue.
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Investment revenue decreased $1.7 million due to lower yields earned on our investment portfolio. See Table 3 — Net
Investment Revenue Analysis for further information regarding average investable balances and yields on the consolidated
investment portfolio.
Money transfer fee and other revenue grew $23.0 million, or 3 percent, from 2008, driven by money transfer transaction
volume growth, partially offset by lower average money transfer fees and the decline in the euro exchange rate. Money
transfer transaction volume increased 6 percent, generating incremental revenue of $53.3 million. Volume growth was lower
in 2009 compared to the prior year, reflecting the slowing economic conditions in 2009 and a growing volume base. Average
money transfer fees declined from lower principal per transaction and corridor mix, reducing revenue by $20.7 million. The
decline in the euro exchange rate, net of hedging activities, reduced revenue by $10.9 million in 2009.
Through the third quarter of 2009, pricing on money transfers remained stable. During the fourth quarter of 2009, we
implemented a low-fee promotion with our largest agent, reducing the average fee per transaction. We expect the
competitive environment to remain high and potentially intensify in various geographic locations, which could impact our
pricing in the future. We continue to evaluate the price-volume dynamic and will make further changes where deemed
appropriate. In January 2008, we launched our MoneyGram Rewards loyalty program in the United States, which provides
tiered discounts on transaction fees to our repeat consumers, less paperwork and notifications to the sender when the funds
are received, among other features. In 2009, we rolled out MoneyGram Rewards in Canada, France, Germany, Spain and
certain agent locations in Italy. Our MoneyGram Rewards program has positively impacted our transaction volumes, with
membership in the program up 30 percent as of December 31, 2009 compared to 2008 and transaction volumes from
members up 34 percent. We plan to launch the program in additional European markets in 2010.
Transactions and the related fee revenue are viewed as originating from the send side of a transaction. Accordingly,
discussion of transactions by geographic location refers to the region originating a transaction. Money transfer transactions
originated in the Americas increased 6 percent. Transactions originating in the United States, excluding transactions sent to
Mexico, increased 9 percent due primarily to intra-United States remittances. Canada and Latin America saw transaction
growth of 15 percent and 9 percent, respectively, from agent network growth. Transactions sent to Mexico declined
9 percent, reflecting the impact of the United States recession on our consumers. Mexico represented approximately
10 percent of our total transactions in 2009 as compared to 12 percent in 2008. Transactions originated in EMEAAP
increased 6 percent despite a negative 9 percentage point impact from volume declines in Spain. EMEAAP transactions
accounted for 24 percent of our volume in 2009 and 2008. The fastest growing regions in 2009 were South East and Central
Africa, the Philippines and South Asia, which all had double-digit growth. The Middle East saw transaction growth of
9 percent, driven by send transactions from, and agent signings and renewals in, the United Arab Emirates. Our France retail
business saw transaction growth of 155 percent, while the United Kingdom saw transaction growth of 6 percent primarily
from sends to India and Eastern Europe, as well as growth from our three largest agents in the United Kingdom. Greece had
transaction growth of 14 percent through its receive markets in Eastern Europe. Spain had volume declines of 24 percent
from local economic conditions.
The money transfer agent base expanded 8 percent to approximately 190,000 locations in 2009, primarily due to expansion
in the international markets. At December 31, 2009, the Americas had 66,000 locations, with 39,500 locations in North
America and 26,500 locations in Latin America (including 12,900 locations in Mexico). At December 31, 2009, EMEAAP
had 124,000 locations, with 39,600 locations in Western Europe, 26,700 locations in the Indian subcontinent, 25,800
locations in Eastern Europe, 19,800 locations in Asia Pacific, 8,000 locations in Africa and 4,100 locations in the Middle
East.
Bill payment revenue decreased $6.6 million, or 5 percent, from 2008 from a 4 percent decrease in transaction volume.
Lower bill payment volumes reduced revenue by $4.9 million, reflecting the departure of a large biller in the third quarter of
2008 and the impact of economic conditions on our bill payment customers. In addition, lower principal per transaction and
biller vertical mix reduced revenue by $1.7 million in 2009.
Commissions expense consists primarily of fees paid to our third-party agents for the money transfer and bill payment
services, including the amortization of capitalized agent signing bonuses. Commissions expense for 2009 decreased
$3.8 million, primarily from lower commission rates and the decline in the euro exchange rate, partially
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offset by growth in money transfer transaction volume. Money transfer transaction volume growth resulted in incremental
commissions expense of $16.1 million, while lower commission rates and the decline in the euro exchange rate, net of
hedging activities, reduced commissions expense by $7.7 million and $6.9 million, respectively. Bill payment fee
commissions expense decreased $3.8 million due to volume declines, partially offset by a $0.6 million increase due to higher
average rates. Commissions expense in 2009 also decreased by $2.5 million primarily from lower signing bonus
amortization as certain historical signing bonuses were fully amortized in the third quarter of 2009.
The operating margin of 8.3 percent for 2009 decreased from 13.8 percent in 2008, due primarily to $34.5 million of legal
reserves related to a patent lawsuit and a settlement agreement with the Federal Trade Commission, a $5.2 million increase
in stock-based compensation, a $7.1 million increase in provision for loss and a $3.2 million charge to impair goodwill
related to discontinued bill payment product offerings, partially offset by the higher fee revenue as discussed above.
2008 Compared to 2007
For 2008, Global Funds Transfer revenue increased $154.5 million, or 18 percent, compared to 2007. Fee and other revenue
increased $157.8 million, or 18 percent, driven by the growth in money transfer and bill payment transaction volume,
partially offset by a $3.3 million decrease in investment revenue from lower yields earned on the realigned portfolio. See
Table 3 — Net Investment Revenue Analysis for further information.
Money transfer fee and other revenue grew $138.7 million, or 19 percent, in 2008, while money transfer transaction volume
increased 18 percent. Money transfer transaction volume growth resulted in incremental fee and other revenue of
$131.8 million in 2008, while average money transfer fees reduced revenue by $11.6 million from lower principal per
transaction and corridor mix. The increase in the euro exchange rate, net of hedging activities, increased revenue by
$20.2 million in 2008. The money transfer growth in 2008 was a result of our network expansion and continued targeted
pricing initiatives to provide a strong consumer value proposition, supported by targeted marketing efforts. For money
transfer, our Americas transactions increased 19 percent in 2008, while EMEAAP transactions increased 16 percent in 2008.
Transaction volume to Mexico grew 2 percent in 2008 compared to 8 percent in 2007, reflecting slowing growth from the
economic conditions in the United States. Mexico represented 12 percent of our total transactions in 2008 compared to
13 percent in 2007. Bill payment transaction volume growth of 13 percent from network expansion increased revenue by
$18.8 million, while higher average fees from higher principal per transaction and vertical mix increased revenue by
$0.3 million in 2008.
Commissions expense increased $92.9 million, or 23 percent, from 2007, primarily driven by higher money transfer and bill
payment transaction volume, higher commission rates, amortization of signing bonuses and increases in the euro exchange
rate. Higher money transfer transaction volumes increased fee commissions expense by $54.4 million, while higher average
commissions per transaction, primarily from Walmart, increased commissions by $4.0 million. The extension of the current
agreement with Walmart, our largest agent, through January 2013 includes certain commission increases over the term of the
contract. The Walmart commission rate increased one percent effective March 25, 2008, but is not scheduled to increase
again until 2011. Amortization of signing bonuses increased $11.6 million in 2008 from the signing of several large agents in
2007 and one large agent in the first quarter of 2008. The change in the euro exchange rate increased fee commissions
expense by $8.8 million. Bill payment commissions expense increased $11.3 million due to volume growth and $3.2 million
due to higher average rates.
Operating income of $139.4 million in 2008 increased from operating income of $127.3 million in 2007, reflecting a higher
growth of fee revenue compared to commissions expense growth and investment revenue declines.
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Table 7 — Financial Paper Products Segment
YEAR ENDED DECEMBER 31,
2009
2008
2007
2009
vs.
2008
2008
vs.
2007
(Amounts in thousands)
Money order revenue:
Fee and other revenue
$
Investment revenue
Total money order revenue
Official check revenue:
Fee and other revenue
Investment revenue
Total official check and payment
processing revenue
Total Financial Paper Products revenue:
Fee and other revenue
Investment revenue
Total Financial Paper Products revenue
Commissions expense
Net revenue
Operating income
Operating margin
69,296
$
5,584
26,357
92,871
74,880
86,311
155,391
)
(13 %
)
(44 %
23,690
18,061
15,055
24,213
133,820
299,680
31 %
)
(82 %
20 %
)
(55 %
47,903
151,881
314,735
)
(68 %
)
(52 %
92,986
78,015
77,575
29,797
160,177
392,551
19 %
)
(81 %
1%
)
(59 %
122,783
238,192
470,126
)
(48 %
)
(49 %
(110,310 )
(262,684 )
92 %
58 %
207,442
)
(10 %
)
(38 %
)
(9 %
)
(68 %
$ 114,488
$
$
$
27,372
22.3 %
127,882
30,169
12.7 %
$
$
$
62,520
)
(4 %
)
(72 %
16 %
)
(79 %
(8,295 )
59,954
93,283
19.8 %
2009 Compared to 2008
Total revenue for the Financial Paper Products segment consists of investment revenue and per-item fees charged to our
financial institution customers and retail agents. For 2009, Financial Paper Products total revenue decreased $115.4 million,
or 48 percent, due primarily to a $130.4 million, or 81 percent, decrease in investment revenue from lower yields earned on
our investment portfolio and a decline in average investable balances from the termination of certain official check financial
customers. See Table 3 — Net Investment Revenue Analysis for further information. This decrease was partially offset by a
$15.0 million increase in fee and other revenue for money order and official check products, primarily due to our repricing
initiatives. Beginning in the fourth quarter of 2008, we implemented a phased repricing initiative for money order, which
includes remittance schedule changes focused on reducing our credit exposure and had an emphasis on agents that sell only
our money order product. During 2009, money order volumes declined 17 percent. This decline is attributed to the
anticipated attrition of agents due to the repricing initiative, consumer pricing increases as agents pass along fee increases,
the continued migration to other payment methods and the general economic environment.
Commissions expense includes payments made to financial institution customers based on official check and money order
average investable balance times short-term interest rate indices. Commissions expense decreased $102.0 million, or
92 percent, from 2008. Commissions expense for 2008 included a $27.7 million net loss due to the termination of interest
rate swaps related to the official check business. See Note 7 — Derivative Financial Instruments of the Notes to
Consolidated Financial Statements for further information. Investment commissions paid to financial institution customers
decreased in 2009 from the decline in the federal funds rate and lower investment balances upon which commissions were
paid. See Table 3 — Net Investment Revenue Analysis for further information.
Operating margin increased to 22.3 percent in 2009 from 12.7 percent in 2008, reflecting the growth in fee revenue from
repricing initiatives, the $27.7 million loss from the termination of swaps in 2008 and lower commissions expense from the
decline in the federal funds rate and lower investment balances.
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2008 Compared to 2007
For 2008, total Financial Paper Products revenue decreased $231.9 million, or 49 percent, due primarily to a $232.4 million
decline in investment revenue from lower yields earned on our realigned investment portfolio and the decrease in our
investment balances from the termination of official check financial institution customers and the termination of our sale of
receivables program. See Table 3 — Net Investment Revenue Analysis for further information.
For 2008 and 2007, commissions expense includes costs associated with interest rate swaps used to hedge our variable rate
commission payments and costs related to the sale of receivables program which was terminated in the first quarter of 2008.
In 2008, commissions expense decreased $152.4 million, or 58 percent, due primarily to lower average investable balances,
lower commission rates from the official check repricing and the decline in the effective federal funds rate. See Table 3 —
Net Investment Revenue Analysis for further information. In addition, commissions expense in 2007 included $22.3 million
of expense related to the sale of receivables program, while minimal expense was incurred in 2008 as the program was
terminated in the first quarter of 2008. Partially offsetting these benefits is a $27.7 million net loss resulting from the
termination of interest rate swaps related to the official check business. See Note 7 — Derivative Financial Instruments of
the Notes to Consolidated Financial Statements for further information regarding the terminations of the interest rate swaps.
Operating income for 2008 of $30.2 million decreased from operating income of $93.3 million in 2007 reflecting the
decrease in revenue. The net investment margin of 1.20 percent in 2008 as compared to 2.21 percent in 2007 reflects the
lower yields on our realigned portfolio, partially offset by lower commission rates from the repricing initiatives and the
declining federal funds rate. As the lower commission rates did not go into effect until the second half of 2008, the lower
yields on the portfolio offset the benefits of the repricing initiatives.
Trends Expected to Impact 2010
The discussion of trends expected to impact 2010 is based on information presently available and contains certain
assumptions regarding future economic conditions. Differences in actual economic conditions during 2010 compared with
our assumptions could have a material impact on our results. See “Cautionary Statements Regarding Forward-Looking
Statements” and Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K for additional factors that could cause
results to differ materially from those contemplated by the following forward-looking statements.
Throughout 2009, global economic conditions remained weak. We cannot predict the duration or extent of severity of these
economic conditions, nor the extent to which these conditions could negatively affect our business, operating results or
financial condition. While the money remittance industry has generally been resilient during times of economic softness, the
current global economic conditions have continued to adversely impact the demand for money remittances. Given the global
economic uncertainty, we have less visibility to the future and believe growth rates could continue to be impacted by slow
economic conditions. In addition, bill payment products available in the United States have not been as resilient as money
transfers given the more discretionary nature of items paid for by consumers using these products.
While there is great uncertainty around when the global economy and the remittance industry will begin to improve, the
World Bank, a key source of industry analysis for developing countries, is projecting flat to modest remittance growth in
2010. This is consistent with our expectations for modest money transfer volume growth. We expect this growth to be driven
by agent expansion and increasing productivity in our existing agent locations through marketing support, customer
acquisition and new product innovation. We believe these efforts will not only help to counteract the current global
economic conditions, but position us for enhanced market share and strong growth when the economy begins to recover.
For our Financial Paper Products segment, we expect the decline in overall paper-based transactions to continue in 2010.
Given the current interest rate environment, we expect our net investment margin to decline as our cash and cash equivalents
will likely reset to lower rates. As described earlier, the effective federal funds rate was so low throughout 2009 that
commissions to most of our financial institution customers were negative during the year. While we expect the effective
federal funds rate to remain at their current historic lows throughout 2010, we do not expect any benefit to commission
expense in 2010 to offset the likely decline in investment yields. Any increase in interest rates in 2010 will also negatively
impact our investment margin due to the lagging impact of rising rates on our investment portfolio.
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We continue to see a trend among state, federal and international regulators toward enhanced scrutiny of anti-money
laundering compliance, as well as consumer fraud prevention and education. In addition, we created a new licensed entity in
connection with the November 2009 adoption of the European Union’s Payment Services Directive, which provides for a
new licensing and regulatory framework for our services in the European Union. As we continue to add staff and enhance
our technology systems to meet regulatory trends, our operating expenses for compliance will likely increase.
Acquisition and Disposal Activity
Acquisition and disposal activity is set forth in Note 4 — Acquisition and Disposal Activity of the Notes to Consolidated
Financial Statements.
Recapitalization
On March 25, 2008, we completed a series of transactions pursuant to which we received an infusion of $1.5 billion of gross
equity and debt capital to support the long-term needs of the business and provide necessary capital due to the investment
portfolio losses in late 2007 and the first quarter of 2008 (the “recapitalization”). The net proceeds of the recapitalization
were used to invest in cash equivalents to supplement our unrestricted assets and to repay $100.0 million on our revolving
credit facility. Following are the key terms of the equity and debt capital issued.
Equity Capital — The equity component of the recapitalization consisted of the private placement of 760,000 shares, in
aggregate, of B Stock and shares of non-voting B-1 Stock to affiliates of THL and affiliates of Goldman Sachs, respectively,
for an aggregate purchase price of $760.0 million. After the issuance of the Series B Stock, the Investors had an equity
interest of approximately 79 percent; this equity interest has increased to 82 percent as of December 31, 2009 from the
accrual of dividends during the year. In connection with the recapitalization, we also paid Goldman Sachs an investment
banking advisory fee equal to $7.5 million in the form of 7,500 shares of B-1 Stock. See Note 12 — Mezzanine Equity of the
Notes to the Consolidated Financial Statements for further information regarding the Series B Stock.
Debt Capital — Our wholly owned subsidiary, Worldwide, entered into a Senior Facility of $600.0 million with various
lenders and JPMorgan as Administrative Agent for the lenders. At the time of the recapitalization, the Senior Facility was
composed of a $100.0 million tranche A term loan (“Tranche A”), a $250.0 million tranche B term loan (“Tranche B”) and a
$250.0 million revolving credit facility. Tranche B was issued at a discount of 93.5 percent, for a $16.3 million discount.
Worldwide also issued $500.0 million of Notes maturing in March 2018 to Goldman Sachs. See Note 10 — Debt of the
Notes to the Consolidated Financial Statements for further information regarding the Senior Facility and the Notes.
LIQUIDITY AND CAPITAL RESOURCES
We have various resources available to us for purposes of managing liquidity and capital needs, including our cash, cash
equivalents, investments, credit facilities and letters of credit. We refer to our cash equivalents, trading investments and
related put options and available-for-sale investments collectively as our “investment portfolio.” We utilize the assets in
excess of payment service obligations measure shown below in various liquidity and capital assessments. While assets in
excess of payment service obligations, as defined, is a capital measure, it also serves as the foundation for various liquidity
analyses.
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Table 8 — Assets in Excess of Payment Service Obligations
December 31,
2009
(Amounts in thousands)
Cash and cash equivalents (substantially restricted)
Receivables, net (substantially restricted)
Trading investments and related put options (substantially restricted)
Available-for-sale investments (substantially restricted)
$
$
5,156,789
(4,843,454 )
Payment service obligations
Assets in excess of payment service obligations
3,776,824
1,054,381
26,951
298,633
December 31,
2008
$
313,335
4,077,381
1,264,885
47,990
438,774
5,829,030
(5,437,999 )
$
391,031
Liquidity
Our primary sources of liquidity include cash flows generated by the sale of our payment instruments, our cash and cash
equivalent balances, credit capacity under our credit facilities and proceeds from our investment portfolio. Our primary
operating liquidity needs relate to the settlement of payment service obligations to our agents and financial institution
customers, as well as general operating expenses.
To meet our payment service obligations at all times, we must have sufficient highly liquid assets and be able to move funds
globally on a timely basis. On average, we pay over $1.0 billion a day to settle our payment service obligations. We
generally receive a similar amount on a daily basis for the principal amount of our payment instruments sold and the related
fees. We use the incoming funds from sales of new payment instruments to settle our payment service obligations for
previously sold payment instruments. This pattern of cash flows allows us to settle our payment service obligations through
on-going cash generation rather than liquidating investments or utilizing our revolving credit facility. We have historically
generated, and expect to continue generating, sufficient cash flows from daily operations to fund ongoing operational needs.
The timely remittance of funds by our agents and financial institution customers is an important component of our liquidity
and allows for the pattern of cash flows described above. If the timing of the remittance of funds were to deteriorate, it
would alter our pattern of cash flows and could require us to liquidate investments or utilize our revolving credit facility to
settle payment service obligations. To manage this risk, we closely monitor the remittance patterns of our agents and
financial institution customers and act quickly if we detect deterioration or alternation in remittance timing or patterns. If
deemed appropriate, we have the ability to deactivate an agent’s equipment at any time, thereby preventing the initiation or
issuance of further money transfers and money orders. See “Enterprise Risk Management — Credit Risk” for further
discussion of this risk and our mitigation efforts.
We also seek to maintain liquidity beyond our operating needs to provide a cushion through the normal fluctuations in our
payment service assets and obligations and to invest in the infrastructure and growth of our business. While the assets in
excess of payment service obligations, as shown in Table 8, would be available to us for our general operating needs and
investment in the Company, we consider a portion of our assets in excess of payment service obligations as additional
assurance that regulatory and contractual requirements are maintained. We believe we have sufficient assets and liquidity to
operate and grow our business for the next 12 months. Should our liquidity needs exceed our operating cash flows, we
believe that our external financing sources, including availability under our Senior Facility, will be sufficient to meet any
liquidity needs.
Cash and Cash Equivalents — To ensure we maintain adequate liquidity to meet our operating needs at all times, we keep a
significant portion of our investment portfolio in cash and cash equivalents at financial institutions rated Aa3 or better by
Moody’s and AA- or better by S&P and in United States government money market funds rated Aaa by Moody’s and AAA
by S&P. As of December 31, 2009, cash and equivalents totaled $3.8 billion, representing 92 percent of our total investment
portfolio. Cash equivalents consisted of time deposits, certificates of deposit and money market funds that invest in United
States government and government agency securities.
Clearing and Cash Management Banks — We move and receive money through a network of clearing and cash management
banks. The relationships with these clearing banks and cash management banks are a critical
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component of our ability to move monies on a global and timely basis. We have agreements with nine clearing banks that
provide clearing and processing functions for official checks, money orders and other draft instruments. We have eight
official check clearing banks, of which three banks are currently operating under post-termination arrangements of their
contracts. The remaining five active banks provide sufficient capacity for our official check business. We rely on two banks
to clear our retail money orders and believe that these banks provide sufficient capacity for that business. One clearing bank
contract has financial covenants that include the maintenance of total cash, cash equivalents, receivables and investments in
an amount at least equal to total outstanding payment service obligations, as well as the maintenance of a minimum
103 percent ratio of total assets held at that bank to instruments estimated to clear through that bank. Financial covenants
related to special purpose entities (“SPEs”) include the maintenance of specified ratios of greater than 100 percent of cash,
cash equivalents and investments held in the SPE to outstanding payment instruments issued by the related financial
institution.
We also maintain contractual relationships with a variety of domestic and international cash management banks for ACH
and wire transfer services for the movement of consumer funds and agent settlements. There are a limited number of
international cash management banks with a network large enough to manage cash settlements for our entire agent base. In
addition, some large international banks have opted not to bank money service businesses. As a result, in addition to utilizing
a large cash management bank, we also utilize regional or country-based banking partners. We do not anticipate that these
in-country relationships will affect our liquidity or timing of remittances.
Special Purpose Entities — For certain of our financial institution customers, we established individual SPEs upon the
origination of our relationship. Along with operational processes and certain financial covenants, these SPEs provide the
financial institutions with additional assurance of our ability to clear their official checks. Under these relationships, the
cash, cash equivalents, investments and payment service obligations related to the financial institution customer are all held
by the SPE. In most cases, the fair value of the cash, cash equivalents and investments must be maintained in excess of the
payment service obligations. As the financial institution customer sells our payment service instruments, the principal
amount of the instrument and any fees are paid into the SPE. As payment service instruments issued by the financial
institution customer are presented for payment, the cash and cash equivalents within the SPE are used to settle the
instrument. As a result, cash and cash equivalents within SPEs are generally not available for use outside of the SPE. We
remain liable to satisfy the obligations, both contractually and under the Uniform Commercial Code, as the issuer and drawer
of the official checks regardless of the existence of the SPEs. Accordingly, we consolidate all of the assets and liabilities of
these SPEs in our Consolidated Balance Sheets, with the individual assets and liabilities of the SPEs classified in a manner
similar to our other assets and liabilities. Under limited circumstances, the financial institution customers that are
beneficiaries of the SPEs have the right to either demand liquidation of the assets in the SPEs or to replace us as the
administrator of the SPE. Such limited circumstances consist of material, and in most cases continued, failure to uphold our
warranties and obligations pursuant to the underlying agreements with the financial institutions.
The combined SPEs hold 3 percent of our $4.1 billion portfolio as of December 31, 2009, as compared to 6 percent at
December 31, 2008. As the SPEs relate to financial institution customers we terminated in connection with the restructuring
of the official check business, we expect the SPEs to continue to decline as a percent of our portfolio as the outstanding
instruments related to the financial institutions roll-off.
Credit Facilities — Our credit facilities consist of the Senior Facility and the Notes. During 2009, we repaid $186.9 million
of outstanding debt, including the repayment of the full $145.0 million balance on our revolving credit line, a $40.0 million
prepayment on Tranche B and $1.9 million of scheduled quarterly principal payments on
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Tranche B. We continue to evaluate further reductions of our outstanding debt ahead of scheduled maturities. Following is a
summary of our outstanding debt at December 31:
Table 9 — Schedule of Credit Facilities
(Amounts in thousands)
Tranche A, due 2013
Tranche B, net of unamortized discount,
due 2013
Revolving credit facility, due 2013
First lien senior secured debt
Second lien notes, due 2018
Total debt
(1)
Interest
Rate
for 2009
Facility
Size
Outstanding
2010
Interest (1)
2009
2008
100,000
$ 100,000
$ 100,000
7.25 %
5.75 %
250,000
250,000
196,791
—
233,881
145,000
14,953
—
13.25 %
600,000
500,000
296,791
500,000
478,881
500,000
20,703
66,250
1,100,000
$ 796,791
$ 978,881
$ 86,953
5.75 %
$
$
$
5,750
Reflects the interest that will be paid in 2010 using the rates in effect on December 31, 2009, assuming no prepayments
of principal and the continued payment of interest on the Notes.
The revolving credit facility has $234.5 million of borrowing capacity as of December 31, 2009, reflecting $15.5 million of
standby letters of credit issued under the facility. Amounts outstanding under the revolving credit facility and Tranche A are
due upon maturity in 2013. As a result of the $40.0 million prepayment of Tranche B in December 2009, no principal
payments are due on Tranche B until maturity in 2013. We may elect an interest rate for the Senior Facility at each reset
period based on either the United States prime bank rate or the Eurodollar rate, with a minimum rate of 250 basis points set
for the Eurodollar option. The interest rate election may be made individually for each term loan and each draw under the
revolving credit facility. For the revolving credit facility and Tranche A, the interest rate is either the United States prime
bank rate plus 250 basis points or the Eurodollar rate plus 350 basis points. In addition, we incur fees of 50 basis points on
the daily unused availability under the revolving credit facility. The interest rate for Tranche B can be set at either the United
States prime bank rate plus 400 basis points or the Eurodollar rate plus 500 basis points. Through 2009 and as of the date of
this filing, our interest rates have been set based on the United States prime bank rate.
The Notes mature in 2018, with principal due in full at that time. The interest rate on the Notes is 13.25 percent per year.
Prior to March 25, 2011, we have the option to capitalize interest at a rate of 15.25 percent. If interest is capitalized,
0.50 percent of the interest is payable in cash and 14.75 percent is capitalized into the outstanding principal balance. We
elected to pay the interest through December 31, 2009, and we anticipate that we will continue to pay the interest on the
Notes for the foreseeable future.
Our borrowing facilities contain various financial and non-financial covenants. A violation of these covenants could
negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and/or causing
acceleration of amounts due under the credit facilities. The financial covenants in our credit facilities measure leverage,
interest coverage and liquidity. Leverage is measured through a senior secured debt ratio calculated as consolidated
indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for certain
items such as net securities gains (losses), stock-based compensation expense, certain legal settlements and asset
impairments, among other items (“adjusted EBITDA”). Interest coverage is calculated as adjusted EBITDA to net cash
interest expense. Liquidity is measured as assets in excess of payment service obligations, as shown in Table 8, adjusted for
various exclusions. We are in compliance with all financial covenants as of December 31, 2009.
The terms of our credit facilities also place restrictions on certain types of payments we may make, including dividends,
acquisitions, and the funding of foreign subsidiaries, among others. We do not anticipate these restrictions to limit our ability
to grow the business either domestically or internationally. In addition, we may only make dividend payments to common
stockholders subject to an incremental build-up based on our
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consolidated net income in future periods. No dividends were paid on our common stock in 2009 and we do not anticipate
declaring any dividends on our common stock during 2010.
Credit Ratings — As of December 31, 2009 our credit ratings from Moody’s, Standard & Poors and Fitch were B1, B+ and
B+, respectively, with a negative outlook assigned by the three credit rating agencies. Our credit facilities, regulatory capital
requirements and other obligations are not impacted by the level of our credit ratings. However, higher credit ratings could
increase our ability to attract capital, minimize our weighted average cost of capital and obtain more favorable terms with
our lenders, agents and clearing and cash management banks.
Mezzanine Equity — Our Series B Stock pays a cash dividend of 10 percent. At the Company’s option, we may accrue
dividends at a rate of 12.5 percent through March 25, 2013 and 15.0 percent thereafter. We accrued dividends in 2008 and
2009, and anticipate accruing dividends for at least the next 12 months.
Contractual and Regulatory Capital
Regulatory Capital Requirements — We have capital requirements relating to government regulations in the United States
and other countries where we operate. Such regulations typically require us to maintain certain assets in a defined ratio to our
payment service obligations. In the United States, through our wholly owned subsidiary and licensed entity, MPSI, we are
regulated by various state agencies that generally require us to maintain a pool of liquid assets and investments with a rating
of A or higher in an amount generally equal to the regulatory payment service obligation measure, as defined by the state, for
our regulated payment instruments, namely teller checks, agent checks, money orders and money transfers. The regulatory
requirements do not require us to specify individual assets held to meet our payment service obligations, nor are we required
to deposit specific assets into a trust, escrow or other special account. Rather, we must maintain a pool of liquid assets.
Provided we maintain a total pool of liquid assets sufficient to meet the regulatory and contractual requirements, we are able
to withdraw, deposit or sell our individual liquid assets at will, with no prior notice or penalty or limitations.
The regulatory requirements in the United States are similar to our internal measure of assets in excess of payment service
obligations set forth in Table 8 — Assets in Excess of Payment Service Obligations . The regulatory payment service assets
measure varies by state, but in all cases excludes investments rated below A-. The most restrictive states may also exclude
assets held at banks that do not belong to a national insurance program, varying amounts of accounts receivable balances
and/or assets held in one of the SPEs. The regulatory payment service obligation measure varies by state, but in all cases is
substantially lower than our payment service obligations as disclosed in the Consolidated Balance Sheets as we are not
regulated by state agencies for payment service obligations resulting from outstanding cashier’s checks or for amounts
payable to agents and brokers. All states require MPSI to maintain positive net worth, with one state also requiring MPSI to
maintain positive tangible net worth of $100.0 million.
We are also subject to regulatory requirements in various countries outside of the United States, which typically results in
needing to either prefund agent settlements or hold minimum required levels of cash within the applicable country. The most
material of these requirements is in the United Kingdom, where our licensed entity, MoneyGram International Limited, is
required to maintain a cash balance equivalent to outstanding payment instruments issued in the European community. This
amount will fluctuate based on our level of activity within the European Community and is likely to increase over time as
our business expands in that region. Assets used to meet these regulatory requirements support our payment service
obligations, but are not available to satisfy other liquidity needs. As of December 31, 2009, we had approximately
$35.0 million of cash deployed internationally to meet regulatory requirements.
We were in compliance with all financial regulatory requirements as of December 31, 2009. We believe that our liquidity
and capital resources will remain sufficient to ensure on-going compliance with all financial regulatory requirements.
Investment Portfolio — Our investment portfolio is composed of $298.6 million of available-for-sale investments and
$27.0 million of trading investments and related put options. Available-for-sale investments consist of $276.5 million of
United States government agency residential mortgage-backed securities and United States government agency debentures,
as well as $22.1 million of other asset-backed securities. In completing our recapitalization, we contemplated that our other
asset-backed securities and trading investments might decline further in value. Accordingly, the capital raised assumed a
zero value for these securities. As a result, further unrealized losses and impairments on these securities are already funded
and would not cause us to seek additional capital or financing.
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Other Funding Sources and Requirements
Contractual Obligations — The following table includes aggregated information about the Company’s contractual
obligations that impact its liquidity and capital needs. The table includes information about payments due under specified
contractual obligations, aggregated by type of contractual obligation.
Table 10 — Contractual Obligations
(Amounts in thousands)
Debt, including interest payments
Operating leases
Other obligations
Total contractual cash obligations
Payments due by period
Less than
1 year
1-3 years
Total
4-5 years
More than
5 years
$
1,424,484
48,022
384
$
88,743
12,231
384
$ 177,430
24,816
—
$ 443,919
10,237
—
$ 714,392
738
—
$
1,472,890
$ 101,358
$ 202,246
$ 454,156
$ 715,130
Debt consists of amounts outstanding under our Senior Facility and the Notes as shown in Table 9 — Schedule of Credit
Facilities, as well as related interest payments, facility fees and annual commitment fees. Included in our Consolidated
Balance Sheet at December 31, 2009 is $796.8 million of debt, net of unamortized discounts of $9.5 million, and
$0.1 million of accrued interest on the debt. The above table reflects the principal and interest that will be paid through the
maturity of the debt using the rates in effect on December 31, 2009 and assuming no prepayments of principal and the
continued payment of interest on the Notes. Operating leases consist of various leases for buildings and equipment used in
our business. Other obligations are unfunded capital commitments related to our limited partnership interests included in
“Other asset-backed securities” in our investment portfolio. We have other commitments as described further below that are
not included in Table 10 as the timing and/or amount of payments are difficult to estimate.
The Series B Stock has a cash dividend rate of 10 percent. At the Company’s option, dividends may be accrued through
March 25, 2013 at a rate of 12.5 percent in lieu of paying a cash dividend. Due to restrictions in our debt agreements, we
elected to accrue the dividends in 2009 and expect that dividends will be accrued for at least the next 12 months. While no
dividends have been declared as of December 31, 2009, we have accrued dividends of $110.3 million in our Consolidated
Balance Sheets as accumulated and unpaid dividends are included in the redemption price of the Series B Stock regardless of
whether dividends have been declared.
We have a funded, noncontributory pension plan that is frozen to both future benefit accruals and new participants. Our
funding policy has historically been to contribute the minimum contribution required by applicable regulations. We were not
required to, and did not make, a contribution to the funded pension plan during 2009. We anticipate a minimum contribution
of $3.0 million to the pension plan trust in 2010. We also have certain unfunded pension and postretirement plans that
require benefit payments over extended periods of time. During 2009, we paid benefits totaling $4.3 million related to these
unfunded plans. Benefit payments under these unfunded plans are expected to be $2.6 million in 2010. Expected
contributions and benefit payments under these plans are not included in the above table as it is difficult to estimate the
timing and amount of benefit payments and required contributions beyond the next 12 months. See “Critical Accounting
Policies — Pension Obligations” for further discussion of these plans.
As of December 31, 2009, the liability for unrecognized tax benefits is $10.7 million. As there is a high degree of uncertainty
regarding the timing of potential future cash outflows associated with liabilities relating to this liability, we are unable to
make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.
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In limited circumstances, we may grant minimum commission guarantees as an incentive to new or renewing agents for a
specified period of time at a contractually specified amount. Under the guarantees, we will pay to the agent the difference
between the contractually specified minimum commission and the actual commissions earned by the agent. As of
December 31, 2009, the minimum commission guarantees had a maximum payment of $7.9 million over a weighted average
remaining term of 1.3 years. The maximum payment is calculated as the contractually guaranteed minimum commission
times the remaining term of the contract and, therefore, assumes that the agent generates no money transfer transactions
during the remainder of its contract. As of December 31, 2009, the liability for minimum commission guarantees is
$0.6 million. Minimum commission guarantees are not reflected in the table above.
Analysis of Cash Flows
Table 11 — Cash Flows from Operating Activities
YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
Net loss
Total adjustments to reconcile net loss
$
Net cash provided by continuing operating activities before
changes in payment service assets and obligations
$
157,003
Change in cash and cash equivalents (substantially restricted)
Change in trading investments and related put options, net
(substantially restricted)
Change in receivables, net (substantially restricted)
Change in payment service obligations
Net change in payment service assets and obligations
Net cash provided by (used in) continuing operating activities
(1,906 )
158,909
$
(261,385 )
341,740
$
80,355
(1,071,997 )
1,301,410
229,413
300,557
(2,524,402 )
(563,779 )
32,900
186,619
(594,545 )
—
128,752
(2,324,486 )
83,200
342,681
(447,319 )
(74,469 )
(4,720,136 )
(585,217 )
82,534
$
(4,639,781 )
$
(355,804 )
Table 11 summarizes the net cash flows from operating activities. Operating activities provided net cash of $82.5 million in
2009. In addition to normal operating expenses, cash generated from operations was used to pay $186.9 million and
$94.4 million of principal and interest, respectively, on our debt, $37.9 million of capital expenditures and $22.2 million for
signing bonuses to new agents. We received an income tax refund of $43.5 million during 2009 and did not make any
income tax payments. We also reinvested $141.0 million and $32.9 million of proceeds from our available-for-sale
investments and trading investments, respectively, into cash and cash equivalents during 2009.
Operating activities used net cash of $4.6 billion in 2008. Besides normal operating activities, cash provided by continuing
operations was used to pay $84.0 million of interest on our debt, $57.7 million for signing bonuses to new agents and
$29.7 million to terminate our interest rate swaps. We also received an income tax refund of $24.7 million during 2008 and
did not make any tax payments. During 2008, we used $4.7 billion of proceeds from the sale and normal maturity of
available-for-sale securities and the recapitalization to invest in cash equivalents and settle payment service obligations for
instruments sold by departing official check financial institution customers in connection with the official check
restructuring.
Operating activities in 2007 used net cash of $355.8 million. Our payment service assets and obligations used $585.2 million
of cash due to the normal fluctuations in the timing of settlements of outstanding payment service instruments and the receipt
of collected funds from our agents, partially offset by proceeds from the sale of a trading investment for $83.2 million.
Besides normal operating activities, cash provided by continuing operations was used to pay $33.1 million for signing
bonuses to new agents, $16.0 million of income taxes and $11.6 million of interest on our debt.
To understand the cash flow activity of our business, the cash flows from operating activities relating to the payment service
assets and obligations should be reviewed in conjunction with the cash flows from investing activities related to our
investment portfolio.
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Table 12 — Cash Flows from Investing Activities
YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
Net investment activity
Purchases of property and equipment
Cash paid for acquisitions, net of cash acquired
Proceeds from sale of business
$ 140,999
(37,948 )
(3,210 )
4,500
$
3,389,331
(38,470 )
(2,928 )
—
$ 318,716
(70,457 )
(29,212 )
—
Net cash provided by investing activities
$ 104,341
$
3,347,933
$ 219,047
Table 12 summarizes the net cash flows from investing activities, primarily consisting of activity within our investment
portfolio. Investing activities provided cash of $104.3 million in 2009. For 2009, investing activities relate primarily to
$141.0 million of proceeds from the maturity of available-for-sale investments. For 2008, investing activities relate primarily
to $2.9 billion of proceeds from the realignment of the investment portfolio and $493.3 million of proceeds from the normal
maturity of available-for-sale investments. These proceeds in both 2009 and 2008 were reinvested in cash and cash
equivalents. Net investment activity in 2007 represents $1.1 billion of proceeds from normal maturities and sales of
investments, of which $758.9 million was reinvested into the long-term portfolio. The excess proceeds of $318.7 million in
2007 were reinvested in cash and cash equivalents.
Other investing activity consisted of capital expenditures of $37.9 million, $38.5 million and $70.5 million for 2009, 2008
and 2007, respectively, for agent equipment, signage and infrastructure to support the growth of the business and
development of software related to our continued investment in the money transfer platform and compliance activities.
Included in the Consolidated Balance Sheets under “Accounts payable and other liabilities” and “Property and equipment” is
$1.2 million of property and equipment received by the Company, but not paid as of December 31, 2009. These amounts
were paid in January 2010. We expect our total capital expenditures in 2010 to range from approximately $40.0 million to
$65.0 million as we continue to invest in our technology infrastructure and agent network to support future growth and
address regulatory trends. In 2008, we acquired two of our super-agents in Spain, MoneyCard and Cambios Sol, for
$2.9 million (net of cash acquired of $5.5 million). In 2007, we acquired PropertyBridge for $28.1 million and also paid the
remaining $1.1 million of purchase price for ACH Commerce, which was to be paid upon the second anniversary of the
acquisition.
Table 13 — Cash Flows from Financing Activities
YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
Net proceeds from the issuance of debt
Payment on debt
Net (payments on) proceeds from credit facilities
Net proceeds from the issuance of preferred stock
Proceeds and tax benefit from exercise of stock options
Purchase of treasury stock
Cash dividends paid
$
—
(41,875 )
(145,000 )
—
—
—
—
$
Net cash (used in) provided by financing activities
$
(186,875 )
$
685,945
(1,875 )
(100,000 )
707,778
—
—
—
1,291,848
$
—
—
195,000
—
7,674
(45,992 )
(16,625 )
$ 140,057
Table 13 summarizes the net cash flows from financing activities. In 2009, we made payments totaling $145.0 million to pay
down our revolving credit facility and payments of $41.9 million on Tranche B, consisting of a $40.0 million prepayment
and $1.9 million of quarterly payments. In 2008, financing activities generated $1.4 billion of cash from the recapitalization,
net of $100.0 million of related transaction costs. From these proceeds, we paid $101.9 million toward the Senior Facility;
the remaining proceeds were invested in cash and cash equivalents as shown in Table 11 — Cash Flows from Operating
Activities . In 2007, we borrowed $195.0 million under our Senior Facility. There were no proceeds received from the
exercise of options or release of restricted stock, purchases of treasury stock or payment of dividends in 2009 and 2008. We
generated $7.7 million of proceeds in 2007 from the exercise of stock options and release of restricted stock, including
related tax benefits of
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$1.1 million. We purchased $46.0 million of treasury stock during 2007 and paid dividends on our common stock of
$16.6 million.
Mezzanine Equity and Stockholders’ Deficit
Mezzanine Equity — See Note 12 — Mezzanine Equity of the Notes to the Consolidated Financial Statements for
information regarding the mezzanine equity.
Stockholders’ Deficit — On May 9, 2007, our Board of Directors approved a 5,000,000 share increase in our current
authorization to purchase shares of common stock for a total authorization of 12,000,000 shares. In 2007, we repurchased
1,620,000 shares of our common stock under this authorization at an average cost of $28.39 per share. We suspended the
buyback program in the fourth quarter of 2007. As of December 31, 2009, we had repurchased a total of 6,795,000 shares of
our common stock under this authorization and have remaining authorization to purchase up to 5,205,000 shares.
Under the terms of the equity instruments and debt issued in connection with the recapitalization, we are limited in our
ability to pay dividends on our common stock. No dividends were paid on our common stock in 2009 and we do not
anticipate declaring any dividends on our common stock during 2010.
Off-Balance Sheet Arrangements
Through December 31, 2007, we had an agreement to sell undivided percentage ownership interests in certain receivables,
primarily from our money order agents, in an amount not to exceed $400.0 million. These receivables were sold to
commercial paper conduits (trusts) sponsored by a financial institution and represented a small percentage of the total assets
in these conduits. Our rights and obligations were limited to the receivables transferred, and were accounted for as sales. As
a result, the assets and liabilities associated with these conduits, including our sold receivables, were not recorded or
included in our financial statements. The business purpose of this agreement was to accelerate cash flow for investment. The
receivables were sold at a discount based upon short-term interest rates. In December 2007, we decided to cease selling
receivables through a gradual reduction in the balances sold each period. In January 2008, we terminated the facility. The
agreement included a 5 percent holdback provision of the purchase price of the receivables and is included in the
Consolidated Statements of Loss in “Investment commissions expense.” There was no expense recorded in 2009 related to
the sales of receivable, while expenses totaled $0.2 million and $23.3 million during 2008 and 2007, respectively.
ENTERPRISE RISK MANAGEMENT
Risk is an inherent part of any business. Our most prominent risk exposures are credit, interest rate, foreign currency
exchange and operational risk. See Part 1, Item 1A “Risk Factors” for a description of the principal risks to our business.
Appropriately managing risk is important to the success of our business and the extent to which we properly and effectively
manage each of the various types of risk is critical to our financial condition and profitability. Our risk management
objective is to monitor and control risk exposures to produce steady earnings growth and long-term economic value.
Management implements policies approved by our Board of Directors that cover our investment, capital, credit and foreign
currency policies and strategies. The Board receives periodic reports regarding each of these areas and approves significant
changes to policy and strategy. An Asset/Liability Committee, composed of senior management, routinely reviews
investment and risk management strategies and results. A Credit Committee, composed of senior management, routinely
reviews credit exposure to our agents.
Following is a discussion of the strategies we use to manage and mitigate the risks we have deemed most critical to our
business. While containing forward-looking statements related to risks and uncertainties, this discussion and related analyses
are not predictions of future events. MoneyGram’s actual results could differ materially from those anticipated due to
various factors discussed under “Cautionary Statements Regarding Forward-Looking Statements.”
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Credit Risk
Credit risk, or the potential risk that we may not collect amounts owed to us, affects our business primarily through
receivables, investments and derivative financial instruments. In addition, the concentration of our cash, cash equivalents and
investments at large financial institutions exposes us to credit risk.
Financial Institution Risk — Our cash, cash equivalents and investments are concentrated at a few large financial
institutions. These institutions act as custodians for our asset accounts, serve as counterparties to our foreign currency
transactions and conduct cash transfers on our behalf for the purpose of clearing our payment instruments and related agent
receivables and agent payables. Through certain check clearing agreements and other contracts, we are required to utilize
several of these financial institutions; in certain cases, we are required to maintain pre-defined levels of cash, cash
equivalents and investments at these financial institutions overnight. As a result of the credit market crisis, several financial
institutions have faced capital and liquidity issues which led them to restrict credit exposure.
We manage financial institution risk by entering into clearing and cash management agreements with only major financial
institutions and regularly monitoring the credit ratings of these financial institutions. Our financial institution risk is further
mitigated as the majority of our cash equivalents and investments held by these institutions are invested in securities issued
by United States government agencies or money market instruments collateralized by United States government agencies,
which have the implicit or explicit guarantee of the United States government depending upon the issuing agency. Our
non-interest bearing cash held at our domestic clearing and cash management banks is covered under the Temporary
Liquidity Guarantee Program (“TLGP”) as those banks opted in to the program. The Federal Deposit Insurance Corporation
(“FDIC”) has created the TLGP program to strengthen confidence and encourage liquidity in the banking system by
guaranteeing newly issued senior unsecured debt of banks, thrifts and certain holding companies and providing full coverage
of non-interest bearing deposit transaction accounts, regardless of dollar amount. In addition, official checks issued by our
financial institution customers are treated as deposits under the TLGP. Components of TLGP have been extended into 2010.
With respect to our credit union customers, our credit exposure is partially mitigated by National Credit Union
Administration insurance. However, as our credit union customers are not insured by a TLGP-equivalent program, we have
required certain credit union customers to provide us with larger balances on deposit and/or to issue cashier’s checks only.
While the value of these assets are not at risk in a disruption or collapse of a counterparty financial institution, the delay in
accessing our assets could adversely affect our liquidity and potentially our earnings depending upon the severity of the
delay and corrective actions we may need to take. Corrective actions could include draws upon our Senior Facility to provide
short-term liquidity until our assets are released, reimbursements of costs or payment of penalties to our agents and higher
banking fees to transition banking relationships in a short timeframe.
At December 31, 2009, we held $1.7 billion, or 41 percent of our investment portfolio, in cash accounts at 11 financial
institutions with a rating of BBB or better, time deposits at two financial institutions with a rating of AA or better and a
certificate of deposit at one financial institution with a rating of AA or better. We held another $1.9 billion, or 47 percent of
our investment portfolio, in cash equivalents collateralized by securities issued by United States government agencies at
eight financial institutions. Our trading and available-for-sale investments totaling $325.6 million, or 8 percent of our
investment portfolio, are held at three financial institutions with a rating of AA or better. The remaining $171.7 million, or
4 percent, of our investment portfolio is composed of cash and cash equivalents held at foreign banks for use by our
international subsidiaries and branches or to comply with local requirements.
Receivables — Credit risk related to receivables is the risk that we are unable to collect the funds owed to us by our agents
and financial institution customers who have collected the principal amount and fees associated with the sale of our payment
instruments from the consumer on our behalf. Substantially all of the business conducted by our Global Funds Transfer
segment is conducted through independent agents, while the business conducted by the Financial Paper Products segment is
conducted through both independent financial institution customers and agents. Our agents and financial institution
customers receive the principal amount and fees related to the sale of our payment instruments, and we must then collect
these funds from them. As a result, we have credit exposure to our agents and financial institution customers. Agents
typically have from one to three days to remit the funds, with longer remittance schedules granted to international agents and
certain domestic agents. As of December 31, 2009, we had credit exposure to our agents of $436.4 million in the aggregate
spread across over 14,000 agents, of which
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five owed us in excess of $15.0 million each. As of December 31, 2009, we had a credit exposure to our official check
financial institution customers of approximately $482.0 million in the aggregate spread across 1,700 financial institutions, of
which one owed us in excess of $15.0 million.
Our strategy in managing credit risk related to receivables is to ensure that the revenue generation from an agent or financial
institution customer is sufficient to provide for an appropriate level of credit risk and to reduce concentrations of risk through
diversification, termination of agents or financial institution customers with poor risk-reward ratios or other means.
Management’s decision during the fourth quarter of 2008 to terminate its ACH Commerce business was based primarily on a
review of the credit risk associated with that business.
As our official checks are issued solely through financial institution customers, we do not consider our credit exposure
related to receivables to be significant for official checks. Due to the larger average principal amount of money orders, we
consider our credit exposure from money orders to be of higher risk than exposure due to money transfers. However, in the
current macroeconomic environment and as a result of our international growth, credit risk related to our money transfer
products is increasing. While the extent of credit risk may vary by product, the process for mitigating risk is substantially the
same. We assess the creditworthiness of each potential agent before accepting them into our distribution network. This
underwriting process includes not only a determination of whether to accept a new agent, but also the remittance schedule
and volume of transactions that the agent will be allowed to perform in a given timeframe. We actively monitor the credit
risk of our existing agents by conducting periodic comprehensive financial reviews and cash flow analyses of our agents that
average high volumes of transactions and monitoring remittance patterns versus reported sales on a daily basis. In the current
macroeconomic environment, we have tightened our underwriting requirements and have initiated earlier action against
agents with a pattern of delayed or late remittances. We also utilize software embedded in our money transfer and retail
money order point of sale equipment which provides credit risk management abilities. First, this software allows us to
control both the number and dollar amount of transactions that can be completed by both agent and location in a particular
timeframe. Second, this software allows us to monitor for suspicious transactions or volumes of sales, which assists us in
uncovering irregularities such as money laundering, fraud or agent self-use. Finally, the software allows us to remotely
disable the point of sale equipment to prevent agents from transacting if suspicious activity is noted or remittances are not
received according to the agent’s contract. The point of sale software requires each location to be re-authorized on a daily
basis for transaction processing. Where appropriate, we will also require bank-issued lines of credit to support our
receivables and guarantees from the owners or parent companies, although such guarantees are often unsecured.
The risk related to official checks is mitigated by only selling these products through financial institution customers, who
have never defaulted on their remittances to us and have had only rare instances of delayed remittances. Substantially all of
our financial institution customers have a next-day remit requirement, which reduces the build-up of credit exposure at each
financial institution. In addition, the termination of our top 10 financial institution customers in connection with the
restructuring of our official check business in 2008 has resulted in less credit exposure at a relatively small number of
financial institutions.
Agents who sell money orders only typically have longer remit timeframes than other agents; in addition, the per transaction
revenue tends to be smaller for money orders than for money transfers. As part of our review of the money order business,
we evaluated our money order only agents to identify agents where the credit risk outweighs the revenue potential. The
Company considered various mitigation actions for the identified agents, including termination of relationships, reductions
in permitted transaction volumes and dollars, repricing the fees charged to the agent and prefunding by the agent of average
remittances.
Investment Portfolio — Credit risk from the investment portfolio relates to the risk that we are unable to collect the interest
or principal owed to us under the legal terms of the various securities. Losses due to credit risk would be reflected as “Net
securities gains (losses)” and negatively impact our net revenue. We manage credit risk related to our investment portfolio
by investing in short-term assets and in issuers with strong credit ratings. Our investment policy permits the investment of
funds only in cash, cash equivalents and securities issued by United States government agencies with a maturity of
13 months or less. This policy relates to both cash generated from our operations and the reinvestment of proceeds from the
investment portfolio. As shown below, approximately
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99 percent of our investment portfolio is composed of cash, cash equivalents and securities issued by, or collateralized by
securities issued by, United States government agencies at December 31, 2009:
Fair
Value
(Amounts in thousands)
Cash, time deposits and certificates of deposit held at large financial institutions
Money markets collateralized by U.S. government agencies
Securities issued by or collateralized by U.S. government agencies
Cash held at international banks
Other investments
Total investment portfolio
Percent of
Investment
Portfolio
$
1,671,335
1,933,764
276,545
171,725
49,039
40.8 %
47.1 %
6.7 %
4.2 %
1.2 %
$
4,102,408
100.0 %
Our credit risk primarily relates to the concentration of our investment portfolio in financial institutions and United States
government agencies. We primarily hold assets at major financial institutions and manage the risk of concentration at these
financial institutions by regularly monitoring their credit ratings. While the credit market crisis and recession have affected
all financial institutions, those holding our assets are well capitalized and, to date, there have been no significant concerns as
to their ability to honor all obligations related to our holdings. The concentration in United States government agencies
includes agencies placed under conservatorship by the United States government in 2008 and extended unlimited lines of
credit from the United States Treasury. The implicit guarantee of the United States government and its actions to date
support our belief that the United States government will honor the obligations of its agencies if the agencies are unable to
do so themselves.
Derivative Financial Instruments — Credit risk related to our derivative financial instruments relates to the risk that we are
unable to collect amounts owed to us by the counterparties to our derivative agreements. With the termination of our interest
rate swaps in the second quarter of 2008, our derivative financial instruments are used solely to manage exposures to
fluctuations in foreign currency exchange rates. If the counterparties to any of our derivative financial instruments were to
default in payments or experience credit rating downgrades, the value of the derivative financial instruments would decline
and adversely impact our operating income. We manage credit risk related to derivative financial instruments by entering
into agreements with only major financial institutions and regularly monitoring the credit ratings of these financial
institutions. We also only enter into agreements with financial institutions that are experienced in the foreign currency upon
which the agreement is based.
Interest Rate Risk
Interest rate risk represents the risk that our operating results are negatively impacted and our investment portfolio declines
in value due to changes in interest rates. Given the nature of the realigned investment portfolio, including the high credit
rating of financial institutions holding or issuing our cash and cash equivalents and the implicit guarantee of the United
States government backing our money markets and majority of available-for-sale investments, we believe there is a low risk
that the value of these securities would decline such that we would have a material adverse change in our stockholders’
equity. At December 31, 2009, the Company’s “Other asset-backed securities” are priced on average at four cents on the
dollar for a total fair value of $22.1 million. While the Company does believe its “Other asset-backed securities” are at a
high risk of further decline, the recapitalization completed on March 25, 2008 included funds to cover all losses on these
securities, as well as the trading investments. Accordingly, any resulting adverse movement in our stockholders’ equity or
assets in excess of payment service obligations from further declines in investments would not result in regulatory or
contractual compliance exceptions. At December 31, 2009, the combined fair value of the trading investment and related put
option was $27.0 million as compared to the $29.4 million par value of the trading investment. The remaining auction rate
security with related put option was called at par on February 12, 2010.
Our operating results are primarily impacted by interest rate risk through our net investment margin, which is investment
revenue less commissions expense and interest expense. As the money transfer business is not materially affected by
investment revenue and pays commissions that are not tied to an interest rate index, interest rate risk has the most impact on
our money order and official check businesses. After the portfolio realignment, we are invested
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primarily in interest-bearing cash accounts and United States government money market funds. These types of investment
have minimal risk of declines in fair value from changes in interest rates. Our commissions paid to financial institution
customers are variable rate, based primarily on the federal funds effective rate and reset daily. Accordingly, both our
investment revenue and our investment commissions expense will decrease when rates decline and increase when rates rise.
However, as commission rates reset more frequently than our investments, the changes in investment revenue will lag
changes in investment commissions expense. In a declining rate environment, our net investment margin will typically be
benefited by this lag, while an increasing rate environment will typically have a negative impact on our net investment
margin. In addition, the investment portfolio and commission interest rates differ, resulting in basis risk. We do not currently
employ any hedging strategies to address the basis risk between our commission rates and our investment portfolio, nor do
we currently expect to employ such hedging strategies. As a result, our net investment margin may be adversely impacted if
changes in the commission rate move by a larger percentage than the yield on our investment portfolio.
In the second quarter of 2008, we repriced our official check product to an average of federal funds effective rate less
85 basis points to better match our investment commission rate with our lower yield realigned portfolio. In the current
environment, the federal funds effective rate is so low that most of our financial institution customers are in a “negative”
commission position, in that we do not owe any commissions to our customers. While many of our contracts require the
financial institution customers to pay us the negative commission amount, we have opted not to require such payment at this
time. As the revenue earned by our financial institution customers from the sale of our official checks primarily comes from
the receipt of their investment commissions from us, the negative commissions reduce the revenue our financial institution
customers earn from our product. Accordingly, our financial institution customers may sharply reduce their issuances of
official checks if the negative commission positions continue. A substantial decline in the amount of official checks sold
would reduce our investment balances, which would in turn result in lower investment revenue for us. As official checks are
still required for many financial transactions, including home closings and vehicle purchases, we believe that risk is naturally
mitigated in part. We continue to assess the potential impact of negative commissions on our official check business. While
there are currently no plans for changes to our business as a result of the negative commissions, we may elect in the future to
change some portion of our compensation structure for select financial institution customers to mitigate the risk of
substantial declines in our investment balances.
The Senior Facility is floating rate debt, resulting in decreases to interest expense in a declining rate environment and
increases to interest expense when rates rise. The Company may elect an interest rate for the Senior Facility at each reset
period based on the United States prime bank rate or the Eurodollar rate. For the revolving credit facility and Tranche A, the
interest rate is either the United States prime bank rate plus 250 basis points or the Eurodollar rate plus 350 basis points. As
of December 31, 2009 the Company has no outstanding balance related to the revolving credit facility. For Tranche B, the
interest rate is either the United States prime bank rate plus 400 basis points or the Eurodollar rate plus 500 basis points.
Under the terms of the Senior Facility, the interest rate determined using the Eurodollar index has a minimum rate of
2.50 percent. Through 2008, the Company paid interest using the Eurodollar rate. Effective with its first interest payment in
2009, the Company elected to use the United States prime bank rate as its basis. Elections are based on the index which is
believed will yield the lowest interest rate until the next reset date. Interest rate risk is managed in part through index
election.
The income statement simulation analysis below incorporates substantially all of our interest rate sensitive assets and
liabilities, together with forecasted changes in the balance sheet and assumptions that reflect the current interest rate
environment. This analysis assumes the yield curve increases gradually over a one-year period. Components of our pre-tax
loss which are interest rate sensitive include “Investment revenue,” “Investment commissions expense” and “Interest
expense.” As a result of the current federal funds rate environment, the outcome of the income statement simulation analysis
on “Investment commissions expense” in a declining rate scenario is not meaningful as we have no downside risk. In the
current federal funds rate environment, the worst case scenario is that we would not owe any commissions to our financial
institution customers as the commission rate would decline to zero or become negative. Accordingly, we have not presented
the impact of the simulation in a declining rate
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environment for “Investment commissions expense.” The following table summarizes the changes to affected components of
the income statement under various scenarios.
Down
200
(Amounts in thousands)
Interest income
Percent change
Investment commissions
expense
Percent change
Interest expense
Percent change
Pre-tax loss from
continuing operations
Percent change
Basis Point Change in Interest Rates
Down
Down
Up
100
50
50
$ (1,666 )
)
(10.4 %
$ (1,666 )
)
(10.4 %
NM
$
NM
263
0.3 %
NM
NM
$ (1,666 )
)
(10.4 %
NM
$
NM
263
0.3 %
NM
NM
NM
$
NM
263
0.3 %
NM
NM
$ 8,424
$ 16,864
52.7 %
$
Up
100
105.6 %
(359 )
)
(57.5 %
$ (569 )
)
(0.6 %
$
(717 )
$ 7,496
10.0 %
$ 15,008
20.1 %
Up
200
$ 33,795
211.6 %
$ (1,435 )
(114.9 )%
$ (1,138 )
(230.0 )%
$ (2,276 )
(1.3 )%
(2.5 )%
$ 30,084
40.2 %
Foreign Currency Risk
We are exposed to foreign currency risk in the ordinary course of business given we offer our products and services through
a network of agents and financial institutions with locations in approximately 190 countries and have subsidiaries in 11
countries. This risk may have an adverse effect on our earnings and equity, so we hedge material transactional exposures
when feasible using forward or option contracts. Translation risk, generated from consolidation of foreign
currency-denominated earnings into United States dollars for reporting purposes, is not hedged as this is not considered an
economic exposure. In 2009, the decline of the euro exchange rate (net of hedging activities) resulted in a net benefit to our
operating results of $1.6 million over 2008. Additionally, by policy, we do not speculate in foreign currencies; all currency
trades relate to underlying transactional exposures.
Our primary source of transactional currency risk is the money transfer business whereby funds are frequently transferred
cross-border and we settle with agents in multiple currencies. Although this risk is somewhat limited due to the fact that
these transactions are short-term in nature, we currently manage some of this risk with forward contracts to protect against
potential short-term market volatility. Additionally, we buy and sell in the spot market daily to settle transactions. The
primary currency pairs traded against the dollar in the spot and forward markets, based on volume, include the European
euro, Mexican peso, British pound and Indian rupee. The duration of forward contracts is typically less than one month.
Realized and unrealized gains or losses on hedges and any associated revaluation of balance sheet exposures are recorded in
“Transaction and operations support” in the Consolidated Statement of Loss. The fair market value of any open hedges at
period end are recorded in “Other assets” in the Consolidated Balance Sheets. The net effect of changes in foreign exchange
rates and the related forward contracts for the year ended December 31, 2009 was a loss of $5.3 million. We do not currently
have any forward contracts that are designated as hedges for accounting purposes.
Counterparty risk on currency trades is managed through careful selection and ongoing evaluation of the financial
institutions utilized as counterparties.
Had the euro appreciated/depreciated relative to the United States dollar by 20 percent from actual exchange rates for 2009,
pre-tax operating income would have increased/decreased $11.5 million for the year. This sensitivity analysis does not
consider the impact of our hedging program.
Operational Risk
Operational risk represents the potential for loss resulting from our operations. This may include, but is not limited to the
risk of fraud by employees or external parties, business continuation and disaster recovery, errors related to transaction
processing and technology, unauthorized transactions and breaches of information security and compliance requirements.
This risk may also include the potential legal actions that could arise as a result of an operational deficiency or as a result of
noncompliance with applicable regulatory requirements. Management has
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direct responsibility for identifying, controlling and monitoring operational risks within their business. Business managers
maintain a system of controls to provide transaction authorization and execution, safeguarding of assets from misuse or theft,
and to ensure the quality of financial and other data. Our Business Resiliency group works with each business function to
develop plans to support business resumption activities including technology, networks and data centers. Our internal audit
function tests the system of internal controls through risk-based audit procedures and reports on the effectiveness of internal
controls to executive management and the Audit Committee of the Board of Directors.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, expenses and related disclosures in the Consolidated Financial Statements. Actual
results could differ from those estimates. On a regular basis, management reviews its accounting policies, assumptions and
estimates to ensure that our financial statements are presented fairly and in accordance with GAAP. See Note 3 — Summary
of Significant Accounting Policies of the Notes to Consolidated Financial Statements for a comprehensive list of our
accounting policies.
Critical accounting policies are those policies that management believes are most important to the portrayal of our financial
position and results of operations, and that require management to make estimates that are difficult, subjective or complex.
Based on these criteria, management has identified and discussed with the Audit Committee the following critical accounting
policies and estimates, including the methodology and disclosures related to those estimates.
Fair Value of Investment Securities — We hold investment securities classified as trading and available-for-sale. Trading
securities are recorded at fair value, with unrealized gains and losses reported in the Consolidated Statements of Loss.
Available-for-sale securities are also recorded at fair value, with unrealized gains and losses recorded in accumulated other
comprehensive loss in stockholders’ deficit.
We measure fair value as an “exit price,” or the exchange price that would be received for an asset in an orderly transaction
between market participants on the measurement date. A three-level hierarchy has been established for fair value
measurements based upon the observability of the inputs to the valuation of an asset or liability, and requires that the use of
observable inputs be maximized and the use of unobservable inputs be minimized. The fair value hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs.
The degree of management judgment involved in determining the fair value of an investment is dependent upon the
availability of quoted market prices or observable market parameters. Fair value for the majority of our investments is
estimated using quoted market prices in active markets for similar securities, broker quotes or industry-standard models that
utilize independently sourced market parameters.
We receive prices from an independent pricing service for the vast majority of the fair value of our investment securities. We
verify these prices through periodic internal valuations, as well as through comparison to comparable securities, any broker
quotes received and liquidation prices. The independent pricing service will only provide a price for an investment if there is
sufficient observable market information to obtain objective pricing. We receive prices from an independent pricing service
for all investments classified as residential mortgage-backed securities and United States government agencies, as well as
certain other asset-backed securities.
For investments that are not actively traded, or for which there is not sufficient observable market information, we estimate
fair value using broker quotes when available. When such quotes are not available, and to verify broker quotes received, we
estimate fair value using industry-standard pricing models that utilize independently sourced market observable parameters,
discount margins for comparable securities adjusted for differences in our security, risk and liquidity premiums observed in
the market place, default rates, prepayment speeds, loss severity and information specific to the underlying collateral to the
investment. We maximize the use of market observable information to the extent possible, and make our best estimate of the
assumptions that a similar market participant would make. Our other asset-backed securities are primarily valued through the
use of broker quotes or internal valuations.
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The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value
amounts. Due to the subjective nature of these assumptions, the estimates determined may not be indicative of the actual exit
price if the investment was sold at the measurement date. In the current market, the most subjective assumptions include the
default rate of collateral securities and loss severity as it relates to our other asset-backed securities. As of December 31,
2009, we continue to hold investments classified as other asset-backed securities with a fair value of $22.1 million. Using the
highest and lowest prices received as part of the valuation process described above, the range of fair value for these
securities was $21.7 million to $35.7 million. At December 31, 2009, $16.4 million, or less than 1 percent, of our total
investment portfolio was valued using internal pricing information. Had we used the third party price to value these
internally priced securities, the value of these investments would have been $16.8 million.
Goodwill — We perform impairment testing of our goodwill balances on an annual basis and whenever an impairment
indicator is identified. The testing is performed by comparing the estimated fair value of our reporting units to their carrying
values. The fair value of our reporting units is estimated based on expected future cash flows discounted using a
weighted-average cost of capital rate (the “discount rate”). Our discount rate is based on our debt and equity balances,
adjusted for current market conditions and investor expectations of return on our equity. In addition, an assumed terminal
value is used to project future cash flows beyond base years. Assumptions used in our impairment testing, such as forecasted
growth rates and the discount rate, are consistent with our internal forecasts and operating plans. The estimates and
assumptions regarding expected cash flows, terminal values and the discount rate require considerable judgment and are
based on historical experience, financial forecasts and industry trends and conditions.
As a result of impairment indicators, we recognized two goodwill impairment charges during 2009. In connection with the
sale of FSMC, Inc., we recorded a charge of $0.6 million in the second quarter of 2009 to impair goodwill assigned to that
reporting unit. We also impaired $3.2 million of goodwill in connection with the decision to discontinue certain bill payment
products in the second quarter of 2009.
In connection with the annual impairment test for 2009, we assessed the following reporting units: Global Funds Transfer,
Retail Money Order, Financial Institution Money Order, Official Check and ACH Commerce. The Global Funds Transfer
reporting unit had assigned goodwill of $425.6 million and the Retail Money Order reporting unit had assigned goodwill of
$2.5 million. No goodwill is assigned to the other reporting units. As a result of the annual impairment test, we recorded a
$2.5 million charge to fully impair the goodwill assigned to the Retail Money Order reporting unit, reflecting our
expectations for the money order business as discussed in “Trends Expected to Impact 2010.” The annual impairment test
indicated a fair value for the Global Funds Transfer reporting unit that was substantially in excess of the reporting unit’s
carrying value. This excess is consistent with our expectations for the reporting unit and market indicators. Accordingly, we
believe the goodwill assigned to the Global Funds Transfer reporting unit is not impaired. If the discount rate for the Global
Funds Transfer reporting unit increases by 50 basis points from the rate used in our fair value estimate, fair value would be
reduced by approximately $79.5 million, assuming all other components of the fair value estimate remain unchanged. If the
growth rate for the Global Funds Transfer reporting unit decreases by 50 basis points from the rate used in our fair value
estimate, fair value would be reduced by approximately $26.6 million, assuming all other components of the fair value
estimate remain unchanged. Our estimated fair value for the Global Funds Transfer reporting unit would continue to be
substantially in excess under either scenario.
Pension obligations — Through our qualified pension plan and various supplemental executive retirement plans,
collectively referred to as our “pension” plans, we provide defined benefit pension plan coverage to certain of our employees
and former employees of Viad. Our pension obligations under these plans are measured as of December 31 (the
“measurement date”). Pension benefits and the related expense are based upon actuarial projections using assumptions
regarding mortality, discount rates, long-term return on assets and other factors. Following are the
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weighted-average actuarial assumptions used in calculating the benefit obligation as of each measurement date and the net
periodic benefit cost for the year ended December 31:
2009
Net periodic benefit cost:
Discount rate
Expected return on plan assets
Rate of compensation increase
Projected benefit obligation:
Discount rate
Rate of compensation increase
2008
2007
6.30%
8.00%
5.75%
6.50%
8.00%
5.75%
5.70%
8.00%
5.75%
5.80%
5.75%
6.30%
5.75%
6.50%
5.75%
At each measurement date, the discount rate is based on the then current interest rates for high-quality, long-term corporate
debt securities with maturities comparable to our obligations. The rate of compensation increase is based on historical
compensation patterns for the plan participants and management’s expectations for future compensation patterns. Effective
December 31, 2009, benefit accruals under all of the supplemental executive retirement plans are frozen. Accordingly, the
rate of compensation increase will not impact pension obligations measured subsequent to December 31, 2009, nor will it
impact net periodic benefit cost subsequent to the year ending December 31, 2010.
Our pension assets are primarily invested in marketable securities that have readily determinable current market values. Our
investments are periodically realigned in accordance with the investment guidelines. The expected return on pension plan
assets is based on our historical market experience, our pension plan investment strategy and our expectations for long-term
rates of return. We also consider peer data and historical returns to assess the reasonableness and appropriateness of our
expected return. Our pension plan investment strategy is reviewed annually and is based upon plan obligations, an evaluation
of market conditions, tolerance for risk and cash requirements for benefit payments. At December 31, 2009, the pension
assets are composed of approximately 56 percent in United States domestic and international equity stock funds,
approximately 35 percent in fixed income securities such as global bond funds and corporate obligations, approximately
5 percent in a real estate limited partnership interest and approximately 4 percent in other securities.
The actual rate of return on average pension assets in 2009 was 4.5 percent, as compared to a 26 percent decline in 2008
from the substantial disruption in the market and the global economic conditions. We believe the 2009 returns indicate some
stabilization in the markets, and anticipate a return to historical long-term norms in the future. This is consistent with the
widely accepted capital market principle that assets with higher volatility generate greater long-term returns and the
historical cyclicality of the investment markets. Accordingly, we do not believe that the actual return for 2009 is
significantly different from the long-term expected return used to estimate the benefit obligation. In addition, the participants
of our plans are relatively young, providing the plan assets with sufficient time to recover to historical return rates.
Our assumptions reflect our historical experience and management’s best judgment regarding future expectations. Certain of
the assumptions, particularly the discount rate and expected return on plan assets, require significant judgment and could
have a material impact on the measurement of our pension obligation. Changing the discount rate by 50 basis points would
have increased/decreased 2009 pension expense by $0.3 million. Changing the expected rate of return by 50 basis points
would have increased/decreased 2008 pension expense by $0.6 million.
Income Taxes — We are subject to income taxes in the United States and various foreign jurisdictions. In determining
taxable income, income or losses before taxes are adjusted for various differences between local tax laws and generally
accepted accounting principles. The determination of taxable income in any jurisdiction requires the interpretation of the
related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the
amount, timing and character of deductions and the sources and character of income and tax credits. Changes in tax laws,
regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each
taxing jurisdiction could have an impact on the amount of income taxes that we provide during any given year.
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Deferred tax assets and liabilities are recorded based on the future tax consequences attributable to temporary differences
that exist between the financial statement carrying value of assets and liabilities and their respective tax basis, and operating
loss and tax credit carry-backs and carry-forwards on a taxing jurisdiction basis. We measure deferred tax assets and
liabilities using enacted statutory tax rates that will apply in the years in which we expect the temporary differences to be
recovered or paid.
We establish valuation allowances for our deferred tax assets based on a more likely than not threshold. In assessing the need
for a valuation allowance, we consider both positive and negative evidence related to the likelihood that the deferred tax
assets will be realized. If, based on the weight of available evidence, it is deemed more likely than not that the deferred tax
assets will not be realized, we establish or maintain a valuation allowance. We weigh the positive and negative evidence
commensurate with the extent it may be objectively verified. It is generally difficult for positive evidence regarding
projected future taxable income, exclusive of reversing taxable temporary differences, to outweigh objective negative
evidence, particularly cumulative losses. Our assessment of whether a valuation allowance is required or should be adjusted
requires judgment and is completed on a taxing jurisdiction basis. We consider, among other matters: the nature, frequency
and severity of any cumulative financial reporting losses; the ability to carry back losses to prior years; future reversals of
existing taxable temporary differences; tax planning strategies; and projections of future taxable income. The accounting
treatment of our deferred taxes represents our best estimate of these items. A valuation allowance established or revised as a
result of our assessment is recorded through “Income tax (benefit) expense” in our Consolidated Statements of Loss.
Changes in our current estimates due to unanticipated events, or other factors, could have a material effect on our financial
condition and results of operations.
We account for our liability for unrecognized tax benefits using a two-step approach to recognizing and measuring uncertain
tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained upon audit by the tax authority, including resolution
of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more
than 50 percent likely of being realized upon settlement. Our tax filings for various periods are subject to audit by various
tax authorities. Actual tax amounts may be materially different from amounts accrued based upon the results of audits by the
tax authorities. The amount of income tax or benefit recognized in our Consolidated Statements of Loss includes the impact
of reserve provisions and changes to reserves that are considered appropriate based on current information and
management’s best estimate, as well as any applicable related net interest and penalties.
Prior to our June 2004 spin-off from Viad, income taxes were determined on a separate return basis as if we had not been
eligible to be included in the consolidated income tax return of Viad and its affiliates. We are considered the divesting entity
in the spin-off and treated as the “accounting successor” to Viad, with the continuing business of Viad is referred to as “New
Viad.” As part of the spin-off, we entered into a Tax Sharing Agreement with Viad which provides for, among other things,
the allocation between MoneyGram and New Viad of federal, state, local and foreign tax liabilities and tax liabilities
resulting from the audit or other adjustment to previously filed tax returns. Although we believe that we have appropriately
proportioned such taxes between MoneyGram and Viad, subsequent adjustments may occur upon filing of amended returns
or resolution of audits by various taxing authorities.
Recent Accounting Developments
Recent accounting developments are set forth in Note 3 — Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the documents incorporated by reference herein may contain forward-looking
statements with respect to the financial condition, results of operation, plans, objectives, future performance and business of
MoneyGram International, Inc. and its subsidiaries. Statements preceded by, followed by or that include words such as
“may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believes” or similar expressions are intended to
identify some of the forward-looking statements within the meaning of the
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Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with
the safe harbor provisions of that Act. These forward-looking statements involve risks and uncertainties. Actual results may
differ materially from those contemplated by the forward-looking statements due to, among others, the risks and
uncertainties described in this Annual Report on Form 10-K, including those described below and under Part I, Item 1A
titled “Risk Factors,” and in the documents incorporated by reference herein. These forward-looking statements speak only
as of the date on which such statements are made. We undertake no obligation to update publicly or revise any
forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as
required by federal securities law.
• Substantial Debt Service and Dividend Obligations. Our substantial debt service and our covenant requirements may
adversely impact our ability to obtain additional financing and to operate and grow our business and may make us
more vulnerable to negative economic conditions.
• Significant Dilution to Stockholders and Control of New Investors. The Series B Stock issued to the Investors at the
closing of the recapitalization, dividends accrued on the Series B Stock post-closing and potential special voting rights
provided to the Investors’ designees on the Company’s Board of Directors significantly dilute the interests of our
existing stockholders and give the Investors control of the Company.
• Sustained Financial Market Disruptions. Disruption in global capital and credit markets may adversely affect our
liquidity, our agents’ liquidity, our access to credit and capital, our agents’ access to credit and capital and our earnings
on our investment portfolio.
• Sustained Negative Economic Conditions. Negative economic conditions generally and in geographic areas or
industries that are important to our business may cause a decline in our transaction volume, and we may be unable to
timely and effectively reduce our operating costs or take other actions in response to a significant decline in transaction
volume.
• International Migration Patterns. A material slow down or complete disruption of international migration patterns
could adversely affect our money transfer volume and growth rate.
• Retention of Global Funds Transfer Agents and Billers. We may be unable to maintain retail agent or biller
relationships or we may experience a reduction in transaction volume from these relationships.
• Stockholder Litigation and Related Risks. Stockholder lawsuits and other litigation or government investigations of
the Company or its agents could result in material settlements, fines, penalties or legal fees.
• Credit Risks. If we are unable to manage credit risks from our retail agents and official check financial institution
customers, which risks may increase during negative economic conditions, our business could be harmed.
• Fraud Risks. If we are unable to manage fraud risks from consumers or certain agents, which risks may increase
during negative economic conditions, our business could be harmed.
• Maintenance of Banking Relationships. We may be unable to maintain existing or establish new banking
relationships, including the Company’s domestic and international clearing bank relationships, which could adversely
affect our business, results of operation and our financial condition.
• Interest Rate Fluctuations. Fluctuations in interest rates may negatively affect the net investment margin of our
Official Check and Money Order businesses.
• Repricing of our Official Check and Money Order Businesses. We may be unable to operate our official check and
money order businesses profitably as a result of our revised pricing strategies.
• Failure to Maintain Sufficient Capital. We may be unable to maintain sufficient capital to pursue our growth
strategy, fund key strategic initiatives, and meet evolving regulatory requirements.
• Failure to Attract and Retain Key Employees. We may be unable to attract and retain key employees.
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• Development of New and Enhanced Products and Related Investment. We may be unable to successfully and timely
implement new or enhanced technology and infrastructure, delivery methods and product and service offerings and to
invest in new products or services and infrastructure.
• Intellectual Property. If we are unable to adequately protect our brand and other intellectual property rights and
avoid infringing on third-party intellectual property rights, our business could be harmed.
• Competition. We may be unable to compete against our large competitors, niche competitors or new competitors that
may enter the markets in which we operate.
• United States and International Regulation. Failure by us or our agents to comply with the laws and regulatory
requirements in the United States and abroad, or changes in laws, regulations or other industry practices and standards
could have an adverse effect on our results of operations.
• Operation in Politically Volatile Areas. Offering money transfer services through agents in regions that are
politically volatile or, in a limited number of cases, are subject to certain OFAC restrictions could cause contravention
of United States law or regulations by us or our agents, subject us to fines and penalties and cause us reputational
harm.
• Network and Data Security. A significant security or privacy breach in our facilities, networks or databases could
harm our business.
• Systems Interruption. A breakdown, catastrophic event, security breach, improper operation or other event impacting
our systems or processes or the systems or processes of our vendors, agents and financial institution customers could
result in financial loss, loss of customers, regulatory sanctions and damage to our brand and reputation.
• Technology Scalability. We may be unable to scale our technology to match our business and transactional growth.
• Company Retail Locations and Acquisitions. If we are unable to manage risks associated with running
Company-owned retail locations and acquiring businesses, our business could be harmed.
• International Risks. Our business and results of operation may be adversely affected by political, economic or other
instability in countries that are important to our business.
• Tax Matters. An unfavorable outcome with respect to the audit of our tax returns or tax positions, or a failure by us to
establish adequate reserves for tax events, could adversely affect our results of operations.
• Status as a Bank Holding Company Subsidiary. If we are deemed to be a subsidiary of a bank holding company, our
ability to engage in other businesses may be limited to those permissible for a bank holding company.
• Internal Controls. Our inability to maintain compliance with the internal control provisions of Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business.
• Overhang of Convertible Preferred Stock to Float. Sales of a substantial number of shares of our common stock or
the perception that significant sales could occur, may depress the trading price of our common stock.
• Change of Control Restrictions. Through March 17, 2010, an Agreement between the Investors and Wal-Mart could
prevent an acquisition of the Company.
• Anti-Takeover Provisions. Our capital structure, our charter documents or specific provisions of Delaware law may
have the effect of delaying, deterring or preventing a merger or change of control of our Company.
• NYSE Delisting. We may be unable to continue to satisfy the NYSE criteria for listing on the exchange.
• Other Factors. Additional risk factors may be described in our other filings with the SEC from time to time.
Actual results may differ materially from historical and anticipated results. These forward-looking statements speak only as
of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or
circumstances arising after such date.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk disclosure is discussed under “Enterprise Risk Management” in Item 6 of this Annual Report on Form 10-K.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 7 is found in a separate section of this Annual Report on Form 10-K on pages F-1
through F-54. See the “Index to Financial Statements” on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the
supervision and with the participation of management, including the Chief Executive Officer and the Interim Principal
Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that
evaluation, the Chief Executive Officer and Interim Principal Financial Officer concluded that, as of the Evaluation Date, the
Company’s disclosure controls and procedures were effective.
No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act)
during the fiscal quarter ended December 31, 2009 has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
Management’s annual report on internal control over financial reporting is provided on page F-2 of this Annual Report on
Form 10-K. The attestation report of the Company’s independent registered public accounting firm, Deloitte & Touche LLP,
regarding the Company’s internal control over financial reporting is provided on page F-3 of this Annual Report on
Form 10-K.
Item 9B. OTHER INFORMATION
None.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information contained in the sections titled “Proposal 2: Election of Directors,” “Board of Directors and Governance”
and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our 2010 Annual
Meeting of Stockholders is incorporated herein by reference. Under the section of our definitive Proxy Statement
incorporated by reference herein titled “Board of Directors and Governance — Board Committees — Audit Committee,” we
identify the financial expert who serves on the Audit Committee of our Board of Directors. Information regarding our
executive officers is contained in “Executive Officers of the Registrant” in Part I, Item 1 of this Annual Report on
Form 10-K.
All of our employees, including our principal executive officer, principal financial officer, principal accounting officer and
controller, or persons performing similar functions (the “Principal Officers”), are subject to our Code of Ethics and our
Always Honest policy. Our directors are also subject to our Code of Ethics and our Always Honest policy. These documents
are posted on our website at www.moneygram.com in the Investor Relations section, and are available in print free of charge
to any stockholder who requests them at the address set forth below. We will disclose any amendments to, or waivers of, our
Code of Ethics and our Always Honest Policy for directors or Principal Officers on our website.
Item 11. EXECUTIVE COMPENSATION
The information contained in the sections titled “Compensation Discussion and Analysis,” “Executive Compensation,”
“2009 Director Compensation,” “Human Resources and Nominating Committee Report” and “Compensation Committee
Interlocks and Insider Participation” in our definitive Proxy Statement for our 2010 Annual Meeting of Stockholders is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information contained in the sections titled “Security Ownership of Management,” “Security Ownership of Certain
Beneficial Owners” and “Proposal 1: Amendments to the MoneyGram International, Inc. 2005 Omnibus Incentive Plan —
Equity Compensation Plan Information” in our definitive Proxy Statement for our 2010 Annual Meeting of Stockholders is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information contained in the section titled “Board of Directors and Governance” under the captions “Director
Independence,” “Policy and Procedures Regarding Transactions with Related Persons” and “Transactions with Related
Persons” in our definitive Proxy Statement for our 2010 Annual Meeting of Stockholders is incorporated herein by
reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained in the section titled “Information Regarding Independent Registered Public Accounting Firm” in
our definitive Proxy Statement for our 2010 Annual Meeting of Stockholders is incorporated herein by reference.
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PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1)
The financial statements listed in the “Index to Financial Statements and Schedules” are filed as part of this
Annual Report on Form 10-K.
(2)
All financial statement schedules are omitted because they are not applicable or the required information is
included in the Consolidated Financial Statements or notes thereto listed in the “Index to Financial Statements.”
(3)
Exhibits are filed with this Annual Report on Form 10-K or incorporated herein by reference as listed in the
accompanying Exhibit Index.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MoneyGram International, Inc.
(Registrant)
Date: March 15, 2010
By: /s/ PAMELA H. PATSLEY
Pamela H. Patsley
Chairman and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on March 15, 2010.
/s/ Pamela H. Patsley
Pamela H. Patsley
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Jean C. Benson
Jean C. Benson
Senior Vice President and Controller (Principal Accounting
Officer and Interim Principal Financial Officer)
*
Thomas M. Hagerty
Director
*
Jess T. Hay
Director
*
Scott L. Jaeckel
Director
*
Seth W. Lawry
Director
*
Othón Ruiz Montemayor
Director
*
Pamela H. Patsley
Director
*
Ganesh B. Rao
Director
*
Albert M. Teplin
Director
/s/ Timothy C. Everett
Timothy C. Everett
*As attorney-in-fact
Executive Vice President, General Counsel and Corporate
Secretary
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EXHIBIT INDEX
Exhibit
Numbe
r
Description
2 .1
* 3 .1
3 .2
4 .1
4 .2
4 .3
4 .4
4 .5
4 .6
4 .7
4 .8
10 .1
10 .2
†10 .3
†10 .4
†10 .5
Separation and Distribution Agreement, dated as of June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc., MGI Merger Sub, Inc. and Travelers Express Company, Inc. (Incorporated by reference
from Exhibit 2.1 to Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).
Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., as amended.
Bylaws of MoneyGram International, Inc., as amended and restated September 10, 2009 (Incorporated by
reference from Exhibit 3.01 to Registrant’s Current Report on Form 8-K filed on September 16, 2009).
Form of Specimen Certificate for MoneyGram Common Stock (Incorporated by reference from Exhibit 4.1
to Amendment No. 4 to Registrant’s Form 10 filed on June 14, 2004).
Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of
MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.3 to Registrant’s Quarterly
Report on Form 10-Q filed on August 13, 2004).
Certificate of Designations, Preferences and Rights of the Series B Participating Convertible Preferred
Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.2 to Registrant’s
Current Report on Form 8-K filed on March 28, 2008).
Certificate of Designations, Preferences and Rights of the Series B-1 Participating Convertible Preferred
Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.3 to Registrant’s
Current Report on Form 8-K filed on March 28, 2008).
Certificate of Designations, Preferences and Rights of the Series D Participating Convertible Preferred
Stock of MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.4 to Registrant’s
Current Report on Form 8-K filed on March 28, 2008).
Indenture, dated as of March 25, 2008, by and among MoneyGram International, Inc., MoneyGram
Payment Systems Worldwide, Inc., the other guarantors party thereto and Deutsche Bank Trust Company
Americas, a New York banking corporation, as trustee and collateral agent (Incorporated by reference from
Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).
Registration Rights Agreement, dated as of March 25, 2008, by and among the several Investor parties
named therein and MoneyGram International, Inc. (Incorporated by reference from Exhibit 4.5 to
Registrant’s Current Report on Form 8-K filed on March 28, 2008).
Exchange and Registration Rights Agreement, dated as of March 25, 2008, by and among MoneyGram
Payment Systems Worldwide, Inc., each of the Guarantors listed on the signature pages thereto, GSMP V
Onshore US, Ltd., GSMP V Offshore US, Ltd. and GSMP V Institutional US, Ltd. (Incorporated by
reference from Exhibit 4.6 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).
Employee Benefits Agreement, dated as of June 30, 2004, by and among Viad Corp, MoneyGram
International, Inc. and Travelers Express Company, Inc. (Incorporated by reference from Exhibit 10.1 to
Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).
Tax Sharing Agreement, dated as of June 30, 2004, by and between Viad Corp and MoneyGram
International, Inc. (Incorporated by reference from Exhibit 10.2 to Registrant’s Quarterly Report on
Form 10-Q filed on August 13, 2004).
MoneyGram International, Inc. 2004 Omnibus Incentive Plan, as amended February 17, 2005
(Incorporated by reference from Exhibit 99.1 to Registrant’s Current Report on Form 8-K filed on
February 23, 2005).
MoneyGram International, Inc. 2005 Omnibus Incentive Plan, as amended February 17, 2010
(Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed on
February 22, 2010).
Form of Amended and Restated Non-Employee Director Indemnification Agreement between MoneyGram
International, Inc. and Non-Employee Directors of MoneyGram International, Inc. (Incorporated by
reference from Exhibit 10.02 to Registrant’s Current Report on Form 8-K filed on February 13, 2009).
66
Table of Contents
Exhibit
Numbe
r
Description
†10 .6
†10 .7
10 .8
10 .9
10 .10
10 .11
10 .12
10 .13
10 .14
10 .15
†10 .16
†10 .17
†10 .18
†10 .19
†10 .20
†10 .21
Form of Employee Director Indemnification Agreement between MoneyGram International, Inc. and
Employee Directors of MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.03 to
Registrant’s Current Report on Form 8-K filed on February 13, 2009).
MoneyGram International, Inc. Performance Bonus Plan, as amended and restated February 17, 2010
(formerly known as the MoneyGram International, Inc. Management and Line of Business Incentive Plan)
(Incorporated by reference from Exhibit 10.02 to Registrant’s Current Report on Form 8-K filed on
February 22, 1010).
Amended and Restated Trademark Security Agreement, dated as of March 25, 2008, by and between
MoneyGram International, Inc. and JPMorgan Chase Bank, N.A., as collateral agent (Incorporated by
reference from Exhibit 10.10 to Registrants’ Current Report on Form 8-K filed on March 28, 2008).
Trademark Security Agreement, dated as of March 25, 2008, by and between PropertyBridge, Inc. and
JPMorgan Chase Bank, N.A., as collateral agent (Incorporated by reference from Exhibit 10.11 to
Registrants’ Current Report on Form 8-K filed on March 28, 2008).
Second Priority Trademark Security Agreement, dated as of March 25, 2008, by and between
PropertyBridge, Inc., as grantor, and Deutsche Bank Trust Company Americas, as collateral agent for the
secured parties (Incorporated by reference from Exhibit 10.12 to Registrants’ Current Report on Form 8-K
filed on March 28, 2008).
Second Priority Trademark Security Agreement, dated as of March 25, 2008, by and between MoneyGram
International, Inc., as grantor, and Deutsche Bank Trust Company Americas, as collateral agent for the
secured parties (Incorporated by reference from Exhibit 10.13 to Registrants’ Current Report on Form 8-K
filed on March 28, 2008).
Amended and Restated Patent Security Agreement, dated as of March 25, 2008, by and between
MoneyGram International, Inc. and JPMorgan Chase Bank, N.A., as collateral agent (Incorporated by
reference from Exhibit 10.14 to Registrants’ Current Report on Form 8-K filed on March 28, 2008).
Patent Security Agreement, dated as of March 25, 2008, by and between MoneyGram Payment Systems,
Inc. and JPMorgan Chase Bank, N.A., as collateral agent (Incorporated by reference from Exhibit 10.15 to
Registrants’ Current Report on Form 8-K filed on March 28, 2008).
Second Priority Patent Security Agreement, dated as of March 25, 2008, by and between MoneyGram
Payment Systems, Inc., as grantor, and Deutsche Bank Trust Company Americas, as collateral agent for the
secured parties (Incorporated by reference from Exhibit 10.16 to Registrants’ Current Report on Form 8-K
filed on March 28, 2008).
Second Priority Patent Security Agreement, dated as of March 25, 2008, by and between MoneyGram
International, Inc., as grantor, and Deutsche Bank Trust Company Americas, as collateral agent for the
secured parties (Incorporated by reference from Exhibit 10.17 to Registrants’ Current Report on Form 8-K
filed on March 28, 2008).
Deferred Compensation Plan for Directors of MoneyGram International, Inc. (Incorporated by reference
from Exhibit 10.12 to Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).
Deferred Compensation Plan for Directors of Viad Corp, as amended August 19, 2004 (Incorporated by
reference from Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q filed on November 12, 2004).
Viad Corp Deferred Compensation Plan, as amended August 19, 2004 (Incorporated by reference from
Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q filed on November 12, 2004).
MoneyGram International, Inc. Deferred Compensation Plan, as amended and restated August 16, 2007
(Incorporated by reference from Exhibit 99.01 to Registrant’s Current Report on Form 8-K filed on
August 22, 2007).
2005 Deferred Compensation Plan for Directors of MoneyGram International, Inc., as amended and
restated March 24, 2008 (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on
Form 8-K filed on September 9, 2008).
MoneyGram International, Inc. Executive Severance Plan (Tier I), as amended and restated August 16,
2007 (Incorporated by reference from Exhibit 99.03 to Registrant’s Current Report on Form 8-K filed on
August 22, 2007).
67
Table of Contents
Exhibit
Numbe
r
Description
†10 .22
†10 .23
†10 .24
†10 .25
†10 .26
†10 .27
†10 .28
†10 .29
*+ .30
10
10 .31
10 .32
10 .33
10 .34
10 .35
First Amendment of the Amended and Restated MoneyGram International, Inc. Executive Severance Plan
(Tier I) (Incorporated by reference from Exhibit 10.20 to Registrant’s Current Report on Form 8-K filed on
March 28, 2008).
MoneyGram International, Inc. Special Executive Severance Plan (Tier I) dated March 25, 2008
(Incorporated by reference from Exhibit 10.18 to Registrant’s Current Report on Form 8-K filed on
March 28, 2008).
MoneyGram International, Inc. Executive Severance Plan (Tier II), as amended and restated August 16,
2007 (Incorporated by reference from Exhibit 99.04 to Registrant’s Current Report on Form 8-K filed on
August 22, 2007).
First Amendment of the Amended and Restated MoneyGram International, Inc. Executive Severance Plan
(Tier II) (Incorporated by reference from Exhibit 10.21 to Registrant’s Current Report on Form 8-K filed
on March 28, 2008).
MoneyGram International, Inc. Special Executive Severance Plan (Tier II) dated March 25, 2008
(Incorporated by reference from Exhibit 10.19 to Registrant’s Current Report on Form 8-K filed on
March 28, 2008).
MoneyGram Supplemental Pension Plan, as amended and restated December 28, 2007 (Incorporated by
reference from Exhibit 99.01 to Registrant’s Current Report on Form 8-K filed on January 4, 2008).
Description of MoneyGram International, Inc. Director’s Charitable Matching Program (Incorporated by
reference from Exhibit 10.13 to Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).
Viad Corp Director’s Charitable Award Program (Incorporated by reference from Exhibit 10.14 to
Amendment No. 3 to Registrant’s Form 10 filed on June 3, 2004).
Second Amended and Restated Credit Agreement, dated as of March 25, 2008, among MoneyGram
International, Inc., MoneyGram Payment Systems Worldwide, Inc. and JPMorgan Chase Bank, N.A.,
individually and as letter of credit issuer, swing line lender, administrative agent and collateral agent and
the other lenders party thereto.
Security Agreement, dated as of January 25, 2008, among MoneyGram International, Inc., MoneyGram
Payment Systems, Inc., FSMC, Inc., CAG Inc., MoneyGram Payment Systems Worldwide, Inc.,
PropertyBridge, Inc., MoneyGram of New York LLC, and JPMorgan Chase Bank, N.A. (Incorporated by
reference from Exhibit 99.03 to Registrant’s Current Report on Form 8-K filed on January 31, 2008).
Amended and Restated Security Agreement, dated as of March 25, 2008, among MoneyGram
International, Inc., MoneyGram Payment Systems, Inc., FSMC, Inc., CAG Inc., MoneyGram Payment
Systems Worldwide, Inc., PropertyBridge, Inc., MoneyGram of New York LLC, and JPMorgan Chase
Bank, N.A., as collateral agent (Incorporated by reference from Exhibit 10.8 to Registrant’s Current Report
on Form 8-K filed on March 28, 2008).
Second Priority Security Agreement, dated as of March 25, 2008, among MoneyGram International, Inc.,
MoneyGram Payment Systems, Inc., FSMC, Inc., CAG Inc., MoneyGram Payment Systems Worldwide,
Inc., PropertyBridge, Inc., MoneyGram of New York LLC, and Deutsche Bank Trust Company Americas,
as collateral agent (Incorporated by reference from Exhibit 10.9 to Registrant’s Current Report on
Form 8-K filed on March 28, 2008).
Amended and Restated Pledge Agreement, dated as of March 25, 2008, among MoneyGram International,
Inc., MoneyGram Payment Systems, Inc., FSMC, Inc., CAG Inc., MoneyGram Payment Systems
Worldwide, Inc., PropertyBridge, Inc., MoneyGram of New York LLC, and JPMorgan Chase Bank, N.A.
(Incorporated by reference from Exhibit 10.6 to Registrant’s Current Report on Form 8-K filed on
March 28, 2008).
Second Priority Pledge Agreement, dated as of March 25, 2008, among MoneyGram International, Inc.,
MoneyGram Payment Systems, Inc., FSMC, Inc., CAG Inc., MoneyGram Payment Systems Worldwide,
Inc., PropertyBridge, Inc., MoneyGram of New York LLC, and Deutsche Bank Trust Company Americas
(Incorporated by reference from Exhibit 10.7 to Registrant’s Current Report on Form 8-K filed on
March 28, 2008).
68
Table of Contents
Exhibit
Numbe
r
Description
10 .36
10 .37
10 .38
10 .39
10 .40
*+ .41
10
10 .42
10 .43
10 .44
†10 .45
†10 .46
†10 .47
†10 .48
†10 .49
†10 .50
†10 .51
Amended and Restated Purchase Agreement, dated as of March 17, 2008, among MoneyGram
International, Inc. and the several Investor parties named therein (Incorporated by reference from
Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on March 18, 2008).
Amended and Restated Fee Arrangement Letter, dated March 17, 2008, between THL Managers VI, LLC
and MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.2 to Registrant’s Current
Report on Form 8-K filed March 18, 2008).
Amended and Restated Fee Arrangement Letter, dated March 17, 2008, between Goldman, Sachs & Co.
and MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.3 to Registrant’s Current
Report on Form 8-K filed on March 18, 2008).
Fee Arrangement Letter, dated as of March 25, 2008, by and between the Investor parties named therein,
Goldman, Sachs & Co. and MoneyGram International, Inc. (Incorporated by reference from Exhibit 10.3 to
Registrant’s Current Report on Form 8-K filed on March 28, 2008).
Subscription Agreement, dated as of March 25, 2008, by and between MoneyGram International, Inc. and
The Goldman Sachs Group, Inc. (Incorporated by reference from Exhibit 10.4 to Registrant’s Current
Report on Form 8-K filed on March 28, 2008).
Amended and Restated Note Purchase Agreement, dated as of March 17, 2008, among MoneyGram
Payment Systems Worldwide, Inc., MoneyGram International, Inc., GSMP V Onshore US, Ltd., GSMP V
Offshore US, Ltd., GSMP V Institutional US, Ltd., and THL Managers VI, LLC.
Second Amended and Restated Note Purchase Agreement, dated as of March 24, 2008, among
MoneyGram Payment Systems Worldwide, Inc., MoneyGram International, Inc., GSMP V Onshore US,
Ltd., GSMP V Offshore US, Ltd., and GSMP V Institutional US, Ltd. (Incorporated by reference from
Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed on March 28, 2008).
Amended and Restated Fee Letter, dated March 17, 2008, among MoneyGram Payment Systems
Worldwide, Inc., GSMP V Onshore US, Ltd., GSMP V Offshore US, Ltd., GSMP V Institutional US, Ltd.,
GS Capital Partners VI Fund, L.P., GS Capital Partners VI Offshore Fund, L.P., GS Capital Partners VI
GmbH & Co. KG, GS Capital Partners VI Parallel, L.P., and THL Managers VI, LLC (Incorporated by
reference from Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on March 18, 2008).
MoneyGram Employee Equity Trust, effective as of June 30, 2004 (Incorporated by reference from
Exhibit 10.16 to Registrant’s Quarterly Report on Form 10-Q filed on August 13, 2004).
Form of MoneyGram International, Inc. 2004 Omnibus Incentive Plan Restricted Stock Agreement, as
amended February 16, 2005 (Incorporated by reference from Exhibit 99.5 to Registrant’s Current Report
on Form 8-K filed on February 23, 2005).
Form of MoneyGram International, Inc. 2004 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, as amended February 16, 2005 (Incorporated by reference from Exhibit 99.6 to Registrant’s
Current Report on Form 8-K filed on February 23, 2005).
Form of MoneyGram International, Inc. 2004 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement for Directors (Incorporated by reference from Exhibit 99.7 to Registrant’s Current Report on
Form 8-K filed on February 23, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Restricted Stock Agreement,
effective June 30, 2005 (Incorporated by reference from Exhibit 99.2 to Registrant’s Current Report on
Form 8-K filed on July 5, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Restricted Stock Agreement,
effective August 17, 2005 (US Version) (Incorporated by reference from Exhibit 99.7 to Registrant’s
Current Report on Form 8-K filed on August 23, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Restricted Stock Agreement,
effective August 17, 2005 (UK Version) (Incorporated by reference from Exhibit 99.9 to Registrant’s
Current Report on Form 8-K filed on August 23, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective August 17, 2005 (US Version) (Incorporated by reference from Exhibit 99.6 to
Registrant’s Current Report on Form 8-K filed on August 23, 2005).
69
Table of Contents
Exhibit
Numbe
r
†10 .52
†10 .53
†10 .54
†10 .55
†10 .56
†10 .57
†10 .58
†10 .59
†10 .60
†10 .61
†10 .62
†10 .63
†10 .64
†10 .65
†10 .66
†10 .67
Description
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective August 17, 2005 (UK Version) (Incorporated by reference from Exhibit 99.8 to
Registrant’s Current Report on Form 8-K filed on August 23, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective February 15, 2006 (US version) (Incorporated by reference from Exhibit 10.41 to
Registrant’s Annual Report on Form 10-K filed on March 1, 2006).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective February 15, 2006 (UK Version) (Incorporated by reference from Exhibit 10.42 to
Registrant’s Annual Report on Form 10-K filed on March 1, 2006).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective May 8, 2007 (Incorporated by reference from Exhibit 99.04 to Registrant’s Current
Report on Form 8-K filed on May 14, 2007).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective August 11, 2009 (version 1) (Incorporated by reference from Exhibit 10.8 to
Registrant’s Quarterly Report on Form 10-Q filed on November 9, 2009).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement, effective August 11, 2009 (version 2) (Incorporated by reference from Exhibit 10.9 to
Registrant’s Quarterly Report on Form 10-Q filed on November 9, 2009).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement for Directors, effective August 17, 2005 (Incorporated by reference from Exhibit 99.4 to
Registrant’s Current Report on Form 8-K filed on August 23, 2005).
Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Non-Qualified Stock Option
Agreement for Directors, effective February 15, 2006 (Incorporated by reference from Exhibit 10.43 to
Registrant’s Annual Report on Form 10-K filed on March 1, 2006).
Amended and Restated Employment Agreement, dated September 1, 2009, between MoneyGram
International, Inc. and Pamela H. Patsley (Incorporated by reference from Exhibit 10.02 to Registrant’s
Current Report on Form 8-K filed on September 4, 2009).
Non-Qualified Stock Option Agreement, dated January 21, 2009, between MoneyGram International, Inc.
and Pamela H. Patsley (Incorporated by reference from Exhibit 10.02 to Registrant’s Current Report on
Form 8-K filed on January 22, 2009).
Non-Qualified Stock Option Agreement, dated May 12, 2009, between MoneyGram International, Inc. and
Pamela H. Patsley (Incorporated by reference from Exhibit 10.02 to Registrant’s Current Report on
Form 8-K filed on May 18, 2009).
Non-Qualified Stock Option Agreement, dated August 31, 2009, between MoneyGram International, Inc.
and Pamela H. Patsley (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on
Form 8-K filed on September 4, 2009).
Amendment to Non-Qualified Stock Option Agreements, dated August 31, 2009, between MoneyGram
International, Inc. and Pamela H. Patsley (Incorporated by reference from Exhibit 10.03 to Registrant’s
Current Report on Form 8-K filed on September 4, 2009).
Non-Qualified Stock Option Agreement, dated August 11, 2009, between MoneyGram International, Inc.
and Daniel J. O’Malley (Incorporated by reference from Exhibit 10.02 to Registrant’s Current Report on
Form 8-K filed on August 13, 2009).
Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement, dated
August 11, 2009, between MoneyGram International, Inc. and Daniel J. O’Malley (Incorporated by
reference from Exhibit 10.03 to Registrant’s Current Report on Form 8-K filed on August 13, 2009).
Separation Agreement and Release of All Claims, dated as of June 18, 2008, between MoneyGram
International, Inc. and Philip W. Milne (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on June 19, 2008).
70
Table of Contents
Exhibit
Numbe
r
†10 .68
†10 .69
†10 .70
†10 .71
†10 .72
†10 .73
†10 .74
†10 .75
†10 .76
†10 .77
†10 .78
†10 .79
†10 .80
†10 .81
†10 .82
†10 .83
Description
Confidential Separation Agreement and Release of All Claims, dated as of April 7, 2008, by and between
MoneyGram International, Inc. and Long Lake Partners, L.P. and William J. Putney (Incorporated by
reference from Exhibit 99.01 to Registrant’s Current Report on Form 8-K filed on April 11, 2008).
Independent Consulting Agreement, dated as of April 8, 2008, by and between MoneyGram Payment
Systems, Inc., including all of its parent organizations, holding companies, predecessors, divisions,
affiliates, related companies and joint ventures, business units and subsidiaries, and William J. Putney
(Incorporated by reference from Exhibit 99.02 to Registrant’s Current Report on Form 8-K filed on
April 11, 2008).
Separation Agreement and Release of All Claims, dated as of March 20, 2009, between MoneyGram
International, Inc. and David J. Parrin (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on March 20, 2009).
Separation Agreement and Release of All Claims, dated as of March 25, 2009, between MoneyGram
International, Inc. and Mary A. Dutra (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on March 27, 2009).
Non-Qualified Stock Option Agreement, dated May 6, 2009, between MoneyGram International, Inc. and
Anthony P. Ryan (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on
Form 8-K filed on May 12, 2009).
Severance Agreement, dated as of May 6, 2009, between MoneyGram International, Inc. and Anthony P.
Ryan (Incorporated by reference from Exhibit 10.02 to Registrant’s Current Report on Form 8-K filed on
May 12, 2009).
Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement, dated
May 6, 2009, between MoneyGram Payment Systems, Inc. and Anthony P. Ryan (Incorporated by
reference from Exhibit 10.03 to Registrant’s Current Report on Form 8-K filed on May 12, 2009).
Agreement and Release, dated May 6, 2009, between MoneyGram International, Inc. and Anthony P. Ryan
(Incorporated by reference from Exhibit 10.04 to Registrant’s Current Report on Form 8-K filed on
May 12, 2009).
Separation Agreement and Release of All Claims, dated October 21, 2009, between MoneyGram
International, Inc. and Anthony P. Ryan (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on October 22, 2009).
Separation Agreement and Release of All Claims, dated as of July 16, 2009, between MoneyGram
International, Inc. and Teresa H. Johnson (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on July 16, 2009).
Offer Letter, dated July 28, 2009, between MoneyGram International, Inc. and Jeffrey R. Woods
(Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on Form 8-K filed on
July 30, 2009).
Non-Qualified Stock Option Agreement, dated August 11, 2009, between MoneyGram International, Inc.
and Jeffrey R. Woods (Incorporated by reference from Exhibit 10.01 to Registrant’s Current Report on
Form 8-K filed on August 13, 2009).
Separation Agreement and Release of All Claims, dated as of January 15, 2010, between MoneyGram
International, Inc. and Jeffrey R. Woods (Incorporated by reference from Exhibit 10.01 to Registrant’s
Current Report on Form 8-K filed on January 19, 2010).
MoneyGram International, Inc. Performance Unit Incentive Plan, as amended and restated May 9, 2007
(Incorporated by reference from Exhibit 99.02 to Registrant’s Current Report on Form 8-K filed on
May 14, 2007).
Summary of Compensation for Non-Management Directors effective January 1, 2009 (Incorporated by
reference from Exhibit 10.02 to Registrant’s Current Report on Form 8-K filed on September 9, 2008).
Form of MoneyGram International, Inc. Executive Compensation Trust Agreement (Incorporated by
reference from Exhibit 99.01 to Registrant’s Current Report on Form 8-K filed on November 22, 2005).
71
Table of Contents
Exhibit
Numbe
r
Description
10 .84
10 .85
+10 .86
10 .87
10 .88
*21
*23
*24
*31 .1
*31 .2
*32 .1
*32 .2
First Amendment to the MoneyGram International, Inc. Executive Compensation Trust Agreement
(Incorporated by reference from Exhibit 99.01 to Registrant’s Current Report on Form 8-K filed on
August 22, 2006).
The MoneyGram International, Inc. Outside Directors’ Deferred Compensation Trust (Incorporated by
reference from Exhibit 99.05 to Registrant’s Current Report on Form 8-K filed on November 22, 2005).
Money Services Agreement between Wal-Mart Stores, Inc. and MoneyGram Payment Systems, Inc. dated
February 1, 2005 as amended (Incorporated by reference from Exhibit 10.71 to Registrant’s Annual Report
on Form 10-K filed on March 25, 2008).
Form of Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement
(Incorporated by reference from Exhibit 10.27 to Registrant’s Quarterly Report on Form 10-Q filed on
May 12, 2008).
MoneyGram International, Inc. Severance Plan (Incorporated by reference from Exhibit 10.03 to
Registrant’s Current Report on Form 8-K filed February 22, 2010).
Subsidiaries of the Registrant
Consent of Deloitte & Touche LLP
Power of Attorney
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer
* Filed herewith.
† Indicates management contract or compensatory plan or arrangement required to be filed as an exhibit to this report.
+ Confidential information has been omitted from this Exhibit and has been filed separately with the SEC pursuant to a
confidential treatment request under Rule 24b-2.
72
Table of Contents
MoneyGram International, Inc.
Annual Report on Form 10-K
Items 8 and 15(a)
Index to Financial Statements
Management’s Responsibility Statement
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2009 and 2008
Consolidated Statements of Loss for the years ended December 31, 2009, 2008 and 2007
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2009, 2008 and
2007
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2009, 2008 and
2007
Notes to the Consolidated Financial Statements
F-1
F-2
F-3
F-5
F-6
F-7
F-8
F-9
F-10
Table of Contents
Management’s Responsibility Statement
The management of MoneyGram International, Inc. is responsible for the integrity, objectivity and accuracy of the
consolidated financial statements of the Company. The consolidated financial statements are prepared by the Company in
accordance with accounting principles generally accepted in the United States of America using, where appropriate,
management’s best estimates and judgments. The financial information presented throughout the Annual Report is consistent
with that in the consolidated financial statements.
Management is also responsible for maintaining a system of internal controls and procedures designed to provide reasonable
assurance that the books and records reflect the transactions of the Company and that assets are protected against loss from
unauthorized use or disposition. Such a system is maintained through accounting policies and procedures administered by
trained Company personnel and updated on a continuing basis to ensure their adequacy to meet the changing requirements of
our business. The Company requires that all of its affairs, as reflected by the actions of its employees, be conducted
according to the highest standards of personal and business conduct. This responsibility is reflected in our Code of Ethics.
To test compliance with the Company’s system of internal controls and procedures, the Company carries out an extensive
audit program. This program includes a review for compliance with written policies and procedures and a comprehensive
review of the adequacy and effectiveness of the internal control system. Although control procedures are designed and
tested, it must be recognized that there are limits inherent in all systems of internal control and, therefore, errors and
irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and
expected benefits of the controls. Projection of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The Audit Committee of the Board of Directors, which is composed solely of outside directors, meets quarterly with
management, internal audit and the independent registered public accounting firm to discuss internal accounting control,
auditing and financial reporting matters, as well as to determine that the respective parties are properly discharging their
responsibilities. Both our independent registered public accounting firm and internal auditors have had and continue to have
unrestricted access to the Audit Committee without the presence of management.
Management assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31,
2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in its Internal Control-Integrated Framework. Based on our assessment and those criteria,
management believes that the Company designed and maintained effective internal control over financial reporting as of
December 31, 2009.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has been engaged to audit our
financial statements and the effectiveness of the Company’s system of internal control over financial reporting. Their reports
are included on pages F-3 and F-4 of this Annual Report on Form 10-K.
/s/ PAMELA H. PATSLEY
Pamela H. Patsley
Chairman and Chief Executive Officer
/s/ JEAN C. BENSON
Jean C. Benson
Senior Vice President and Controller
(Interim Principal Financial Officer)
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
MoneyGram International, Inc.
Minneapolis, Minnesota
We have audited the internal control over financial reporting of MoneyGram International, Inc. and subsidiaries (the
“Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Responsibility Statement. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on
a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements as of and for the year ended December 31, 2009 of the Company and our report dated
March 15, 2010 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 15, 2010
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
MoneyGram International, Inc.
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of MoneyGram International, Inc. and subsidiaries (the
“Company”) as of December 31, 2009 and 2008, and the related consolidated statements of loss, comprehensive income
(loss), cash flows and stockholders’ (deficit) equity for each of the three years in the period ended December 31, 2009. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of
MoneyGram International, Inc. and subsidiaries at December 31, 2009 and 2008, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 15, 2010 expressed an unqualified opinion on the Company’s internal control over
financial reporting.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 15, 2010
F-4
Table of Contents
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31,
2009
2008
(Amounts in thousands, except share data)
ASSETS
Cash and cash equivalents
Cash and cash equivalents (substantially restricted)
Receivables, net (substantially restricted)
Trading investments and related put options (substantially restricted)
Available-for-sale investments (substantially restricted)
Property and equipment
Intangible assets
Goodwill
Other assets
Total assets
LIABILITIES
Payment service obligations
Debt
Pension and other postretirement benefits
Accounts payable and other liabilities
$
—
3,776,824
1,054,381
26,951
298,633
127,972
7,680
425,630
211,592
$
—
4,077,381
1,264,885
47,990
438,774
156,263
14,548
434,337
208,118
$
5,929,663
$
6,642,296
$
4,843,454
796,791
119,170
188,933
$
5,437,999
978,881
130,900
134,040
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 16)
MEZZANINE EQUITY
Participating Convertible Preferred Stock-Series B, $0.01 par value,
800,000 shares authorized, 495,000 shares issued and outstanding
Participating Convertible Preferred Stock-Series B-1, $0.01 par value,
500,000 shares authorized, 272,500 shares issued and outstanding
Total mezzanine equity
STOCKHOLDERS’ DEFICIT
Preferred shares, $0.01 par value, none issued
Common shares, $0.01 par value, 1,300,000,000 shares authorized,
88,556,077 shares issued
Additional paid-in capital
Retained loss
Unearned employee benefits
Accumulated other comprehensive loss
Treasury stock: 6,040,958 and 5,999,175 shares in 2009 and 2008
Total stockholders’ deficit
Total liabilities, mezzanine equity and stockholders’ deficit
$
See Notes to Consolidated Financial Statements
F-5
5,948,348
6,681,820
539,084
458,408
325,244
283,804
864,328
742,212
—
—
886
—
(694,914 )
(8 )
(35,671 )
(153,306 )
886
62,324
(649,254 )
(424 )
(42,707 )
(152,561 )
(883,013 )
(781,736 )
5,929,663
$
6,642,296
Table of Contents
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF LOSS
FOR THE YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands, except per share data)
REVENUE
Fee and other revenue
Investment revenue
Net securities gains (losses)
$
Total revenue
Fee commissions expense
Investment commissions expense
1,130,893
33,219
7,790
$
1,105,676
162,130
(340,688 )
$
949,059
398,234
(1,189,756 )
1,171,902
497,105
1,362
927,118
502,317
102,292
157,537
410,301
253,607
Total commissions expense
498,467
604,609
663,908
Net revenue (losses)
673,435
322,509
(506,371 )
199,053
284,277
47,425
107,911
57,091
—
—
224,580
219,905
45,994
95,020
56,672
16,030
1,499
188,092
191,066
44,704
11,055
51,979
—
—
695,757
659,700
486,896
(22,322 )
(20,416 )
(337,191 )
(75,806 )
(993,267 )
78,481
(1,906 )
—
(261,385 )
—
(1,071,748 )
(249 )
EXPENSES
Compensation and benefits
Transaction and operations support
Occupancy, equipment and supplies
Interest expense
Depreciation and amortization
Valuation loss on embedded derivatives
Debt extinguishment loss
Total expenses
Loss from continuing operations before income taxes
Income tax (benefit) expense
Loss from continuing operations
Loss from discontinued operations, net of tax
NET LOSS
$
(1,906 )
$
(261,385 )
$
(1,071,997 )
BASIC AND DILUTED LOSS PER COMMON SHARE:
Continuing operations
Discontinued operations, net of tax
$
(1.48 )
—
$
(4.19 )
—
$
(12.94 )
—
Net loss per common share
$
(1.48 )
$
(4.19 )
$
(12.94 )
$
(1,906 )
(110,279 )
(10,213 )
$
(261,385 )
(76,593 )
(7,736 )
$
(1,071,748 )
—
—
Net loss available to common stockholders:
Loss from continuing operations
Accrued preferred stock dividends
Accretion recognized on preferred stock
Net loss available to common stockholders from continuing
operations
Loss allocated to common stockholders from discontinued
(122,398 )
—
(345,714 )
—
(1,071,748 )
(249 )
operations, net of tax
$
Net loss available to common stockholders
(122,398 )
82,499
Weighted-average outstanding common shares
See Notes to Consolidated Financial Statements
F-6
$
(345,714 )
82,456
$
(1,071,997 )
82,818
Table of Contents
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
NET LOSS
OTHER COMPREHENSIVE INCOME (LOSS)
Net unrealized gains (losses) on available-for-sale securities:
Net holding gains (losses) arising during the period, net of tax
expense (benefit) of $0, $(134,570) and $(450,924)
Reclassification adjustment for net realized losses included
in net loss, net of tax benefit of $0, $124,097 and $452,033
$ (1,906 )
Net unrealized (losses) gains on derivative financial instruments:
Net holding gains (losses) arising during the period, net of tax
expense (benefit) of $1,329 and $(14,299)
Reclassification adjustment for net unrealized (gains) losses
included in net loss, net of tax (expense) benefit of
$(478),$11,006 and ($4,510)
Pension and postretirement benefit plans:
Reclassification of prior service costs for pension and
postretirement benefit plans recorded to net loss, net of tax
benefit of $106, $38 and $72
Reclassification of net actuarial loss for pension and
postretirement benefit plans recorded to net loss, net of tax
benefit of $2,785, $1,679 and $1,668
Valuation adjustment for pension and postretirement benefit
plans, net of tax (benefit) expense of $(2,251), ($17,409) and
$9,152
Unrealized foreign currency translation (losses) gains, net of tax
(benefit) expense of $(249), $1,863 and $(2,257)
$
$
(735,717 )
4,071
202,475
737,528
7,178
(17,086 )
1,811
—
2,168
(23,333 )
(780 )
17,957
(7,357 )
(780 )
20,125
(30,690 )
173
62
117
4,543
2,740
2,649
(3,672 )
(28,405 )
14,372
3,039
(3,682 )
(19,525 )
(15,423 )
5,130
$
See Notes to Consolidated Financial Statements
F-7
(1,071,997 )
(219,561 )
7,036
COMPREHENSIVE INCOME (LOSS)
$
3,107
(406 )
Other comprehensive income (loss)
(261,385 )
(280,910 )
$
(1,087,420 )
Table of Contents
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
2009
2008
2007
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Net loss from discontinued operations
Provision for deferred income taxes
Depreciation and amortization
Other-than-temporary impairment charges
Net (gain) loss on sales and maturities of investments
Unrealized losses on trading investments
Valuation gain on put options related to trading investments
Net amortization of investment premiums and discounts
Valuation loss on embedded derivative
Impairment of goodwill
Asset impairments and adjustments
Signing bonus amortization
Amortization of debt discount and deferred financing costs
Debt extinguishment loss
Provision for uncollectible receivables
Non-cash compensation and pension expense
Other non-cash items, net
Change in foreign currency translation adjustments
Change in other assets
Change in accounts payable and other liabilities
$
(1,906 )
$
(261,385 )
$
(1,071,997 )
—
(14,915 )
57,091
4,069
(7,555 )
—
(4,304 )
740
—
6,245
11,983
35,280
12,765
—
21,432
9,608
4,650
(406 )
27,860
(5,634 )
—
(425 )
56,672
70,274
256,299
40,620
(26,505 )
735
16,030
8,809
—
37,261
7,484
1,499
12,396
12,596
11,709
3,039
(71,131 )
(95,622 )
249
37,637
51,979
1,193,210
(3,649 )
195
—
(15,752 )
—
6,355
850
25,815
197
—
8,532
14,177
(28,088 )
(3,682 )
5,401
7,984
158,909
300,557
32,900
186,619
(594,545 )
341,740
(2,524,402 )
—
128,752
(2,324,486 )
1,301,410
(563,779 )
83,200
342,681
(447,319 )
82,534
(4,639,781 )
(355,804 )
—
140,999
—
(37,948 )
4,500
(3,210 )
2,896,011
493,320
—
(38,470 )
—
(2,928 )
321,693
755,921
(758,898 )
(70,457 )
—
(29,212 )
Net cash provided by investing activities
104,341
3,347,933
219,047
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt
Transaction costs for issuance and amendment of debt
Payment on debt
Proceeds from revolving credit facility
Payment on revolving credit facility
Proceeds from issuance of preferred stock
Transaction costs for issuance of preferred stock
Proceeds and tax benefit from exercise of stock options
Purchase of treasury stock
Cash dividends paid
—
—
(41,875 )
—
(145,000 )
—
—
—
—
—
Net cash (used in) provided by financing activities
(186,875 )
Total adjustments
Change in cash and cash equivalents (substantially restricted)
Change in trading investments and related put options, net (substantially restricted)
Change in receivables, net (substantially restricted)
Change in payment service obligations
Net cash provided by (used in) continuing operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments classified as available-for-sale
Proceeds from maturities of investments classified as available-for-sale
Purchases of investments classified as available-for-sale
Purchases of property and equipment
Proceeds from sale of business
Cash paid for acquisitions, net of cash acquired
733,750
(47,805 )
(1,875 )
—
(100,000 )
760,000
(52,222 )
—
—
—
1,291,848
—
—
—
197,000
(2,000 )
—
—
7,674
(45,992 )
(16,625 )
140,057
CASH FLOWS OF DISCONTINUED OPERATIONS
Investing cash flows
—
—
(3,300 )
Net cash used in discontinued operations
—
—
(3,300 )
—
—
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS — Beginning of period
CASH AND CASH EQUIVALENTS — End of period
$
See Notes to Consolidated Financial Statements
F-8
—
—
—
$
—
—
—
$
—
Table of Contents
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Amounts in thousands, except share data)
December 31, 2006
Cumulative effect of adoption of FIN 48
Net loss
Dividends ($0.20 per share)
Employee benefit plans
Treasury shares acquired
Net unrealized gain on available-for-sale
securities
Net unrealized loss on derivative financial
instruments
Amortization of prior service cost for pension
and postretirement benefits, net of tax
Amortization of unrealized losses on pension
and postretirement benefits, net of tax
Valuation adjustment for pension and
postretirement benefit plans, net of tax
Unrealized foreign currency translation
adjustment
Commo
n
Stock
$
886
Retained
Unearned
Accumulated
Other
Paid-In
Capital
(Loss)
Income
Employee
Benefits
Comprehensive
Loss
71,900
$
723,106
(21,963 )
(1,071,997 )
(16,625 )
$
1,177
December 31, 2007
Cumulative adjustment for SFAS No. 158change of measurement date
Net loss
Reclassification of embedded derivative
liability
Dividends on preferred stock
Accretion on preferred stock
Employee benefit plans
Net unrealized loss on available-for-sale
securities
Net unrealized gain on derivative financial
instruments
Amortization of prior service cost for pension
and postretirement benefits, net of tax
Amortization of unrealized losses on pension
and postretirement benefits, net of tax
Valuation adjustment for pension and
postretirement benefit plans, net of tax
Unrealized foreign currency translation
adjustment
886
December 31, 2008
Net loss
Dividends on preferred stock
Accretion on preferred stock
Employee benefit plans
Net unrealized gain on available-for-sale
securities
Reclassification of unrealized gain on
derivative financial instruments, net of tax
Amortization of prior service cost for pension
and postretirement benefits, net of tax
Amortization of unrealized losses on pension
and postretirement benefits, net of tax
Valuation adjustment for pension and
postretirement benefit plans, net of tax
Unrealized foreign currency translation
adjustment
886
December 31, 2009
$
Additional
(17,185 )
$
(6,292 )
Treasury
Stock
$
13,905
73,077
(387,479 )
(3,280 )
1,811
(30,690 )
(30,690 )
117
117
2,649
2,649
14,372
14,372
(3,682 )
(3,682 )
(21,715 )
(150,006 )
(488,517 )
(1,857 )
(261,385 )
2,856
(649,254 )
(1,906 )
(43,754 )
70,827
(76,593 )
(7,736 )
3,050
(2,555 )
(424 )
(17,086 )
(17,086 )
20,125
20,125
62
62
2,740
2,740
(28,405 )
(28,405 )
3,039
3,039
(42,707 )
(152,561 )
416
(781,736 )
(1,906 )
(110,279 )
(10,213 )
14,085
(745 )
7,178
$
886
$
—
$
(694,914 )
$
(8 )
$
669,063
(21,963 )
(1,071,997 )
(16,625 )
14,420
(45,992 )
1,811
(1,467 )
70,827
(76,593 )
(7,736 )
2,749
(66,525 )
(10,213 )
14,414
$
(662 )
(45,992 )
(390 )
(261,385 )
62,324
(103,352 )
Total
7,178
(780 )
(780 )
173
173
4,543
4,543
(3,672 )
(3,672 )
(406 )
(406 )
(35,671 )
$
(153,306 )
$
(883,013 )
See Notes to Consolidated Financial Statements
F-9
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of the Business
MoneyGram International, Inc. and its wholly owned subsidiaries (“MoneyGram”) offers products and services under its two
reporting segments: Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment provides
global money transfer services and bill payment services to consumers through a network of agents. The Financial Paper
Products segment provides payment processing services, primarily official check outsourcing services, and money orders
through financial institutions and agents. The Company’s headquarters are located in Minneapolis, Minnesota, United States
of America. References to “MoneyGram,” the “Company,” “we,” “us” and “our” are to MoneyGram International, Inc. and
its subsidiaries and consolidated entities.
MoneyGram was incorporated on December 18, 2003 in the state of Delaware as a subsidiary of Viad Corp (“Viad”) to
effect the spin-off of Viad’s payment services business operated by Travelers Express Company, Inc. (“Travelers”) to its
stockholders (the “spin-off”). On June 30, 2004 (the “Distribution Date”), Travelers was merged with a subsidiary of
MoneyGram and Viad then distributed 88,556,077 shares of MoneyGram common stock in a tax-free distribution (the
“Distribution”). Stockholders of Viad received one share of MoneyGram common stock for every share of Viad common
stock owned on the record date of June 24, 2004. Due to the relative significance of MoneyGram to Viad, MoneyGram is the
divesting entity and treated as the “accounting successor” to Viad for financial reporting purposes. Effective December 31,
2005, the entity that was formerly Travelers was merged into MoneyGram Payment Systems, Inc. (“MPSI”), a wholly
owned subsidiary of MoneyGram, with MPSI remaining as the surviving corporation.
Note 2 — Recapitalization
On March 25, 2008, the Company completed a recapitalization, pursuant to which the Company received $1.5 billion of
gross equity and debt capital to support the long-term needs of the business and provide necessary capital due to the
Company’s investment portfolio losses as described in Note 6 — Investment Portfolio . The equity component of the
recapitalization consisted of the sale in a private placement of Series B Participating Convertible Preferred Stock of the
Company (the “B Stock”) and Series B-1 Participating Convertible Preferred Stock of the Company (the “B-1 Stock,” and
collectively with the B Stock, the “Series B Stock”). The debt component of the recapitalization consisted of a senior secured
amended and restated credit agreement entered into with a group of lenders (the “Senior Facility”) and the issuance of senior
secured second lien notes (the “Notes”). See Note 10 — Debt and Note 12 — Mezzanine Equity for further information
regarding the equity and debt components.
Participation Agreement between the Investors and Walmart Stores, Inc. — On February 11, 2008, the affiliates of Thomas
H. Lee Partners, L.P. (“THL”) and affiliates of Goldman, Sachs & Co. (“Goldman Sachs,” and collectively with THL, the
“Investors”) entered into a Participation Agreement (as amended on March 17, 2008) with Walmart Stores, Inc. (“Walmart”)
in connection with the recapitalization. The Company is not a direct party to the Participation Agreement, which was
negotiated solely between the Investors and Walmart. Under the terms of the Participation Agreement, the Investors are
obligated to pay Walmart certain percentages of accumulated cash payments received by the Investors in excess of the
Investors’ original investment in the Company. Cash payments include dividends paid by the Company to the Investors and
any cash payments received by the Investors in connection with the sale of any shares of the Company’s stock to an
unaffiliated third party or upon redemption by the Company. Walmart, in its sole discretion, may elect to receive payments
in cash or equivalent shares of stock held by the Investors. In addition, through March 17, 2010, the Investors must receive
Walmart’s consent prior to voting in favor of, consenting to, or selling shares in a transaction that would cause a change in
control of the Company, as defined by the Participation Agreement.
The Company has no obligation to Walmart or additional obligations to the Investors under the terms of the Participation
Agreement. However, as the Company indirectly benefited from the agreement, the Company will recognize the
Participation Agreement in its consolidated financial statements as if the Company itself entered into
F-10
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the agreement with Walmart. As Walmart may elect to receive any payments under the Participation Agreement in cash, the
agreement is accounted for as a liability award. The Company will recognize a liability equal to the fair value of the
Participation Agreement through a charge to the Consolidated Statements of Loss based upon the probability that certain
performance conditions will be met. The liability will be remeasured each period until settlement, with changes in fair value
recognized in the Consolidated Statements of Loss. Walmart’s ability to earn the award under the Participation Agreement is
conditioned upon the Investors receiving cash payments related to the Company’s preferred stock in excess of the Investors’
original investment in the Company. While it is probable that performance conditions will be met at December 31, 2009, the
fair value of the liability is zero at this time as the Company’s discount rate, based on its debt interest rates and credit rating,
exceeds the dividend rate on the preferred stock.
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation — The consolidated financial statements of MoneyGram are prepared in conformity with accounting
principles generally accepted in the United States of America (“GAAP”). The Consolidated Balance Sheets are unclassified
due to the short-term nature of the settlement obligations, contrasted with the ability to invest cash awaiting settlement in
long-term investment securities.
During 2009, the Company reclassified its put options related to trading investments from “Other assets” to “Trading
investments and related put options (substantially restricted)” in its Consolidated Balance Sheets to reflect the interaction of
the two assets. Consistent with its classification of current tax positions, during 2009 the Company reclassified its net
deferred tax positions into “Other assets” or “Accounts payable and other liabilities” depending on the net position. The
balances as of December 31, 2008 have been revised to conform to the current presentation. These reclassifications were not
material and had no impact on net loss, net cash flows from continuing operating activities or stockholders’ deficit as
previously reported.
Principles of Consolidation — The consolidated financial statements include the accounts of MoneyGram International,
Inc. and its subsidiaries. Inter-company profits, transactions and account balances have been eliminated in consolidation. The
Company participates in various trust arrangements (special purpose entities or “SPEs”) related to official check processing
agreements with financial institutions and structured investments within the investment portfolio.
Working in cooperation with certain financial institutions, the Company historically established separate consolidated SPEs
that provided these financial institutions with additional assurance of its ability to clear their official checks. The Company
maintains control of the assets of the SPEs and receives all investment revenue generated by the assets. The Company
remains liable to satisfy the obligations of the SPEs, both contractually and by operation of the Uniform Commercial Code,
as issuer and drawer of the official checks. As the Company is the primary beneficiary and bears the primary burden of any
losses, the SPEs are consolidated in the Consolidated Financial Statements. The assets of the SPEs are recorded in the
Consolidated Balance Sheets in a manner consistent with the assets of the Company based on the nature of the asset.
Accordingly, the obligations have been recorded in the Consolidated Balance Sheets under “Payment service obligations.”
The investment revenue generated by the assets of the SPEs is allocated to the Financial Paper Products segment in the
Consolidated Statement of Loss. For the years ending December 31, 2009 and 2008, the Company’s SPEs had cash and cash
equivalents of $143.6 million and $281.2 million, respectively, and payment service obligations of $115.3 million and
$239.8 million, respectively.
In connection with the SPEs, the Company must maintain certain specified ratios of greater than 100 percent of segregated
assets to outstanding payment instruments. These specified ratios require the Company to contribute additional assets if the
fair value of the segregated assets is less than the outstanding payment instruments at any time. The segregated assets consist
solely of cash and cash equivalents; therefore, the Company does not anticipate a need to contribute additional assets in the
future to maintain the specified ratios as required by the SPEs. Under
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
certain limited circumstances, the related financial institution customers have the right to either demand liquidation of the
segregated assets or to replace the Company as the administrator of the SPE. Such limited circumstances consist of material
(and in most cases continued) failure of MoneyGram to uphold its warranties and obligations pursuant to its underlying
agreements with the financial institution customers.
Certain structured investments owned by the Company represent beneficial interests in grantor trusts or other similar entities.
These trusts typically contain an investment grade security, generally a United States Treasury strip, and an investment in the
residual interest in a collateralized debt obligation, or in some cases, a limited partnership interest. For certain of these trusts,
the Company owns a percentage of the beneficial interests which results in the Company absorbing a majority of the
expected losses. Therefore, the Company consolidates these trusts by recording and accounting for the assets of the trust
separately in the Consolidated Financial Statements.
Management Estimates — The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying
notes. Actual results could differ from those estimates.
Substantially Restricted — The Company’s licensed entity MPSI is regulated by various state agencies that generally
require the Company to maintain a pool of assets with an investment rating of A or higher (“permissible investments”) in an
amount generally equal to the payment service obligations, as defined by each state, for those regulated payment
instruments, namely teller checks, agent checks, money orders and money transfers. The regulatory payment service assets
measure varies by state, but in all cases excludes investments rated below A-. The most restrictive states may also exclude
assets held at banks that do not belong to a national insurance program, varying amounts of accounts receivable balances
and/or assets held in one of the SPEs. The regulatory payment service obligations measure varies by state, but in all cases is
substantially lower than the Company’s payment service obligations as disclosed in the Consolidated Balance Sheets as the
Company is not regulated by state agencies for payment service obligations resulting from outstanding cashier’s checks or
for amounts payable to agents and brokers.
In connection with the credit facilities, one clearing bank agreement and the SPEs, the Company also has certain financial
covenants that require it to maintain pre-defined ratios of certain assets to payment service obligations. The financial
covenants under the credit facilities are described in Note 10 — Debt. One clearing bank agreement has financial covenants
that include the maintenance of total cash, cash equivalents, receivables and investments in an amount at least equal to
payment service obligations, as disclosed in the Consolidated Balance Sheets, as well as the maintenance of a minimum
103 percent ratio of total assets held at that bank to instruments estimated to clear through that bank. Financial covenants
related to the SPEs include the maintenance of specified ratios of cash, cash equivalents and investments held in the SPE to
the outstanding payment instruments issued by the related financial institution customer.
The regulatory and contractual requirements do not require the Company to specify individual assets held to meet its
payment service obligations, nor is the Company required to deposit specific assets into a trust, escrow or other special
account. Rather, the Company must maintain a pool of liquid assets sufficient to comply with the requirements. No third
party places limitations, legal or otherwise, on the Company regarding the use of its individual liquid assets. The Company is
able to withdraw, deposit or sell its individual liquid assets at will, with no prior notice or penalty, provided the Company
maintains a total pool of liquid assets sufficient to meet the regulatory and contractual requirements.
The Company is not regulated by state agencies for payment service obligations resulting from outstanding cashier’s checks;
however, the Company restricts a portion of the funds related to these payment instruments due to contractual arrangements
and Company policy. Assets restricted for regulatory or contractual reasons are not available to satisfy working capital or
other financing requirements. Consequently, the Company considers a significant amount of cash and cash equivalents,
receivables and investments to be restricted to satisfy the liability to pay the principal amount of regulated payment service
obligations upon presentment. Cash and cash equivalents,
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
receivables and investments exceeding payment service obligations are generally available; however, management considers
a portion of these amounts as providing additional assurance that business needs and regulatory requirements are maintained
during the normal fluctuations in the value of the Company’s payment service assets and obligations. The following table
shows the amount of assets in excess of payment service obligations at December 31:
(Amounts in thousands)
2009
Cash and cash equivalents (substantially restricted)
Receivables, net (substantially restricted)
Trading investments and related put options (substantially restricted)
Available-for-sale investments (substantially restricted)
$
2008
3,776,824
1,054,381
26,951
298,633
$
5,156,789
(4,843,454 )
Payment service obligations
Assets in excess of payment service obligations
$
313,335
4,077,381
1,264,885
47,990
438,774
5,829,030
(5,437,999 )
$
391,031
Regulatory requirements also require MPSI to maintain positive net worth, with one state requiring that MPSI maintain
positive tangible net worth. In its most restrictive state, the Company had excess permissible investments of $315.3 million
over the state’s payment service obligations measure at December 31, 2009, with substantially higher excess permissible
investments for all other states. The Company was in compliance with its contractual and financial regulatory requirements
as of December 31, 2009.
Cash and Cash Equivalents (substantially restricted) — The Company defines cash and cash equivalents as cash on hand
and all highly liquid debt instruments with original maturities of three months or less at the purchase date which the
Company does not intend to rollover.
Receivables, net (substantially restricted) — The Company has receivables due from financial institutions and agents for
payment instruments sold. These receivables are outstanding from the day of the sale of the payment instrument until the
financial institution or agent remits the funds to the Company. The Company provides an allowance for the portion of the
receivable estimated to become uncollectible as determined based on known delinquent accounts and historical trends.
Receivables are generally considered past due one day after the contractual remittance schedule, which is typically one to
three days after the sale of the underlying payment instrument. Receivables are evaluated for collectibility by examining the
facts and circumstances surrounding each customer where an account is delinquent and a loss is deemed possible.
Receivables are generally written off against the allowance one year after becoming past due. Following is a summary of
activity within the allowance for losses:
(Amounts in thousands)
2009
Beginning balance
Charged to expense
Write-offs, net of recoveries
$
16,178
21,432
(13,075 )
Ending balance
$
24,535
2008
$
8,019
12,396
(4,237 )
$ 16,178
2007
$
6,824
8,532
(7,337 )
$
8,019
Sale of Receivables — The Company had an agreement to sell undivided percentage ownership interests in certain
receivables, primarily from its money order agents. The Company sold receivables under this agreement to accelerate the
cash flow available for investment. The receivables were sold without recourse to two commercial paper conduit trusts and
represented a small percentage of the total assets in each trust. The Company’s rights and obligations were limited to the
receivables transferred and the transactions were accounted for as sales. The assets and liabilities associated with the trusts,
including the sold receivables, were not recorded or consolidated in the Company’s financial statements. In January 2008,
the Company terminated the facility. The agreement included a
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5 percent holdback provision of the purchase price of the receivables, with the related cost included in the Consolidated
Statements of Loss in “Investment commissions expense.” The expense recorded in 2008 and 2007 was $0.2 million and
$23.3 million, respectively.
Investments (substantially restricted) — The Company classifies securities as trading or available-for-sale in its
Consolidated Balance Sheets. The Company has no securities classified as held-to-maturity. Securities that are bought and
held principally for the purpose of resale in the near term are classified as trading securities. The Company records trading
securities at fair value, with gains or losses reported in the Consolidated Statements of Loss. Securities held for indefinite
periods of time, including any securities that may be sold to assist in the clearing of payment service obligations or in the
management of the investment portfolio, are classified as available-for-sale securities. These securities are recorded at fair
value, with the net after-tax unrealized gain or loss recorded as a separate component of stockholders’ equity. Realized gains
and losses and other-than-temporary impairments are recorded in the Consolidated Statements of Loss.
Interest income on “Residential mortgage-backed securities” and “Other asset-backed securities” for which risk of credit loss
is deemed remote is recorded utilizing the level yield method. Changes in estimated cash flows, both positive and negative,
are accounted for with retrospective changes to the carrying value of investments in order to maintain a level yield over the
life of the investment. Interest income on mortgage-backed and other asset-backed investments for which risk of credit loss
is not deemed remote is recorded under the prospective method as adjustments of yield. Starting in the second quarter of
2008, interest income for “Other asset-backed securities” has been recorded under the prospective method as the risk of
credit loss is not deemed remote.
During the second quarter of 2008, the Company began applying the cost recovery method of accounting for interest to its
investments categorized as “Other asset-backed securities.” The cost recovery method accounts for interest on a cash basis
and treats any interest payments received as deemed recoveries of principal, reducing the book value of the related security.
When the book value of the related security is reduced to zero, interest payments are then recognized as income upon
receipt. The Company began applying the cost recovery method of accounting as it believes it is probable that the Company
will not recover all, or substantially all, of its principal investment and interest for its “Other asset-backed securities” given
the sustained deterioration in the market, the collapse of many asset-backed securities and the low levels to which the
securities have been written down.
Securities with gross unrealized losses at the Consolidated Balance Sheet date are subject to a process for identifying
other-than-temporary impairments. Securities that the Company deems to be other-than-temporarily impaired are written
down to fair value in the period the impairment occurs. The assessment of whether such impairment has occurred is based on
management’s evaluation of the underlying reasons for the decline in fair value on an individual security basis. The
Company considers a wide range of factors about the security and uses its best judgment in evaluating the cause of the
decline in the estimated fair value of the security and the prospects for recovery. The Company considers an investment to be
other-than-temporarily impaired when it is deemed probable that the Company will not receive all of the cash flows
contractually stipulated for the investment. The Company evaluates mortgage-backed and other asset-backed investments
rated A and below for which risk of credit loss is deemed more than remote for impairment. When an adverse change in
expected cash flows occurs, and if the fair value of a security is less than its carrying value, the investment is written down to
fair value through a permanent reduction to its amortized cost. Any impairment charges are included in the Consolidated
Statements of Loss under “Net securities gains (losses).”
Payment Service Obligations — Payment service obligations primarily consist of: outstanding payment instruments;
amounts owed to financial institutions for funds paid to the Company to cover clearings of official check payment
instruments, remittances and clearing adjustments; amounts owed to agents for funds paid to consumers on behalf of the
Company; commissions owed to financial institution customers and agents for instruments sold; amounts owed to
investment brokers for purchased securities; and unclaimed instruments owed to various states. These obligations are
recognized by the Company at the time the underlying transactions occur.
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value of Financial Instruments — Financial instruments consist of cash and cash equivalents, investments, derivatives,
receivables, payment service obligations, accounts payable and debt. The carrying values of cash and cash equivalents,
receivables, accounts payable and payment service obligations approximate fair value due to the short-term nature of these
instruments. The carrying value of the Company’s Senior Facility approximates fair value as interest related to the debt is
variable rate. The carrying value of the Company’s fixed-rate Notes also approximates fair value as the contractual interest
rate is comparable to debt with similar maturities issued by companies with similar credit qualities. See Note 5 — Fair Value
Measurement for information regarding the principles and processes used to estimate the fair value of investments and
derivatives.
Derivative Financial Instruments — The Company recognizes derivative instruments in the Consolidated Balance Sheets at
fair value. The accounting for changes in the fair value depends on the intended use of the derivative and the resulting
designation. For a derivative instrument designated as a fair value hedge, the Company recognizes the change in fair value in
earnings in the period of change, together with the offsetting change in the hedged item. For a derivative instrument
designated as a cash flow hedge, the Company initially reports the effective portion of the derivative’s change in fair value in
“Accumulated other comprehensive loss” in the Consolidated Balance Sheets, and subsequently reclassifies the net change
in fair value into earnings when the hedged exposure affects earnings.
The Company evaluates the hedge effectiveness of its derivatives designated as cash flow hedges at inception and on an
on-going basis. Hedge ineffectiveness, if any, is recorded in earnings on the same line as the underlying transaction risk.
When a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Any gain or loss on
derivatives designated as hedges that are terminated or discontinued is recorded in the “Net securities gains (losses)”
component in the Consolidated Statements of Loss. For a derivative instrument that does not qualify, or is not designated, as
a hedge, the change in fair value is recognized in “Transaction and operations support” in the Consolidated Statements of
Loss.
Cash flows resulting from derivative financial instruments are classified in the same category as the cash flows from the
items being hedged. The Company does not use derivative instruments for trading or speculative purposes.
Property and Equipment — Property and equipment includes agent equipment, communication equipment, computer
hardware, computer software, leasehold improvements, office furniture and equipment, land and signs, and is stated at cost
net of accumulated depreciation. Property and equipment, with the exception of land, is depreciated using a straight-line
method over the lesser of the estimated useful lives or lease term. Land is not depreciated. The cost and related accumulated
depreciation of assets sold or disposed of are removed from the financial statements, with the resulting gain or loss, if any,
recognized under the caption “Occupancy, equipment and supplies” in the Consolidated Statement of Loss. Estimated useful
lives by major asset category are generally as follows:
Agent equipment
Communication equipment
Computer hardware
Computer software
Leasehold improvements
Office furniture and equipment
Signage
3 years
5 years
3 years
Lesser of the license term or 5 years
Lesser of the lease term or 10 years
Lesser of the lease term or 7 years
3 years
For the years ended December 31, 2009 and 2008, software development costs of $9.8 million and $10.9 million,
respectively, were capitalized. At December 31, 2009 and 2008, there is $35.5 million and $37.6 million, respectively, of
unamortized software development costs included in property and equipment.
Tenant allowances for leasehold improvements are capitalized as leasehold improvements upon completion of the
improvement and depreciated over the shorter of the remaining term of the lease or 10 years.
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible Assets and Goodwill — Goodwill represents the excess of the purchase price over the fair value of net assets
acquired in business combinations and is assigned to the reporting unit in which the acquired business will operate.
Intangible assets are recorded at their estimated fair value at the date of acquisition or at cost if internally developed.
Goodwill and intangible assets with indefinite lives are not amortized, but are instead subject to impairment testing.
Intangible assets with finite lives are amortized using a straight-line method over their respective useful lives as follows:
Customer lists
Patents
Non-compete agreements
Trademarks
Developed technology
3-15 years
15 years
3 years
36-40 years
5 years
Intangible assets and goodwill are tested for impairment annually in November of each fiscal year, or whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested for impairment using
a fair-value based approach, and is assessed at the reporting unit level, or the lowest level for which discrete financial
condition and operating results are available. The carrying value of the reporting unit is compared to its estimated fair value,
with any excess of carrying value over fair value deemed to be an impairment. Intangible and other long-lived assets are
tested for impairment by comparing the carrying value of the assets to the estimated future undiscounted cash flows to be
generated by the asset. If an impairment is determined to exist for goodwill and intangible assets, the carrying value of the
asset is reduced to the estimated fair value.
Payments on Long-Term Contracts — The Company makes payments to certain agents and financial institution customers
as an incentive to enter into long-term contracts. The payments, or signing bonuses, are generally required to be refunded pro
rata in the event of nonperformance under, or cancellation of, the contract by the customer. For contracts requiring payments
to be refunded, the signing bonuses are capitalized and amortized over the life of the related contract as such costs are
recoverable through future operations or, in the case of early termination, through penalties or refunds. Amortization of
signing bonuses on long-term contracts is recorded in “Fee commissions expense” in the Consolidated Statements of Loss.
The carrying values of the signing bonuses are reviewed annually or whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable. Signing bonuses for contracts that do not require a refund in the event of
nonperformance or cancellation are expensed upon payment in “Fee commissions expense” in the Consolidated Statements
of Loss.
Income Taxes — The provision for income taxes is computed based on the pre-tax loss included in the Consolidated
Statements of Loss. Deferred income taxes result from temporary differences between the financial reporting basis of assets
and liabilities and their respective tax-reporting basis. Deferred tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be
realized.
The Company adopted accounting guidance that addresses accounting for uncertainty in income taxes on January 1, 2007.
The cumulative effect of applying this guidance was reported as a $22.0 million reduction to the opening balance of retained
income. The liability for unrecognized tax benefits is recorded as a non-cash item in “Accounts payable and other liabilities”
in the Consolidated Balance Sheets. The Company records interest and penalties for unrecognized tax benefits in “Income
tax (benefit) expense” in the Consolidated Statements of Loss. See Note 15 — Income Taxes for further discussion.
Treasury Stock — Repurchased common stock is stated at cost and is presented as a separate reduction of stockholders’
deficit. See Note 13 — Stockholders’ Deficit for further discussion.
Foreign Currency Translation — The Company converts assets and liabilities of foreign operations to their United States
dollar equivalents at rates in effect at the balance sheet dates, recording the translation adjustments
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets. Income statements of foreign operations are
translated from the operation’s functional currency to United States dollar equivalents at the average exchange rate for the
month. Foreign currency exchange transaction gains and losses are reported in “Transaction and operations support” in the
Consolidated Statements of Loss.
Revenue Recognition — The Company derives revenue primarily through service fees charged to consumers and its
investing activity. A description of these revenues and recognition policies is as follows:
• Fee and other revenues primarily consist of transaction fees and foreign exchange revenue.
– Transaction fees consist primarily of fees earned on money transfer, money order, bill payment and official check
transactions. The money transfer transaction fees vary based on the principal value of the transaction and the
locations in which these money transfers originate and to which they are sent. The money order and bill payment
transaction fees are fixed fees charged on a per item basis. Transaction fees are recognized at the time of the
transaction or sale of the product.
– Foreign exchange revenue is derived from the management of currency exchange spreads on money transfer
transactions involving different “send” and “receive” currencies. Foreign exchange revenue is recognized at the time
the exchange in funds occurs.
– Other revenue consists of processing fees on rebate checks and controlled disbursements, service charges on aged
outstanding money orders, money order dispenser fees and other miscellaneous charges. These fees are recognized
in earnings in the period the item is processed or earned.
• Investment revenue is derived from the investment of funds generated from the sale of payment instruments, primarily
official checks and money orders, and consists of interest income, dividend income and amortization of premiums and
discounts. Interest and dividends are recognized as earned, with the exception of interest related to available-for-sale
investments classified as “Other asset-backed securities.” For “Other asset-backed securities,” interest is recognized
using the cost recovery method as described under the accounting policy for “Investments (substantially restricted).”
Premiums and discounts on investments are amortized using a straight-line method over the life of the investment.
• Securities gains and losses are recognized upon the sale, call or maturity of securities using the specific identification
method to determine the cost basis of securities sold. Impairments are recognized in the period the security is deemed
to be other-than-temporarily impaired. Unrealized gains and losses resulting from changes in the fair value of trading
investments and put options related to trading investments are recognized in the period in which the change occurs.
Fee Commissions Expense — The Company pays fee commissions to third-party agents for money transfer and bill
payment services. In a money transfer transaction, both the agent initiating the transaction and the agent disbursing the funds
receive a commission that is generally based on a percentage of the fee charged to the customer. The Company generally
does not pay commissions to agents on the sale of money orders. Fee commissions are recognized at the time of the
transaction. Fee commissions expense also includes the amortization of capitalized signing bonuses.
Investment Commissions Expense — Investment commissions expense includes amounts paid to financial institution
customers based upon average outstanding balances generated by the sale of official checks, as well as costs associated with
interest rate swaps hedging commission payments and the sale of receivables program. The Company terminated its interest
rate swaps in the second quarter of 2008 as described in Note 7 — Derivative Financial Instruments and terminated its sale
of receivable program in the first quarter of 2008. Commissions paid to financial institution customers generally are variable
based on short-term interest rates. Investment commissions are recognized each month based on the average outstanding
balances of each financial institution customer and their contractual variable rate for that month.
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Marketing & Advertising Expense — Marketing and advertising costs are expensed as incurred or at the time the
advertising first takes place. Marketing and advertising expense was $40.2 million, $52.9 million and $56.5 million for 2009,
2008 and 2007, respectively.
Stock-Based Compensation — All stock-based compensation awards are measured at fair value at the date of grant and
expensed over their vesting or service periods. For awards meeting the criteria for equity treatment, expense is recognized
using the straight-line method. For awards meeting the criteria for liability treatment, the fair value is remeasured at each
period and the pro-rata portion of the expense is recognized using the straight-line method. See Note 14 — Stock-Based
Compensation for further discussion of the Company’s stock-based compensation.
Earnings Per Share — The Company utilizes the two-class method for computing basic earnings per common share, which
reflects the amount of undistributed earnings allocated to the common stockholders using the participation percentage of
each class of stock. Undistributed earnings is determined as the Company’s net loss less dividends declared or accumulated
on preferred stock less any preferred stock accretion. The undistributed earnings allocated to the common stockholders are
divided by the weighted-average number of common shares outstanding during the period to compute basic earnings per
common share. Diluted earnings per common share reflects the potential dilution that could result if securities or incremental
shares arising out of the Company’s stock-based compensation plans and the outstanding shares of Series B Stock were
exercised or converted into common stock. Diluted earnings per common share assumes the exercise of stock options using
the treasury stock method and the conversion of the Series B Stock using the if-converted method.
Potential common shares are excluded from the computation of diluted earnings per common share when the effect would be
anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders. Stock
options are anti-dilutive when the exercise price of these instruments is greater than the average market price of the
Company’s common stock for the period. The Series B Stock is anti-dilutive when the incremental earnings per share of
Series B Stock on an if-converted basis is greater than the basic earnings per common share. Following are the potential
common shares excluded from diluted earnings per common share as their effect would be anti-dilutive:
(Amounts in thousands)
2009
2008
Shares related to stock options
Shares related to restricted stock
Shares related to preferred stock
21,636
28
381,749
3,577
127
337,637
1,495
249
—
Shares excluded from the computation
403,413
341,341
1,744
2007
Recent Accounting Pronouncements — In April 2009, the Financial Accounting Standards Board (“FASB”) issued
guidance to make the other-than-temporary impairments guidance more operational and to improve the presentation of
other-than-temporary impairments in the financial statements. This guidance replaces the existing requirement that the
entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a
requirement that management assert it does not have the intent to sell the security and that it is more likely than not
management will not have to sell the security before recovery of its cost basis. This guidance requires increased disclosure
about the credit and noncredit components of impaired debt securities that are not expected to be sold, as well as increased
disclosures regarding expected cash flows, credit losses and an aging of securities with unrealized losses. The Company
adopted the guidance effective for the interim period ending June 30, 2009, with no material impact on its Consolidated
Financial Statements as the Company has the intent to sell its securities which generated other-than-temporary impairments
in 2009.
In June 2009, the FASB issued guidance which amends previously issued derecognition guidance for financial transfers of
assets, eliminates the exemption from consolidation for qualifying SPEs and amends the consolidation guidance applicable
to variable interest entities. This guidance will be effective for any financial transfers completed by the Company after
January 1, 2010, and for consolidated financial statements prepared subsequent
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
to December 31, 2009. The Company is currently evaluating the impact of this guidance on its Consolidated Financial
Statements.
Note 4 — Acquisitions and Disposals
Blue Dolphin Financial Services N.V. — On February 5, 2010, the Company acquired Blue Dolphin Financial Services
N.V. (“Blue Dolphin”), a former super-agent in the Netherlands, for a purchase price of $1.4 million and an earn-out
potential of $1.4 million. The acquisition of Blue Dolphin provides the Company with the opportunity for further network
expansion in the Netherlands and Belgium under the European Union Payment Services Directive and additional control
over sales and marketing activities.
R. Raphaels & Sons PLC — On February 2, 2009, the Company acquired the French assets of R. Raphaels & Sons PLC
(“Raphaels Bank”) for a purchase price of $3.2 million. The acquisition of Raphaels Bank provided the Company with five
money transfer stores in and around Paris, France that have been integrated into its French retail operations.
The preliminary purchase price allocation as of December 31, 2009 includes $2.0 million of goodwill assigned to the
Company’s Global Funds Transfer segment. The purchase price allocation is preliminary pending the completion of the
valuation of fixed assets, intangible assets and deferred taxes and will be completed in the first quarter of 2010. The
Company incurred $0.2 million of transaction costs related to this acquisition in 2008 which are included in the “Transaction
and operations support” line in the Consolidated Statements of Loss. The operating results of Raphaels Bank subsequent to
the acquisition date are included in the Company’s Consolidated Statements of Loss. The financial impact of the acquisition
is not material to the Consolidated Balance Sheets or Consolidated Statements of Loss.
FSMC, Inc. — On May 15, 2009, the Company’s subsidiary FSMC, Inc. (“FSMC”), entered into an asset purchase
agreement with Solutran, Inc. to sell certain assets and rights for a price of $4.5 million. As a result of the sale, which was
completed in the third quarter of 2009, the Company recorded an impairment charge of $0.6 million to write off goodwill
associated with FSMC. This impairment charge is recorded in the “Transaction and operations support” line in the
Consolidated Statements of Loss. The operating results of FSMC are not material to the Company’s Consolidated Statements
of Loss and the assets and liabilities are not material to the Company’s Consolidated Balance Sheets. FSMC is included in
the Company’s “Other” results for segment reporting purposes.
ACH Commerce — After evaluating the Company’s market opportunity for certain of its electronic payment services, the
Company announced a decision in December 2008 to exit the ACH Commerce business. In connection with this decision,
the Company recognized an impairment charge of $8.8 million to write off the goodwill associated with ACH Commerce. In
the third quarter of 2009, the Company recorded an impairment charge of $1.4 million on its proprietary software related to
ACH Commerce. The impairment charge was recorded in the “Transaction and operations support” line in the Consolidated
Statements of Loss. ACH Commerce is not material to the Consolidated Statements of Loss or the Consolidated Balance
Sheets. ACH Commerce is included in the Company’s “Other” results for segment reporting purposes.
MoneyCard World Express, S.A. and Cambios Sol S.A . — In July 2008, the Company acquired MoneyCard World Express,
S.A. (“MoneyCard”) and Cambios Sol S.A. (“Cambios Sol”), two of its former super-agents in Spain, for purchase prices of
$3.4 million and $4.5 million, respectively, including cash acquired of $1.4 million and $4.1 million, respectively. The
acquisition of these money transfer entities provided the Company with a money transfer license in Spain, as well as the
opportunity for further network expansion and more control over marketing and promotional activities in the region.
In 2009, the Company finalized its purchase price allocation, resulting in goodwill of $4.3 million assigned to the
Company’s Global Funds Transfer segment and $1.4 million of intangible assets. The intangible assets consist primarily of
customer lists and developed technology and are being amortized over useful lives ranging from three
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
to five years. In addition, the Company recognized an indefinite life intangible asset of $0.6 million relating to the money
transfer license. The purchase price allocation includes $0.5 million of transaction costs. The operating results of MoneyCard
and Cambios Sol subsequent to the acquisition dates are included in the Company’s Consolidated Statements of Loss. The
financial impact of the acquisitions is not material to the Consolidated Balance Sheets or Consolidated Statements of Loss.
PropertyBridge, Inc. — On October 1, 2007, the Company acquired PropertyBridge, Inc. (“PropertyBridge”) for
$28.1 million. PropertyBridge is a provider of electronic payment processing services for the real estate management
industry and offers a complete solution to the resident payment cycle, including the ability to electronically accept security
deposits and rent payments. Residents can pay rent online, by phone or in person and set up recurring payments.
PropertyBridge is a component of the Company’s Global Funds Transfer segment.
In 2007, the Company finalized its purchase price allocation, resulting in goodwill of $24.1 million assigned to the
Company’s Global Funds Transfer segment and intangible assets of $6.0 million, consisting primarily of customer lists,
developed technology and a non-compete agreement. The intangible assets are being amortized over useful lives ranging
from three to 15 years. The potential earn-out payment of up to $10.0 million contingent on PropertyBridge’s performance
during 2008 was not achieved. The purchase price allocation included $0.2 million of transaction costs. The operating results
of PropertyBridge subsequent to October 1, 2007 are included in the Company’s Consolidated Statements of Loss. The
financial impact of the acquisition is not material to the Consolidated Balance Sheets or Consolidated Statements of Loss.
Game Financial Corporation — During 2007, the Company paid $3.3 million in connection with the settlement of a
contingency in the Sales and Purchase Agreement related to the continued operations of Game Financial Corporation, which
was sold in 2004, with one casino. The Company recognized a loss from discontinued operations of $0.3 million in the
Consolidated Statements of Loss in 2007, representing the recognition of a deferred tax asset valuation allowance, partially
offset by the reversal of the remaining liability.
Other Disposals — During 2009, the Company decided to sell its corporate airplane. In connection with this decision, the
Company recognized a $7.0 million impairment in the “Transaction and operations support” line in the Consolidated
Statements of Loss.
Note 5 — Fair Value Measurement
The Company records certain of its assets and liabilities at fair value. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants
on the measurement date. A three-level hierarchy is used for fair value measurements based upon the observability of the
inputs to the valuation of an asset or liability as of the measurement date. Under the hierarchy, the highest priority is given to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), followed by observable inputs
(Level 2) and unobservable inputs (Level 3). A financial instrument’s level within the hierarchy is based on the lowest level
of any input that is significant to the fair value measurement. Following is a description of the Company’s valuation
methodologies for assets and liabilities measured at fair value:
Investments — For United States government agencies and residential mortgage-backed securities collateralized by United
States government agency securities, fair value measures are generally obtained from independent sources, including a
pricing service. As market quotes are generally not readily available or accessible for these specific securities, the pricing
service generally measures fair value through the use of pricing models and observable inputs for similar assets and market
data. Accordingly, these securities are classified as Level 2 financial instruments. The Company periodically corroborates
the valuations provided by the pricing service through internal valuations utilizing externally developed cash flow models,
comparison to actual transaction prices for any sold securities and any broker quotes received on the same security.
F-20
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For other asset-backed securities, investments in limited partnerships and trading investments, market quotes are generally
not available. If available, the Company will utilize a fair value measurement from a pricing service. The pricing service
utilizes a pricing model based on market observable data and indices, such as quotes for comparable securities, yield curves,
default indices, interest rates and historical prepayment speeds. If a fair value measurement is not available from the pricing
service, the Company will utilize a broker quote if available. Due to a general lack of transparency in the process that the
brokers use to develop prices, most valuations that are based on brokers’ quotes are classified as Level 3. If no broker quote
is available, or if such quote cannot be corroborated by market data or internal valuations, the Company will perform internal
valuations utilizing externally developed cash flow models. These pricing models are based on market observable spreads
and, when available, observable market indices. The pricing models also use inputs such as the rate of future prepayments
and expected default rates on the principal, which are derived by the Company based on the characteristics of the underlying
structure and historical prepayment speeds experienced at the interest rate levels projected for the underlying collateral. The
pricing models for certain asset-backed securities also include significant non-observable inputs such as internally assessed
credit ratings for non-rated securities, combined with externally provided credit spreads. Observability of market inputs to
the valuation models used for pricing certain of the Company’s investments deteriorated with the disruption to the credit
markets as overall liquidity and trading activity in these sectors has been substantially reduced. Accordingly, securities
valued using a pricing model have consistently been classified as Level 3 financial instruments.
Derivatives — Derivatives consist of interest rate swaps, foreign currency forward contracts and embedded derivatives
contained in the Series B Stock. As the Company’s derivative agreements are not exchange traded, the valuations are
determined using pricing models with inputs that are observable in the market or that can be derived principally from, or
corroborated by, observable market data. The Company’s derivative agreements related to interest rate swaps and foreign
currency forward contracts are well-established products, allowing the use of pricing models that are widely accepted in the
industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based
parameters such as the price of the Company’s common stock, interest rates, volatility, credit spreads and the credit quality
of the counterparty. For the interest rate swaps and forward contracts, these models do not contain a high level of
subjectivity as the methodologies used in the models do not require significant judgment and the inputs are readily
observable. Accordingly, the Company has classified its interest rate swaps and forward contracts as Level 2 financial
instruments. The fair value of the embedded derivatives is estimated using a partial differential equation methodology and, to
the extent possible, market observable or market corroborated data. However, certain assumptions, particularly the future
volatility of the Company’s common stock price, are subjective as market data is either unobservable or may not be available
on a consistent basis. Given the significance of the future volatility to the fair value estimate, the Company has classified its
embedded derivatives as Level 3 financial instruments.
Other Financial Instruments — Other financial instruments consist of put options related to trading investments. The fair
value of the put options is estimated using the expected cash flows from the instruments assuming their exercise in June
2010. These cash flows are discounted at a rate corroborated by market data for a financial institution comparable to the put
option counter-party, as well as the Company’s interest rate on its Notes. The discounted cash flows of the put options are
then reduced by the estimated fair value of the related trading investments. Given the subjectivity of the discount rate and the
estimated fair value of the trading investments, the Company has classified its put options related to trading investments as
Level 3 financial instruments. The fair value of the put options is remeasured each period, with the change in fair value
recognized in earnings.
Debt — Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes.
The fair value of debt is estimated using market quotations, where available, credit ratings, observable market indices and
other market data. As of December 31, 2009, the fair value of Tranche A and Tranche B under the Senior Facility is
estimated at $94.7 million and $199.0 million, respectively. As of December 31, 2009, the fair value of the Second Lien
Notes is estimated at $492.5 million.
F-21
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company had no financial liabilities recorded at fair value as of December 31, 2009 and 2008. Following are the
Company’s financial assets recorded at fair value by hierarchy level as of December 31:
2009
(Amounts in thousands)
Trading investments and related put options (substantially
restricted)
Available-for-sale investments (substantially restricted):
United States government agencies
Residential mortgage-backed securities — agencies
Other asset-backed securities
Total financial assets
Level 1
$
$
—
Level 2
Level 3
Total
—
$ 26,951
—
—
—
7,715
268,830
—
—
—
22,088
7,715
268,830
22,088
—
$ 276,545
$ 49,039
$ 325,584
Level 3
Total
$
$
26,951
2008
(Amounts in thousands)
Trading investments and related put options (substantially
restricted)
Available-for-sale investments (substantially restricted):
United States government agencies
Residential mortgage-backed securities — agencies
Other asset-backed securities
Total financial assets
Level 1
$
$
F-22
—
Level 2
—
$ 47,990
—
—
—
17,449
391,797
—
—
—
29,528
17,449
391,797
29,528
—
$ 409,246
$ 77,518
$ 486,764
$
$
47,990
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below provides a roll-forward of the financial assets classified in Level 3 which are measured at fair value on a
recurring basis for the years ended December 31:
2009
(Amounts in thousands)
Trading
Investments
and Related
Put Options
Beginning balance
Issuance of put options
Sales and settlements
Realized gains
Realized losses
Principal paydowns
Other-than-temporary
impairments
Unrealized gains —
instruments still held at the
reporting date
Unrealized losses —
instruments still held at the
reporting date
$
Ending balance
$
47,990
—
—
7,557
—
(32,900 )
Other
Asset-Backed
Securities
$
—
4,304
—
26,951
2008
Total
Level 3
Financial
Assets
$
29,528
—
—
—
(2 )
(6,417 )
$
Trading
Investments
and Related
Put Options
77,518
—
—
7,557
(2 )
(39,317 )
$
62,105
24,114
—
—
—
—
(4,069 )
4,557
8,861
2,391
(1,509 )
(1,509 )
(40,620 )
22,088
$
$
2,478,832
—
(2,355,014 )
—
(13,760 )
(16,073 )
—
(4,069 )
49,039
$
47,990
Total
Level 3
Financial
Assets
Other
Asset-Backed
Securities
$
2,540,937
24,114
(2,355,014 )
—
(13,760 )
(16,073 )
(70,274 )
(70,274 )
5,817
8,208
—
$
29,528
(40,620 )
$
77,518
There were no financial liabilities classified in Level 3 for the year ended December 31, 2009. The table below provides a
roll-forward for the year ended December 31, 2008 of the financial liabilities classified in Level 3.
2008
Embedded
Derivatives in
Preferred
Stock
(Amounts in thousands)
Beginning balance
Issuance of preferred stock
Valuation losses
Cash settlement of derivatives upon termination
Reversal of liability to Additional paid-in capital
$
Ending balance
$
F-23
—
54,797
16,030
—
(70,827 )
—
Derivative
Financial
Total
Level 3
Financial
Instruments
Liabilities
$
$
28,723
—
973
(29,696 )
—
—
$
$
28,723
54,797
17,003
(29,696 )
(70,827 )
—
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6 — Investment Portfolio
The Company’s portfolio is invested in cash and cash equivalents, trading investments and available-for-sale investments, all
of which are substantially restricted as described in Note 3 — Summary of Significant Accounting Policies . Components of
the investment portfolio as of December 31, were as follows:
(Amounts in thousands)
Cash
Money markets
Time deposits
Certificate of deposit
2009
$
Cash and cash equivalents
Trading investments and related put options
Available-for-sale investments
Total investment portfolio
1,243,060
1,933,764
400,000
200,000
2008
$
3,776,824
26,951
298,633
$
4,102,408
1,575,601
1,626,788
874,992
—
4,077,381
47,990
438,774
$
4,564,145
Cash and Cash Equivalents — Cash and cash equivalents consist of cash, money-market securities, time deposits and a
certificate of deposit. Cash primarily consists of interest-bearing deposit accounts and non-interest bearing transaction
accounts. The Company’s money-market securities are invested in eight funds, all of which are AAA rated and consist of
United States Treasury bills, notes or other obligations issued or guaranteed by the United States government and its
agencies, as well as repurchase agreements secured by such instruments. The time deposits have maturities of six months or
less and are issued from financial institutions that are rated AA as of the date of this filing. The certificate of deposit has a
maturity of one year and is issued from an institution that is rated AA as of the date of this filing.
Trading Investments and Related Put Options — As of December 31, 2008, trading investments consisted of three
securities: an auction rate security collateralized by commercial paper with a rating of A-1/P-1 and original maturities of less
than 28 days; an auction rate security collateralized by perpetual preferred stock issued by the monoline insurer and paying a
discretionary dividend; and perpetual preferred stock of a monoline insurer paying a discretionary dividend. The Company
also held three put options which, beginning in June 2010, allow the Company to put each trading security back at par to the
trading firm that originally sold the security to the Company. Under the November 2008 buy-back program that generated
the put options, the trading firm also had the right to call the related security at any time at par plus accrued interest. The
Company has received all contractual interest payments, including the penalty rate payments, related to its trading
investments.
Two trading investments were called at par during 2009, resulting in a $7.6 million gain recorded in “Net securities gains
(losses)”, net of the reversal of the related put options. The fair value of the remaining trading investment is $11.8 million on
a par value of $29.4 million as of December 31, 2009, which is unchanged from the prior year. The fair value of the related
put option is $15.2 million, reflecting a valuation gain of $4.3 million from the passage of time. The put option will continue
to be remeasured each period through earnings. In February 2010, the remaining trading investment was called at par.
The fair value of the trading investments as of December 31, 2008 was $21.5 million on a par value of $62.3 million. The
fair value of the put options was $26.5 million as of December 31, 2008. The Company recorded a net valuation loss on its
trading investments and related put options of $14.1 million during the year ended December 31, 2008 due to market
concerns regarding the capital position of the monoline insurers and their intent to pay dividends on their preferred stock.
F-24
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Available-for-sale Investments — Available-for-sale investments consist of mortgage-backed securities, asset-backed
securities and agency debenture securities. After other-than-temporary impairment charges, the amortized cost and fair value
of available-for-sale investments are as follows at December 31:
(Amounts in thousands, except net average price)
Residential mortgage-backed securities —
agencies
Other asset-backed securities
United States government agencies
Total
(Amounts in thousands, except net average price)
Residential mortgage-backed securities —
agencies
Other asset-backed securities
United States government agencies
Total
2009
Gross
Unrealized
Losses
Gross
Unrealized
Gains
Amortized
Cost
Fair
Value
Net
Average
Price
$ 259,563
15,706
6,854
$
9,296
6,382
861
$
(29 )
—
—
$ 268,830
22,088
7,715
$ 104.13
3.74
85.72
$ 282,123
$
16,539
$
(29 )
$ 298,633
$
Amortized
Cost
2008
Gross
Unrealized
Losses
Gross
Unrealized
Gains
34.84
Fair
Value
Net
Average
Price
$ 385,276
27,703
16,463
$
6,523
1,825
986
$
(2 )
—
—
$ 391,797
29,528
17,449
$ 102.37
4.43
91.84
$ 429,442
$
9,334
$
(2 )
$ 438,774
$
41.05
Gains and Losses and Other-Than-Temporary Impairments — At December 31, 2009 and 2008, net unrealized gains of
$16.5 million and $9.3 million, respectively, are included in the Consolidated Balance Sheets in “Accumulated other
comprehensive loss.” No deferred tax liability is currently recognized for the net unrealized gains due to the deferred tax
position described in Note 15 — Income Taxes . During 2009, 2008 and 2007, losses of $4.1 million, $326.6 million and
$1,189.6 million, respectively, were reclassified from “Accumulated other comprehensive loss” to earnings in connection
with the sale, maturity or pay-down of the underlying securities and other-than-temporary impairments recognized during
the year. Net securities gains (losses) were as follows for the year ended December 31:
(Amounts in thousands)
Gross realized gains
Gross realized losses
Other-than-temporary impairments
Net securities losses from available-for-sale investments
Unrealized gains (losses) from trading investments and related put
options
Realized gains from trading investments and related put options
2009
$
—
(2 )
(4,069 )
2008
$
34,200
(290,498 )
(70,274 )
2007
$
5,611
(1,962 )
(1,193,210 )
(4,071 )
(326,572 )
(1,189,561 )
4,304
7,557
(14,116 )
—
(195 )
—
Net securities gains (losses)
$
7,790
$
(340,688 )
$
(1,189,756 )
The Company realigned its investment portfolio during the first quarter of 2008, resulting in the sale of securities with a fair
value of $3.2 billion (after other-than-temporary impairment charges) for proceeds of $2.9 billion and a net realized loss of
$256.3 million. The net realized loss was the result of further deterioration in the markets during the first quarter of 2008 and
the short timeframe over which the Company sold its securities. Proceeds from the sales were reinvested in cash and cash
equivalents to supplement the Company’s assets in excess of payment service
F-25
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
obligations. Other-than-temporary impairment charges of $70.3 million during 2008 were the result of further deterioration
in the markets. The Company continues to have the intent to sell its investments classified as “Other asset-backed
securities.”
At December 31, 2009 and 2008, approximately 93 percent of the available-for-sale portfolio is invested in debentures of
United States government agencies or securities collateralized by United States government agency debentures. These
securities have always had the implicit backing of the United States government. During 2008, the United States government
took action to place certain agencies under conservatorship and provide unlimited lines of credit through the United States
Treasury. These actions served to provide greater comfort to the market regarding the intent of the United States government
to back the securities issued by its agencies. The Company expects to receive full par value of the securities upon maturity or
pay-down, as well as all interest payments. The “Other asset-backed securities” continue to have market exposure. The
Company has factored this risk into its fair value estimates, with the average price of an asset-backed security at $0.04 per
dollar of par at December 31, 2009.
Investment Ratings — In rating the securities in its investment portfolio, the Company uses ratings from Moody’s Investor
Service (“Moody’s”), Standard & Poors (“S&P”) and Fitch Ratings (“Fitch”). If the rating agencies have split ratings, the
Company uses the highest rating from either Moody’s or S&P for disclosure purposes. Securities issued or backed by United
States government agencies are included in the AAA rating category. Investment grade is defined as a security having a
Moody’s equivalent rating of Aaa, Aa, A or Baa or an S&P or Fitch equivalent rating of AAA, AA, A or BBB. The
Company’s investments at December 31 consisted of the following ratings:
(Dollars in thousands)
AAA, including United
States agencies
AA
A
BBB
Below investment grade
Total
Number of
Securities
2009
Fair
Value
2008
Percent of
Investments
Number of
Securities
Percent of
Investments
Fair Value
34
—
1
1
69
$ 276,215
—
415
1,842
20,161
92 %
0%
0%
1%
7%
42
3
5
2
68
$ 409,672
5,064
2,919
543
20,576
94 %
0%
1%
0%
5%
105
$ 298,633
100 %
120
$ 438,774
100 %
Had the Company used the lowest rating from either Moody’s or S&P in the information presented above, investments rated
A or better would have remained the same as of December 31, 2009 and been reduced by $3.5 million as of December 31,
2008.
Contractual Maturities — The amortized cost and fair value of available-for-sale securities at December 31, by contractual
maturity, are shown below. Actual maturities may differ from contractual maturities as borrowers may have the right to call
or prepay obligations, sometimes without call or prepayment penalties. Maturities of mortgage-backed and other
asset-backed securities depend on the repayment characteristics and experience of the underlying obligations.
2009
(Amounts in thousands)
After one year through five years
After five years through ten years
Mortgage-backed and other asset-backed securities
2008
Amortized
Cost
$
6,854
—
275,269
Fair
Value
$
7,715
—
290,918
Amortized
Cost
$
1,003
15,460
412,979
Fair
Value
$
1,073
16,376
421,325
Total
$ 282,123
$ 298,633
$ 429,442
$ 438,774
Fair Value Determination — The Company uses various sources of pricing for its fair value estimates of its
available-for-sale portfolio. The percentage of the portfolio for which the various pricing sources were used is as
F-26
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
follows at December 31, 2009 and 2008: 91 percent and 93 percent, respectively, used a third party pricing service; 4 percent
and 3 percent, respectively, used broker pricing; and 5 percent and 4 percent, respectively, used internal pricing.
Assessment of Unrealized Losses — At December 31, 2009 and 2008, the Company had nominal unrealized losses in its
available-for-sale portfolio, with no unrealized losses aged 12 months or more, after the recognition of other-than-temporary
impairment charges.
Note 7 — Derivative Financial Instruments
The Company uses forward contracts to hedge income statement exposure to foreign currency exchange risk arising from its
assets and liabilities denominated in foreign currencies. While these contracts economically hedge foreign currency risk,
they are not designated as hedges for accounting purposes. The “Transaction and operations support” line in the
Consolidated Statements of Loss reflects losses of $5.3 million, $5.5 million and $1.5 million in 2009, 2008 and 2007,
respectively, from the effect of changes in foreign exchange rates on foreign-denominated receivables and payables, which is
net of a loss of $5.2 million, a gain of $4.3 million and a loss of $8.3 million from the related forward contracts for 2009,
2008 and 2007, respectively. As of December 31, 2009 and 2008, the Company had $59.4 million and $98.4 million,
respectively, of outstanding notional amounts relating to its forward contracts.
At December 31, the Company reflects the following fair values of derivative forward contract instruments in its
Consolidated Balance Sheets:
(Amounts in thousands)
Forward contracts
Balance
Sheet
Location
Other
assets
Derivative Assets
2009
2008
$ 5,361
$ 3,765
Derivative Liabilities
2009
2008
$ 29
$ 2,512
The Company is exposed to credit loss in the event of non-performance by counterparties to its derivative contracts.
Collateral generally is not required of the counterparties or of the Company. In the unlikely event a counterparty fails to meet
the contractual terms of the derivative contract, the Company’s risk is limited to the fair value of the instrument. The
Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting
major international banks and financial institutions as counterparties. The Company has not had any historical instances of
non-performance by any counterparties, nor does it anticipate any future instances of non-performance.
Historically, the Company entered into foreign currency forward contracts of 12 months to hedge forecasted foreign
currency money transfer transactions. The Company designated these forward contracts as cash flow hedges. The Company
recognized a $2.4 million gain and a $2.8 million loss for the years ended December 31, 2009 and 2008, respectively, in the
“Fee and other revenue” line of the Consolidated Statements of Loss, including $0.8 million of unrealized gains and
$2.2 million of unrealized losses reclassified from “Accumulated other comprehensive loss” upon the final settlement of
these cash flow hedges for the years ending December 31, 2009 and 2008. As of December 31, 2008, the Company had
$0.8 million of unrealized gains on its cash flow hedges recorded in “Accumulated other comprehensive loss” in the
Consolidated Balance Sheets. The notional amount of outstanding cash flow hedges as of December 31, 2008 was
$18.1 million, all of which matured in 2009. There were no outstanding cash flow hedges as of December 31, 2009.
The Company historically used interest rate swaps to hedge the variability of cash flows from its floating rate debt, as well as
its floating rate commission payments to financial institution customers in the Financial Paper Products segment, primarily
relating to the official check product. In connection with its restructuring of the official check business in 2008, the
Company terminated certain of its financial institution customer relationships. The termination of the relationships led the
Company to discontinue hedge accounting treatment in 2008 as the forecasted
F-27
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
transaction would no longer occur. The commission swaps were terminated in 2008, resulting in a $27.7 million loss being
recognized in “Investment commissions expense” in the Consolidated Statements of Loss. Additionally, as described in
Note 10 — Debt , the Company’s Senior Facility was deemed extinguished as a result of the modifications made to the
Senior Facility in connection with the recapitalization. As a result, the Company discontinued hedge accounting treatment of
its debt swap and terminated the swap in 2008. As a result of the swap termination, the Company recognized a $2.0 million
loss in “Interest expense” in the Consolidated Statements of Loss.
As described in Note 12 — Mezzanine Equity , the B Stock contains a conversion option allowing the stockholder to convert
the B Stock into shares of common stock. As the Certificate of Designation for the B Stock does not explicitly state that a
net-cash settlement is not required in the event the Company has insufficient shares of common stock to effect a conversion,
guidance from the Securities and Exchange Commission (the “SEC”) requires the Company to presume a net-cash
settlement would be required. As a result, the conversion option met the definition of an embedded derivative requiring
bifurcation and liability accounting treatment to the extent the Company did not have sufficient shares to effect a full
conversion. As of March 31, 2008 and June 30, 2008, the Company had a shortfall of committed and authorized common
stock, requiring the Company to recognize an embedded derivative. On August 11, 2008, the Investors and the Company
formally clarified that the provisions of the B Stock do not allow the Investors to require the Company to net-cash settle the
conversion option if the Company does not have sufficient shares of common stock to effect a conversion. Effective with
this agreement, the B Stock conversion option no longer met the criteria for an embedded derivative requiring bifurcation
and liability accounting treatment. Accordingly, the Company remeasured the liability through August 11, 2008 and then
recorded the liability to “Additional paid-in capital” in the third quarter of 2008. The increase in the fair value of the liability
from the issuance of the B Stock through August 11, 2008 of $16.0 million was recognized in the “Valuation loss on
embedded derivatives” line in the Consolidated Statements of Loss. There will be no further impact to the Company’s
Consolidated Statements of Loss as no further remeasurement of the conversion option is required.
The Series B Stock also contains a change of control redemption option which, upon exercise, requires the Company to cash
settle the par value of the Series B Stock and any accumulated unpaid dividends at a 1 percent premium. As the cash
settlement is made at a premium, the change of control redemption option meets the definition of an embedded derivative
requiring bifurcation and liability accounting treatment. The fair value of the change of control redemption option was
de minimus as of December 31, 2009 and 2008.
Note 8 — Property and Equipment
Property and equipment consists of the following at December 31:
(Amounts in thousands)
Land
Office furniture and equipment
Leasehold improvements
Agent equipment
Signage
Computer hardware and software
2009
$
$
380,314
(252,342 )
Accumulated depreciation
Total property and equipment
2,907
38,871
21,378
78,973
51,584
186,601
2008
$
127,972
2,907
45,053
18,522
92,124
46,808
179,408
384,822
(228,559 )
$
156,263
F-28
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Depreciation expense for the year ended December 31 is as follows:
(Amounts in thousands)
2009
Office furniture and equipment
Leasehold improvements
Agent equipment
Signage
Computer hardware and software
$
Total depreciation expense
2008
4,600
3,526
11,449
10,891
23,351
$
$ 53,817
4,055
2,593
10,393
11,558
23,692
$ 52,291
2007
$
4,131
1,728
8,585
9,814
23,415
$ 47,673
At December 31, 2009 and 2008, there was $1.2 million and $2.6 million, respectively, of property and equipment that had
been received by the Company and included in “Accounts payable and other liabilities” in the Consolidated Balance Sheets.
The Company recognized a $7.0 million impairment charge in 2009 in connection with its decision to sell its corporate
airplane. The Company also fully impaired $1.4 million of software related to its ACH Commerce business based on
changes in its exit plan. During 2008 and 2007, the Company decided to discontinue certain software development projects
and recognized an impairment charge of $0.9 million and $0.2 million, respectively. All impairment charges are included in
the “Transaction and operations support” line in the Consolidated Statement of Loss.
Note 9 — Intangible Assets and Goodwill
Intangible assets at December 31 consist of the following:
2009
(Amounts in thousands)
Amortized intangible assets:
Customer lists
Non-compete agreements
Trademarks and license
Developed technology
Total intangible assets
Gross
Carrying
Value
Accumulated
Amortization
2008
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
$ 15,307
200
597
1,519
$
(9,130 )
(150 )
(1 )
(662 )
$ 6,177
50
596
857
$ 29,465
3,417
981
1,519
$
(17,486 )
(2,840 )
(150 )
(358 )
$ 11,979
577
831
1,161
$ 17,623
$
(9,943 )
$ 7,680
$ 35,382
$
(20,834 )
$ 14,548
In 2009, the Company recorded impairment charges of $3.6 million related to customer lists and trademarks associated with
its retail money order business. Intangible impairment charges are included in the “Transaction and operations support” line
of the Consolidated Statements of Loss. No impairments of intangible assets were identified during 2008 and 2007. In
connection with the acquisitions of MoneyCard and Cambios Sol in 2008, the Company recorded intangible assets of
$1.4 million for customer lists, developed technology and a money transfer license.
Intangible asset amortization expense for 2009, 2008 and 2007 was $3.3 million, $4.4 million and $4.3 million, respectively.
The estimated future intangible asset amortization expense is $2.3 million, $1.2 million, $0.7 million, $0.4 million and
$0.3 million for 2010, 2011, 2012, 2013 and 2014, respectively.
F-29
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Following is a roll-forward of goodwill by reporting segment:
Financial Paper
Products
2009
2008
Global Funds Transfer
2009
2008
Balance at beginning of year:
Goodwill
$ 426,794
Accumulated impairment charges
—
$ 422,487
—
$
2,487
—
$ 2,487
—
Other
2009
$
2008
20,220
(15,164 )
$
20,220
(6,355 )
Goodwill acquired
Impairment charge
Divestitures
426,794
2,012
(3,176 )
—
422,487
4,307
—
—
2,487
—
(2,487 )
—
2,487
—
—
—
5,056
—
(582 )
(4,474 )
13,865
—
(8,809 )
—
Balance at end of year:
Goodwill
Accumulated impairment charges
428,806
(3,176 )
426,794
—
2,487
(2,487 )
2,487
—
15,746
(15,746 )
20,220
(15,164 )
$ 425,630
$ 426,794
$
—
$ 2,487
$
—
$
5,056
Goodwill acquired in 2009 relates to the acquisition of Raphaels Bank. Goodwill acquired in 2008 relates to the acquisitions
of MoneyCard and Cambios Sol. Goodwill related to these acquisitions is not deductible for tax purposes.
In connection with the sale of FSMC in 2009, the Company recorded a charge of $0.6 million to impair goodwill that was in
excess of the final sale price. In addition, goodwill was reduced by $4.5 million from the sale of FSMC. The Company also
impaired $3.2 million of goodwill in 2009 in the Global Funds Transfer segment associated with a decision to discontinue
certain bill payment product offerings. In 2008, the Company decided to wind-down the customer-facing operations of the
business formerly known as ACH Commerce after evaluating the market opportunity for certain of its electronic payment
services. As a result, the Company recognized an impairment charge of $8.8 million in 2008 for the full amount of goodwill
related to the ACH Commerce reporting unit. The FSMC and ACH Commerce reporting units are not components of the
Global Funds Transfer and Financial Paper Products segments.
The Company performed an annual assessment of goodwill during the fourth quarters of 2009, 2008 and 2007. As a result of
the 2009 annual assessment, it was determined that the fair value of the retail money order reporting unit, a component of the
Financial Paper Products segment, was fully impaired. The Company recorded an impairment charge of $2.5 million to the
Financial Paper Products segment in 2009, which was calculated as the excess of the implied fair value of the retail money
order reporting unit over the carrying amount of goodwill. There were no impairments recognized in 2008 as a result of the
annual impairment test. As a result of the 2007 annual assessment, it was determined that the fair value of the FSMC
reporting unit was impaired. The Company recorded an impairment charge of $6.4 million to the FSMC reporting segment
in 2007, which was calculated as the excess of the implied fair value over the carrying amount of goodwill. Goodwill
impairment charges are included in the “Transaction and operations support” line of the Consolidated Statements of Loss.
F-30
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 10 — Debt
Following is a summary of the outstanding debt at December 31:
2009
(Amounts in thousands)
Senior Tranche A Loan, due 2013
Senior Tranche B Loan, net of unamortized discount, due
2013
Senior revolving credit facility, due 2013
Second lien notes, due 2018
Total debt
Amount
2008
WeightedAverage
Interest
Rate
Amount
WeightedAverage
Interest
Rate
$ 100,000
5.75 %
$ 100,000
6.33 %
196,791
—
500,000
7.25 %
—
13.25 %
233,881
145,000
500,000
7.78 %
6.27 %
13.25 %
$ 796,791
$ 978,881
Senior Facility — On March 25, 2008, the Company’s wholly owned subsidiary MoneyGram Payment Systems
Worldwide, Inc. (“Worldwide”) entered into a senior secured amended and restated credit agreement of $600.0 million with
JPMorgan Chase Bank, N.A. (“JPMorgan”) as Administrative Agent for a group of lenders (the “Senior Facility”). The
Senior Facility was composed of a $100.0 million tranche A term loan (“Tranche A”), a $250.0 million tranche B term loan
(“Tranche B”) and a $250.0 million revolving credit facility, each of which matures in March 2013. Tranche B was issued by
the Company at a discount of 93.5 percent, or $16.3 million, which was recorded as a reduction to the carrying value of
Tranche B and is being amortized over the life of the debt using the effective interest method. A portion of the proceeds from
the issuance of Tranche B was used to repay $100.0 million of the revolving credit facility on March 25, 2008.
The Company may elect an interest rate for the Senior Facility at each reset period based on the United States prime bank
rate or the Eurodollar rate. The interest rate election may be made individually for each term loan and each draw under the
revolving credit facility. For Tranche A and the revolving credit facility, the interest rate is either the United States prime
bank rate plus 250 basis points or the Eurodollar rate plus 350 basis points. For Tranche B, the interest rate is either the
United States prime bank rate plus 400 basis points or the Eurodollar rate plus 500 basis points. Under the terms of the
Senior Facility, the interest rate determined using the Eurodollar index has a minimum rate of 2.50 percent. Fees on the daily
unused availability under the revolving credit facility are 50 basis points. Substantially all of the Company’s non-financial
assets are pledged as collateral for the loans under the Senior Facility, with the collateral guaranteed by the Company’s
material domestic subsidiaries. The non-financial assets of the material domestic subsidiaries are pledged as collateral for
these guarantees.
During 2009, the Company elected the United States prime bank rate as its interest basis, as compared to the Eurodollar rate
in 2008. In 2009, the Company repaid the full $145.0 million outstanding under the revolving credit facility. As of
December 31, 2009, the Company has $234.5 million of availability under the revolving credit facility, net of $15.5 million
of outstanding letters of credit which reduce the amount available under the revolving credit facility. In addition to
$1.9 million of mandatory quarterly payments, the Company prepaid $40.0 million of its Tranche B loan in December 2009.
With this prepayment, all mandatory quarterly Tranche B payments have been fully prepaid through maturity. Amortization
of the debt discount on Tranche B of $4.8 million and $2.0 million during 2009 and 2008, respectively, is recorded in
“Interest expense” in the Consolidated Statements of Loss. The 2009 amortization includes a pro-rata write-off of
$1.9 million as a result of the Tranche B prepayment.
Second Lien Notes — As part of the recapitalization, Worldwide issued $500.0 million of senior secured second lien notes
to Goldman Sachs (the “Notes”), which will mature in March 2018. The interest rate on the Notes is 13.25 percent per year.
Prior to March 25, 2011, the Company has the option to capitalize interest at a rate of 15.25 percent. If interest is capitalized,
0.50 percent of the interest is payable in cash and 14.75 percent is capitalized
F-31
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
into the outstanding principal balance. The Company paid the interest through December 31, 2009 and anticipates that it will
continue to pay the interest on the Notes for the foreseeable future.
Prior to the fifth anniversary, the Company may redeem some or all of the Notes at a price equal to 100 percent of the
principal, plus any accrued and unpaid interest plus a premium equal to the greater of 1 percent or an amount calculated by
discounting the sum of (a) the redemption payment that would be due upon the fifth anniversary plus (b) all required interest
payments due through such fifth anniversary using the treasury rate plus 50 basis points. Starting with the fifth anniversary,
the Company may redeem some or all of the Notes at prices expressed as a percentage of the outstanding principal amount of
the Notes plus accrued and unpaid interest, starting at approximately 107 percent on the fifth anniversary, decreasing to
100 percent on or after the eighth anniversary. Upon a change of control, the Company is required to make an offer to
repurchase the Notes at a price equal to 101 percent of the principal amount plus accrued and unpaid interest. The Company
is also required to make an offer to repurchase the Notes with proceeds of certain asset sales that have not been reinvested in
accordance with the terms of the Notes or have not been used to repay certain debt.
Inter-creditor Agreement — In connection with the above financing arrangements, the lenders under both the Senior
Facility and the Notes entered into an inter-creditor agreement under which the lenders have agreed to waive certain rights
and limit the exercise of certain remedies available to them for a limited period of time, both before and following a default
under the financing arrangements.
364-Day Facility — On November 15, 2007, the Company entered into a $150.0 million revolving credit facility (the
“364-Day Facility”) with JPMorgan. The Company did not borrow under the 364-Day Facility in 2007 or 2008. In
connection with the recapitalization on March 25, 2008, the Company terminated the 364-Day Facility.
Debt Covenants and other restrictions — Borrowings under the Company’s debt agreements are subject to various
covenants that limit the Company’s ability to: incur additional indebtedness; effect mergers and consolidations; sell assets or
subsidiary stock; pay dividends and other restricted payments; invest in certain assets; and effect loans, advances and certain
other transactions with affiliates. In addition, the Senior Facility has a covenant that places limitations on the use of proceeds
from borrowings under the facility.
Both the Senior Facility and the Notes contain a financial covenant requiring the Company to maintain a minimum liquidity
ratio of at least 1:1 for certain assets to outstanding payment service obligations. The Senior Facility also has two financial
covenants referred to as the interest coverage ratio and senior secured debt ratio. The Company must maintain a minimum
interest coverage ratio of 1.5:1 through September 30, 2010, 1.75:1 from December 31, 2010 through September 30, 2012
and 2:1 from December 31, 2012 through maturity. The senior secured debt ratio is not permitted to exceed 6:1 through
September 30, 2010, 5.5:1 from December 31, 2010 through September 30, 2011, 5:1 from December 31, 2011 through
September 30, 2012 and 4.5:1 from December 31, 2012 through maturity. At December 31, 2009, the Company is in
compliance with its financial covenants.
Deferred Financing Costs — In connection with the waivers obtained on the Senior Facility and the 364-Day Facility
during the first quarter of 2008, the Company capitalized financing costs of $1.5 million. The Company also capitalized
$19.6 million and $33.4 million of financing costs for the amendment and restatement of the Senior Facility and the issuance
of the Notes, respectively. These costs were capitalized in “Other assets” in the Consolidated Balance Sheets and are being
amortized over the term of the related debt using the effective interest method.
Amortization of deferred financing costs recorded in “Interest expense” in the Consolidated Statements of Loss for the years
ended December 31, 2009, 2008 and 2007 was $8.0 million, $5.5 million and $0.2 million, respectively. Amortization during
2009 includes $0.9 million for the write-off of a pro rata portion of deferred financing costs in connection with the
prepayment on Tranche B. In connection with the modification of the Senior Facility in 2008, the Company recognized a
debt extinguishment loss of $1.5 million, reducing deferred financing costs. In addition, the Company expensed $0.4 million
of unamortized deferred financing costs upon the termination of the 364-Day Facility in 2008.
F-32
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest Paid in Cash — The Company paid $94.4 million, $84.0 million and $11.6 million of interest in 2009, 2008 and
2007, respectively.
Maturities — Debt totaling $306.3 million will mature in 2013.
Note 11 — Pensions and Other Benefits
Pension Benefits — The Pension Plan is a frozen non-contributory funded defined benefit pension plan under which no new
service or compensation credits are accrued by the plan participants. Cash accumulation accounts continue to be credited
with interest credits until participants withdraw their money from the Pension Plan. It is the Company’s policy to fund the
minimum required contribution each year.
Supplemental Executive Retirement Plans — The Company has obligations under various Supplemental Executive
Retirement Plans (“SERPs”), which are unfunded non-qualified defined benefit pension plans providing postretirement
income to their participants. Prior to 2009, all but one SERP was frozen to new participants and new benefits. Following a
December 2009 amendment to two plans, all SERPs are now frozen. It is the Company’s policy to fund the SERPs as
benefits are paid.
Postretirement Benefits Other Than Pensions — The Company has unfunded defined benefit postretirement plans that
provide medical and life insurance for its participants. The Company amended the postretirement benefit plan to close it to
new participants as of December 31, 2009. Current enrolled retirees, as well as three former employees who are eligible to
enroll after their COBRA coverage ends, will remain eligible for coverage. The Company has determined that its
postretirement benefit plan is actuarially equivalent to the Medicare Act and its application for determination of actuarial
equivalence has been approved by the Medicare Retiree Drug Subsidy program. The Company’s funding policy is to make
contributions to the postretirement benefits plans as benefits are paid.
Actuarial Valuation Assumptions — The measurement date for the Company’s defined benefit pension plan, SERPs and
postretirement benefit plans is December 31. Following are the weighted-average actuarial assumptions used in calculating
the benefit obligation and net benefit cost as of and for the years ended December 31:
2009
Net periodic benefit cost:
Discount rate
Expected return on plan assets
Rate of compensation increase
Initial healthcare cost trend rate
Ultimate healthcare cost trend rate
Year ultimate healthcare cost trend rate is reached
Projected benefit obligation:
Discount rate
Rate of compensation increase
Initial healthcare cost trend rate
Ultimate healthcare cost trend rate
Year ultimate healthcare cost trend rate is reached
Pension and SERPs
2008
2007
Postretirement Benefits
2009
2008
2007
6.30 %
8.00 %
5.75 %
—
—
—
6.50 %
8.00 %
5.75 %
—
—
—
5.70 %
8.00 %
5.75 %
—
—
—
6.30 %
—
—
8.50 %
5.00 %
2013
6.50 %
—
—
9.00 %
5.00 %
2013
5.70 %
—
—
9.50 %
5.00 %
2013
5.80 %
5.75 %
—
—
—
6.30 %
5.75 %
—
—
—
6.50 %
5.75 %
—
—
—
5.80 %
—
9.50 %
5.00 %
2019
6.30 %
—
8.50 %
5.00 %
2013
6.50 %
—
9.00 %
5.00 %
2013
The Company utilizes a building-block approach in determining the long-term expected rate of return on plan assets.
Historical markets are studied and long-term historical relationships between equity securities and fixed income securities
are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater
return over the long run. Current market factors, such as inflation and interest rates, are
F-33
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
evaluated before long-term capital market assumptions are determined. The long-term portfolio return also takes proper
consideration of diversification and rebalancing. Peer data and historical returns are reviewed for reasonableness and
appropriateness.
The health care cost trend rate assumption has a significant effect on the amounts reported. A one-percentage point change in
assumed health care trends would have the following effects for 2009:
(Amounts in thousands)
Effect on total of service and interest cost components
Effect on postretirement benefit obligation
One Percentage
Point Increase
One Percentage
Point Decrease
$ 329
489
$ (254 )
(403 )
Pension Assets — The Company employs a total return investment approach whereby a mix of equities and fixed income
securities are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established
through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment
portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified
across United States and non-United States stocks, as well as growth, value, and small and large capitalizations. Other assets,
such as real estate and cash, are used judiciously to enhance long-term returns while improving portfolio diversification. The
Company strives to maintain an equity and fixed income securities allocation mix of approximately 60 percent and
40 percent, respectively. Investment risk is measured and monitored on an ongoing basis through quarterly investment
portfolio reviews and annual liability measurements.
The Company’s weighted-average asset allocation for the defined benefit pension plan by asset category at the measurement
date of December 31 is as follows:
2009
Equity securities
Fixed income securities
Real estate
Other
Total
2008
55.6 %
35.0 %
5.5 %
3.9 %
57.8 %
32.9 %
5.1 %
4.2 %
100.0 %
100.0 %
The Company records its pension assets at fair value as described in Note 5 — Fair Value Measurement. Following are the
Company’s financial assets recorded at fair value by hierarchy level as of December 31:
2009
(Amounts in thousands)
Level 1
Level 2
Level 3
Equity securities
Fixed income
Real estate
Other
$
—
5,008
—
2,298
$ 57,244
30,978
—
1,692
$
—
—
5,688
—
Total financial assets
$ 7,306
$ 89,914
$ 5,688
Total
$
57,244
35,986
5,688
3,990
$ 102,908
F-34
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2008
(Amounts in thousands)
Level 1
Level 2
Level 3
Total
Equity securities
Fixed income
Real estate
Other
$
—
12,661
—
2,175
$ 55,202
18,790
—
1,888
$
—
—
4,835
—
$ 55,202
31,451
4,835
4,063
Total financial assets
$ 14,836
$ 75,880
$ 4,835
$ 95,551
The Company’s pension plan assets include one security that the Company considers to be a Level 3 asset for valuation
purposes. This security is an investment in a real estate joint venture and requires the use of unobservable inputs in its fair
value measurement. The fair value of this asset as of December 31, 2009 and 2008 was $5.7 million and $4.8 million,
respectively. The change in fair value of this asset resulted in an unrealized gain on the fair value of $0.9 million for 2009,
with no change in fair value for 2008.
Plan Financial Information — Net periodic benefit expense (income) for the defined benefit pension plan and SERPs and
postretirement benefit plans includes the following components for the years ended December 31:
(Amounts in thousands)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
(credit)
Recognized net actuarial loss
Curtailment (gain) loss
Net periodic benefit expense
(income)
2009
$
894
12,659
(9,403 )
Pension and SERPs
2008
$
346
3,777
(1,535 )
$
6,738
1,069
12,678
(10,275 )
$
414
2,528
658
$
7,072
Postretirement Benefits
2009
2008
2007
2,298
11,900
(10,083 )
$
483
4,226
—
$
8,824
572
837
—
(352 )
—
(12,804 )
$
(11,747 )
$
543
822
—
(352 )
—
—
$ 1,013
2007
$
697
837
—
(294 )
90
—
$ 1,330
On January 1, 2008, the Company adopted a change in measurement date for its defined benefit pension plan and SERPs and
the defined benefit postretirement benefit plans in accordance with applicable accounting guidance. The change in
measurement date was adopted using the transition method of measuring its plan assets and benefit obligations as of
January 1, 2008. Net periodic costs of $0.4 million for the period from the Company’s previous measurement date of
November 30, 2007 through January 1, 2008 were recognized as a separate adjustment to “Retained loss,” net of tax.
Changes in the fair value of the plan assets and benefit obligation for this period were recognized as an adjustment of
$1.5 million to the opening balance of “Accumulated other comprehensive loss” in 2008.
The Company recognized a net $1.5 million curtailment gain in 2009 from the amendment of two SERPs and accumulated
participant terminations. The amendment of the postretirement benefit plan resulted in a curtailment gain of $12.8 million in
2009. During 2008, the Company recorded a curtailment loss of $0.7 million under the SERPs related to the departure of the
Company’s former chief executive officer and another executive officer. The postretirement benefits expense for 2009, 2008
and 2007 was reduced by less than $0.4 million due to subsidies received under the Medicare Prescription Drug,
Improvement and Modernization Act of 2003. Subsidies to be received under the Medicare Act in 2010 are not expected to
be material.
F-35
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amounts recognized in other comprehensive income (loss) and net periodic benefit expense for the year ended
December 31, 2009 are as follows:
Pension
and
SERPs
Net actuarial loss
Amortization of net actuarial loss
Amortization of prior service (cost) credit
Curtailment (gain) loss
Prior service costs
Net actuarial (gain) loss
$
Postretirement
Benefits
2,837
(3,777 )
(346 )
$
(2,124 )
(2,577 )
3,086
—
352
1,839
(973 )
Total recognized in other comprehensive income (loss)
$
(5,987 )
$
4,304
Total recognized in net periodic benefit expense (income)
$
6,738
$
(11,747 )
Total recognized in net periodic benefit expense (income) and other
comprehensive income (loss)
$
751
$
(7,443 )
The estimated net loss and prior service cost for the defined benefit pension plan and SERPs that will be amortized from
“Accumulated other comprehensive loss” into “Net periodic benefit expense” during 2010 is $4.8 million ($3.0 million net
of tax) and $0.1 million (less than $0.1 million net of tax), respectively. For the postretirement benefit plans, there will be no
costs amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” during 2010 as all plans
are frozen.
The benefit obligation and plan assets, changes to the benefit obligation and plan assets, and the funded status of the defined
benefit pension plan and SERPs and the postretirement benefit plans as of and for the year ended December 31 are as
follows:
(Amounts in thousands)
Change in benefit obligation:
Benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial loss (gain)
Plan amendments
Adjustment for change in measurement date
Medicare Part D reimbursements
Benefits paid
Benefit obligation at the end of the year
Pension and SERPs
2009
2008
Postretirement Benefits
2009
2008
$ 207,454
894
12,659
9,352
(6,236 )
—
—
(12,507 )
$ 199,728
1,069
12,678
6,280
—
490
—
(12,790 )
$
13,416
572
837
2,018
(11,937 )
—
3
(388 )
$ 12,680
543
822
(442 )
—
68
8
(263 )
$ 211,616
$ 207,455
$
4,521
$ 13,416
F-36
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pension and SERPs
2009
2008
(Amounts in thousands)
Change in plan assets:
Fair value of plan assets at the beginning of the year
Actual return on plan assets
Employer contributions
Adjustment for change in measurement date
Benefits paid
Postretirement Benefits
2009
2008
$
95,551
15,918
3,946
—
(12,507 )
$
135,997
(30,626 )
3,636
(666 )
(12,790 )
$
—
—
388
—
(388 )
$
—
—
263
—
(263 )
Fair value of plan assets at the end of the year
$
102,908
$
95,551
$
—
$
—
Unfunded status at the end of the year
$
(108,708 )
$
(111,904 )
$ (4,521 )
$
(13,416 )
The pension plan’s unfunded status decreased by approximately 3 percent despite an increase in the benefit obligation as the
fair value of the pension plan assets increased $7.4 million during the year. The unfunded status of the defined benefit
pension plan was $43.0 million and the unfunded status of the SERPs was $65.7 million at December 31, 2009.
Following are the components recognized in the Consolidated Balance Sheets relating to the defined benefit pension plan
and SERPs and the postretirement benefit plans at December 31:
Pension and SERPs
2009
2008
(Amounts in thousands)
Components recognized in the Consolidated
Balance Sheets:
Pension and other postretirement benefits
liability
Deferred tax asset (liability)
Accumulated other comprehensive loss:
Unrealized losses (gains) for pension and
postretirement benefits, net of tax
Prior service cost (credit) for pension and
postretirement benefits, net of tax
$
(108,708 )
34,691
$
Postretirement Benefits
2009
2008
(111,904 )
36,966
$ (4,521 )
264
$ (13,416 )
(474 )
56,378
58,559
542
(791 )
223
1,754
—
(1,335 )
The projected benefit obligation and accumulated benefit obligation for the defined benefit pension plan, SERPs and the
postretirement benefit plans are in excess of the fair value of plan assets as shown below:
Pension Plan
(Amounts in thousands)
Projected benefit obligation
Accumulated benefit
obligation
Fair value of plan assets
SERPs
Postretirement Benefits
2009
2008
2009
2008
2009
2008
$ 145,933
$ 139,080
$ 65,683
$ 68,375
$ 4,521
$ 13,416
145,933
102,909
139,080
95,551
65,683
—
68,375
—
—
—
—
—
Estimated future benefit payments for the defined benefit pension plan and SERPs and the postretirement benefit plans are as
follows:
(Amounts in thousands)
Pension and SERPs
Postretirement benefits
2010
2011
2012
2013
2014
2015-19
$ 13,815
315
$ 13,886
315
$ 14,249
313
$ 13,946
329
$ 17,543
339
$ 79,514
1,608
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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company has a minimum required contribution of approximately $2.6 million for the defined benefit pension plan in
2010, and will continue to make contributions to the SERPs and the postretirement benefit plans to the extent benefits are
paid. Aggregate benefits paid for the unfunded plans are expected to be $4.4 million in 2010.
Employee Savings Plan — The Company has an employee savings plan that qualifies under Section 401(k) of the Internal
Revenue Code of 1986, as amended. Contributions to, and costs of, the 401(k) defined contribution plan totaled $3.7 million,
$3.7 million and $3.4 million in 2009, 2008 and 2007, respectively. MoneyGram does not have an employee stock
ownership plan.
Deferred Compensation Plans — Under the Deferred Compensation Plan for Directors of MoneyGram International, Inc.,
non-employee directors were allowed to defer all or part of their retainers, fees and stock awards in the form of stock units or
cash prior to 2009. In 2007, the plan was amended to require that a portion of the retainer received by non-employee
directors be deferred in stock units. In 2008, the plan was amended to state that directors who join the Board on or after
March 24, 2008 shall not be eligible to participate in the plan. Effective January 1, 2009, voluntary deferrals of director fees
and stock unit retainers under the plan were permanently discontinued. Deferrals made prior to 2009 will remain in the plan
until such amounts become distributable in accordance with the Director’s deferral elections. Under the Deferred
Compensation Plan for Management, certain employees may defer their base compensation and incentive pay in the form of
cash. In addition, the Company makes contributions to the participants’ accounts for profit sharing contributions beyond the
IRS qualified plan limits. Management deferred accounts are generally payable on the deferral date based upon the timing
and method elected by the participant. Deferred stock unit accounts are credited quarterly with dividend equivalents and will
be adjusted in the event of a change in the Company’s capital structure from a stock split, stock dividend or other change.
Deferred cash accounts are credited quarterly with interest at a long-term, medium-quality bond rate. Both deferred
compensation plans are unfunded and unsecured, and the Company is not required to physically segregate any assets in
connection with the deferred accounts. The Company has rabbi trusts associated with each deferred compensation plan
which are funded through voluntary contributions by the Company. At December 31, 2009 and 2008, the Company had a
liability related to the deferred compensation plans of $2.8 million and $2.6 million, respectively, recorded in the “Accounts
payable and other liabilities” component in the Consolidated Balance Sheets. The rabbi trusts had a market value of
$10.0 million and $9.2 million at December 31, 2009 and 2008, respectively, recorded in “Other assets” in the Consolidated
Balance Sheets.
Note 12 — Mezzanine Equity
Preferred Stock — In connection with the recapitalization, the Company issued 495,000 shares of B Stock and
265,000 shares of B-1 Stock to the Investors for a purchase price of $495.0 million and $265.0 million, respectively. As a
result of the issuance of the Series B Stock, the Investors had an equity interest of approximately 79 percent on March 25,
2008. With the accrual of dividends, the Investors had an equity interest of approximately 82 percent and 80 percent on
December 31, 2009 and 2008, respectively. In addition, the Company capitalized $107.5 million of transaction costs,
including $7.5 million paid through the issuance of 7,500 shares of B-1 Stock to Goldman Sachs. The B Stock is convertible
into shares of common stock of the Company at a price of $2.50 per share, subject to adjustment. The B-1 Stock is
convertible into B Stock by any stockholder other than Goldman Sachs. While held by Goldman Sachs, the B-1 Stock is
convertible into Series D Participating Convertible Preferred Stock (“Series D Stock”), which is a non-voting common
equivalent stock.
The Series B Stock pays a cash dividend of 10 percent. At the Company’s option, dividends may be accrued through
March 25, 2013 at a rate of 12.5 percent in lieu of paying a cash dividend. If the Company is unable to pay the dividends in
cash after March 25, 2013, dividends will accrue at a rate of 15 percent. The Company anticipates that it will accrue
dividends on the Series B Stock for at least the next 12 months. While no dividends have been declared as of December 31,
2009, the Company has accrued dividends through a charge to “Additional paid-in capital” as
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
accumulated and unpaid dividends are included in the redemption price of the Series B Stock. The Series B Stock also
participates in any dividends declared on the common stock on an as-converted basis.
The Series B Stock may be redeemed at the option of the Company after March 25, 2013 if the common stock trades above
$15.00, subject to adjustment, for a period of thirty consecutive trading days. The Series B Stock will be redeemable at the
option of the Investors after March 25, 2018 or upon a change of control. As of December 31, 2009, the Company believes
that it is not probable that the Series B Stock will become redeemable as (a) the contingencies for the change of control
redemption option and the optional redemption by the Company are not met, and (b) these two contingencies may occur
prior to the ability of the Investors to exercise their option to redeem. The B Stock votes as a class with the common stock of
the Company and has a number of votes equal to (i) the number of shares of common stock issuable if all outstanding shares
of B Stock were converted plus (ii) the number of shares of common stock issuable if all outstanding shares of B-1 Stock
were converted into B Stock and subsequently converted into common stock.
The Series B Stock is recorded in the Company’s Consolidated Balance Sheets as “Mezzanine Equity” as it has redemption
features not solely within the Company’s control. The conversion feature in the B Stock met the definition of an embedded
derivative requiring bifurcation during a portion of 2008. The change of control redemption option contained in the Series B
Stock meets the definition of an embedded derivative requiring bifurcation. The original fair value of the embedded
derivatives of $54.8 million was recognized as a reduction of “Mezzanine equity.” See Note 7 — Derivative Financial
Instruments for further discussion of the embedded derivatives in the Series B Stock. The Company capitalized transaction
costs totaling $37.6 million and $17.2 million relating to the issuance of the B Stock and B-1 Stock, respectively, through a
reduction of “Mezzanine Equity.” As it is probable the Series B Stock will become redeemable in 2018, these transaction
costs, along with the discount recorded in connection with the embedded derivatives, will be accreted to the Series B Stock
redemption value of $767.5 million plus any accumulated but unpaid dividends over a 10-year period using the effective
interest method. Following is a summary of mezzanine equity activity:
(Amounts in thousands)
B Stock
—
495,000
(54,797 )
(37,648 )
49,399
6,454
Balance at December 31, 2007
Issuance of shares
Bifurcation of embedded derivative
Transaction costs related to the issuance of shares
Dividends accrued
Accretion
$
Balance at December 31, 2008
Dividends accrued
Accretion
Tax benefit on transaction costs
Balance at December 31, 2009
458,408
71,124
8,539
1,013
$ 539,084
Series
B Stock
B-1 Stock
$
—
272,500
—
(17,172 )
27,194
1,282
283,804
39,155
1,674
611
$ 325,244
$
—
767,500
(54,797 )
(54,820 )
76,593
7,736
742,212
110,279
10,213
1,624
$ 864,328
Registration Rights — As part of the recapitalization, the Company entered into a Registration Rights Agreement with the
Investors. Under the terms of the Registration Rights Agreement, after a specified holding period, the Company must
promptly file a shelf registration statement with the SEC relating to securities held by the Investors. The Company is
generally obligated to keep the shelf registration statement effective for up to 15 years or, if earlier, until all the securities
owned by the Investors have been sold. The Investors are also entitled to five demand registrations and unlimited piggyback
registrations.
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 13 — Stockholders’ Deficit
Rights Agreement — In connection with the spin-off, MoneyGram adopted a rights agreement (the “Rights Agreement”) by
and between the Company and Wells Fargo Bank, N.A., as the rights agent. The preferred share purchase rights (the
“rights”) issuable under the Rights Agreement were attached to the shares of MoneyGram common stock distributed in the
spin-off. In addition, pursuant to the Rights Agreement, one right was issued with each share of MoneyGram common stock
issued after the spin-off.
As part of the recapitalization, the Company amended the Rights Agreement with Wells Fargo Bank, N.A. as rights agent to
exempt the issuance of the Series B Stock from the Rights Agreement. On November 3, 2008, the Company amended the
Rights Agreement, accelerating the expiration date to November 10, 2008. As of December 31, 2008, the Rights Agreement
is no longer in effect.
Preferred Stock — The Company’s Certificate of Incorporation provides for the issuance of up to 7,000,000 shares of
preferred stock that may be issued in one or more series, with each series to have certain rights and preferences as shall be
determined by unlimited discretion of the Company’s Board of Directors, including, without limitation, voting rights,
dividend rights, conversion rights, redemption privileges and liquidation preferences. At December 31, 2009 and 2008, the
Company had the following designations of preferred shares: 2,000,000 shares of Series A junior participating preferred
stock (“Series A Stock”); 800,000 shares of B Stock; 500,000 shares of B-1 Stock; and 200,000 shares of Series D Stock. At
December 31, 2009 and 2008, no Series A Stock or Series D Stock is issued or outstanding. See Note 12 — Mezzanine
Equity for further information on the B Stock, B-1 Stock and Series D Stock.
Common Stock — The Company’s Certificate of Incorporation provides for the issuance of up to 1,300,000,000 shares of
common stock with a par value of $0.01. In connection with the spin-off, MoneyGram was recapitalized such that there were
88,556,077 shares of MoneyGram common stock issued. The holders of MoneyGram common stock are entitled to one vote
per share on all matters to be voted upon by its stockholders. The holders of common stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common
stock. The determination to pay dividends on common stock will be at the discretion of the Board of Directors and will
depend on the Company’s financial condition, results of operations, cash requirements, prospects and such other factors as
the Board of Directors may deem relevant. No dividends were paid in 2009. Under the terms of the equity securities and debt
issued in connection with the recapitalization, the Company’s ability to declare or pay dividends or distributions to the
stockholders of the Company’s common stock is severely limited. The following is a summary of common stock issued and
outstanding at December 31:
(Amounts in thousands)
2009
2008
Common shares issued
Treasury stock
88,556
(6,041 )
88,556
(5,999 )
Common shares outstanding
82,515
82,557
Treasury Stock — The Board of Directors has authorized the repurchase of a total of 12,000,000 shares. As of
December 31, 2009, the Company has repurchased 6,795,000 shares of common stock under this authorization and
F-40
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
has remaining authorization to repurchase up to 5,205,000 shares. There were no shares repurchased during 2008 or 2009.
Following is a summary of treasury stock share activity:
Treasury
Stock
Shares
(Amounts in thousands)
Balance at December 31, 2007
Submission of shares for withholding taxes upon release of restricted stock and
forfeiture of shares of restricted stock
5,911
Balance at December 31, 2008
Submission of shares for withholding taxes upon release of restricted stock and
forfeiture of shares of restricted stock
5,999
Balance at December 31, 2009
6,041
88
42
Accumulated Other Comprehensive Loss — The components of “Accumulated other comprehensive loss” at December 31
include:
(Amounts in thousands)
Net unrealized gains on securities classified as available-for-sale
Unrealized gains on derivative financial instruments
Cumulative foreign currency translation adjustments
Prior service cost for pension and postretirement benefits, net of tax
Unrealized losses on pension and postretirement benefits, net of tax
Accumulated other comprehensive loss
2009
2008
$
16,510
—
4,962
(223 )
(56,920 )
$
9,332
780
5,368
(419 )
(57,768 )
$
(35,671 )
$
(42,707 )
Note 14 — Stock-Based Compensation
In connection with the spin-off, each holder of a Viad stock option was issued a stock option for MoneyGram common
stock. The exercise price of each MoneyGram stock option issued in connection with the spin-off equals the exercise price of
the Viad stock option times a fraction, the numerator of which was the closing price of a share of MoneyGram common
stock on the first trading day subsequent to the date of spin-off and the denominator of which was that price plus the closing
price of a share of Viad common stock on the first trading day subsequent to the date of spin-off (divided by four to reflect
the post-spin Viad reverse stock split). These MoneyGram options are considered to have been issued under the MoneyGram
International, Inc. 2004 Omnibus Incentive Plan. MoneyGram will take all tax deductions relating to the exercise of stock
options and the vesting of restricted stock held by employees and former employees of MoneyGram, and Viad will take the
deductions arising from options and restricted stock held by its employees and former employees.
On May 10, 2005, the Company’s stockholders approved the MoneyGram International, Inc. 2005 Omnibus Incentive Plan,
which authorizes the issuance of awards of up to 7,500,000 shares of common stock. Effective upon the approval of the 2005
Omnibus Incentive Plan, no new awards may be granted under the 2004 Omnibus Incentive Plan. The 2005 Omnibus
Incentive Plan provides for the following types of awards to officers, directors and certain key employees: (a) incentive and
nonqualified stock options; (b) stock appreciation rights; (c) restricted stock and restricted stock units; (d) dividend
equivalents; (e) performance based awards; and (f) stock and other stock-based awards. Shares related to forfeited and
cancelled awards become available for new grants, as well as shares that are withheld for full or partial payment to the
Company of the exercise price of awards. Shares that are withheld as satisfaction of tax obligations relating to an award, as
well as previously issued shares used for payment of the
F-41
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
exercise price or satisfaction of tax obligations relating to an award, become available for new grants through May 10, 2015.
The Company plans to satisfy stock option exercises and vesting of awards through the issuance of treasury stock. On
May 12, 2009, the stockholders of the Company approved a modification of the 2005 Omnibus Incentive Plan to increase the
authorization for the issuance of awards from 7,500,000 shares of common stock to 47,000,000 shares of common stock. As
of December 31, 2009, the Company has remaining authorization to issue awards of up to 12,587,461 shares of common
stock.
Stock Options — Prior to 2009, option awards were generally granted with an exercise price equal to the average of the
high and low market price of the Company’s common stock on the date of grant. Beginning in 2009, option awards are
generally granted with an exercise price equal to the closing market price of the Company’s common stock on the date of
grant. No stock options were granted in 2008. Stock options granted in 2007 become exercisable over a three-year period in
an equal number of shares each year and have a term of 10 years. All outstanding stock options contain certain forfeiture and
non-compete provisions.
Pursuant to the terms of all options granted in 2009, 50 percent of the options awarded become exercisable through the
passage of time (the “Time-based Tranche”) and 50 percent of the options awarded become exercisable upon the
achievement of certain conditions (the “Performance-based Tranche”). The Time-based Tranche generally becomes
exercisable over a five-year period in either (a) an equal number of shares each year or (b) a tranched vesting schedule
whereby 15 percent of the Time-based Tranche vests immediately and then at rates of 10 to 20 percent each year. The
Time-based Tranche for options granted to the Company’s Chairman and Chief Executive Officer becomes exercisable over
a four-year period in an equal number of shares each year. The Performance-based Tranche becomes exercisable upon the
achievement within five years of grant of the earlier of (a) a pre-defined common stock price for any period of 20
consecutive trading days, (b) a change in control of the Company resulting in a pre-defined per share consideration or (c) in
the event the Company’s common stock does not trade on a United States exchange or trading market, a public offering
resulting in the Company’s common stock meeting pre-defined equity values. All options granted in 2009 have a term of
10 years. Options granted to the Chairman and Chief Executive Officer, as well as the Company’s former chief executive
officer, contain certain forfeiture provisions, including the continuation of vesting terms for the 12-month period
immediately following termination by the Company without cause or voluntary termination for good reason, as defined by
the award agreements. The Company’s Chairman and Chief Executive Officer was granted an option award on August 31,
2009 for 6,300,000 shares, of which 2,000,000 shares will not vest and are subject to forfeiture if the stockholders of the
Company do not approve certain amendments to the MoneyGram International, Inc. 2005 Omnibus Incentive Plan. On
August 31, 2009, options granted to the Company’s Chairman and Chief Executive Officer in January and May 2009 were
modified to extend the timeframe under which the Performance-based Tranche may vest to August 31, 2014, provided
employment is maintained through August 31, 2013. There was no incremental expense resulting from this modification.
For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing
model for the Time-based Tranches and a combination of Monte-Carlo simulation and the Black-Scholes single option
pricing model for the Performance-based Tranches. Expected volatility is based on the historical volatility of the price of the
Company’s common stock since the spin-off on June 30, 2004. The Company used the simplified method to estimate the
expected term of the award and historical information to estimate the forfeiture rate. The expected term represents the period
of time that options are expected to be outstanding, while the forfeiture rate represents the number of options that will be
forfeited by grantees due to termination of employment. In addition, the Company considers any expectations regarding
future activity which could impact the expected term and forfeiture rate. The risk-free rate for the Black-Scholes model is
based on the United States Treasury yield curve in effect at the time of grant for periods within the expected term of the
option, while the risk-free rate for the Monte-Carlo simulation is based on the five-year United States Treasury yield in
effect at the time of grant. Compensation cost, net of expected forfeitures, is recognized using a straight-line method over the
vesting or service period. The following table provides weighted-average grant-date fair value and assumptions utilized to
F-42
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
estimate the grant-date fair value of the options granted during the years ended December 31. No stock options were granted
in 2008.
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected life
Weighted-average grant-date fair value per option
2009
2007
0.0%
72.8%-76.9%
2.3%-3.2%
5.3-6.5 years
$1.49
0.7%
29.1%
4.6%
6.5 years
$11.47
Following is a summary of stock option activity for 2009:
Shares
WeightedAverage
Exercise
Price
WeightedAverage
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
($000)
Options outstanding at December 31, 2008
Granted
Exercised
Forfeited/Expired
2,970,126
43,250,000
—
(8,074,712 )
$
20.49
2.18
—
3.38
Options outstanding at December 31, 2009
38,145,414
$
3.35
8.38 years
$ 22,307
Vested or expected to vest at December 31, 2009
36,101,090
$
3.41
8.39 years
$ 21,074
3,969,596
$
12.21
5.64 years
$
Options exercisable at December 31, 2009
1,302
Restricted Stock and Performance-Based Restricted Stock — The Company has granted both restricted stock and
performance-based restricted stock. The vesting of restricted stock is typically three years from the date of grant. All
performance-based restricted stock awards have vested as of December 31, 2009.
Restricted stock awards were valued at the quoted market price of the Company’s common stock on the date of grant and
expensed using the straight-line method over the vesting or service period of the award. Following is a summary of restricted
stock activity for 2009:
Total
Shares
Restricted stock outstanding at December 31, 2008
Vested
Forfeited
91,671
(56,117 )
(25,880 )
WeightedAverage
Price
$
28.25
27.62
29.26
Restricted stock outstanding at December 31, 2009
9,674
F-43
$
29.26
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Following is a summary of pertinent information related to the Company’s stock-based awards:
(Amounts in thousands)
2009
Expense recognized related to options
Expense recognized related to restricted stock
Intrinsic value of options exercised
Cash received from option exercises
Tax benefit realized for tax deductions from option exercises
$ 14,459
(307 )
—
—
—
(Amounts in thousands)
Options
Unrecognized compensation expense
Remaining weighted-average vesting period
$
2008
2007
$ 3,274
417
—
—
—
$ 3,852
2,247
3,582
6,606
1,068
Restricted Stock
42,749
1.5 years
$
8
0.1 years
Note 15 — Income Taxes
The components of loss from continuing operations before income taxes are as follows for the year ended December 31:
(Amounts in thousands)
2009
2008
2007
United States
Foreign
$
(19,975 )
(2,347 )
$
(345,063 )
7,872
$
(993,273 )
6
Loss from continuing operations before income taxes
$
(22,322 )
$
(337,191 )
$
(993,267 )
International income consists of statutory income and losses from the Company’s international subsidiaries. Most of the
Company’s wholly owned subsidiaries recognize revenue based solely on services agreements with MPSI. Income tax
(benefit) expense related to continuing operations is as follows for the year ended December 31:
(Amounts in thousands)
Current:
Federal
State
Foreign
2009
$
Current income tax (benefit) expense
Deferred income tax (benefit) expense
Income tax (benefit) expense
(8,172 )
669
2,002
2008
$
(5,501 )
(14,915 )
$
(20,416 )
$
2007
(55,980 )
(8,064 )
(13,938 )
$ 35,445
3,999
1,400
(77,982 )
2,176
40,844
37,637
(75,806 )
$ 78,481
As of December 31, 2009 and 2008, the Company had a net income tax receivable of $1.3 million and $35.9 million,
respectively, recorded in the “Other assets” line in the Consolidated Balance Sheets. The Company received a $43.5 million
federal income tax refund in 2009 and a $24.7 million federal income tax refund in 2008. Income tax expense totaling
$1.9 million in 2007 is included in “Loss from discontinued operations, net of tax” in the Consolidated Statements of Loss.
Federal and state taxes paid were $2.2 million, $1.7 million and $16.0 million for
F-44
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MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2009, 2008 and 2007, respectively. A reconciliation of the expected federal income tax at statutory rates for year ended to
the actual taxes provided is as follows:
(Amounts in thousands)
2009
Income tax at statutory federal income tax rate
Tax effect of:
State income tax, net of federal income tax effect
Valuation allowance
Non-taxable loss on embedded derivatives
Decrease in tax reserve
Other
$
Tax-exempt income
Income tax (benefit) expense
$
(7,813 )
2008
$
(118,017 )
2007
$
(347,643 )
2,051
(16,090 )
—
(2,469 )
3,905
1,634
44,639
5,611
(7,761 )
(1,186 )
3,606
434,446
—
—
(152 )
(20,416 )
—
(75,080 )
(726 )
90,257
(11,776 )
(20,416 )
$
(75,806 )
$
78,481
We had a tax benefit of $20.4 million in 2009, primarily reflecting the release of $17.6 million of valuation allowances on
deferred tax assets. Our pre-tax net loss of $22.3 million, when adjusted for our estimated book to tax differences, results in
taxable income, allowing us to release some valuation allowances on our tax loss carryovers. These book to tax differences
include impairments on securities and other assets and accruals related to separated employees, litigation and unrealized
foreign exchange losses. The decrease in tax reserve in 2009 was driven by the favorable settlement or closing of years
subject to state audit. Included in “Other” for 2009 is $1.6 million of expense for the reversal of tax benefits upon the
forfeiture of share-based awards and $2.3 million of expense on asset impairments. Changes in facts and circumstances in
the future may cause us to record additional tax benefits as further deferred tax valuation allowances are released and
carry-forwards are utilized. The Company continues to evaluate additional available tax positions related to the net securities
losses.
In 2008, we had a $75.8 million tax benefit, primarily reflecting the recognition of a $90.5 million benefit in the fourth
quarter of 2008 upon the completion of an evaluation of the technical merits of tax positions with respect to part of the net
securities losses in 2008 and 2007. The $90.5 million benefit relates to the amount of tax carry-back we were able to utilize
to recover tax payments made for fiscal 2005 through 2007. We had tax expense of $78.5 million in 2007 on a pre-tax loss of
$993.3 million, reflecting the tax treatment of the $1.2 billion of investment losses incurred in 2007.
Deferred tax assets and liabilities are recorded based on the future tax consequences attributable to temporary differences
that exist between the financial statement carrying value of assets and liabilities and their respective tax basis, and operating
loss and tax credit carry-backs and carry-forwards on a taxing jurisdiction basis. We measure deferred tax assets and
liabilities using enacted statutory tax rates that will apply in the years in which we expect the temporary differences to be
recovered or paid. Our ability to realize our deferred tax assets depends on our ability to generate sufficient taxable income
within the carry-back or carry-forward periods provided for in the tax law. We establish valuation allowances for our
deferred tax assets based on a more likely than not threshold. To the extent management believes that recovery is not likely,
a valuation allowance is established in the period in which the
F-45
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
determination is made. The Company’s deferred tax assets and liabilities at December 31 are composed of the following:
(Amounts in thousands)
Deferred tax assets:
Postretirement benefits and other employee benefits
Tax loss carryovers
Tax credit carryovers
Basis difference in revalued investments
Bad debt and other reserves
Other
Valuation allowance
2009
$
Total deferred tax asset
Deferred tax liabilities:
Depreciation and amortization
Unrealized gain on derivative financial instruments
Gross deferred tax liability
Net deferred tax asset (liability)
$
49,145
319,005
46,577
114,708
8,990
22,703
(496,149 )
2008
$
52,133
308,870
45,394
126,341
5,977
7,126
(494,310 )
64,979
51,531
(61,520 )
—
(63,507 )
(478 )
(61,520 )
(63,985 )
3,459
$
(12,454 )
Net deferred tax asset positions are reflected in the “Other assets” line in the Consolidated Balance Sheets, while net
deferred tax liability positions are included in the “Accounts payable and other liabilities” line in the Consolidated Balance
Sheets. Our deferred tax assets increased in 2009 from estimated timing adjustments, finalizing the 2008 tax return and the
affect of tax audit adjustments, primarily related to positions taken on the Company’s investment losses. The valuation
allowance in 2009 increased from these additional deferred tax assets, substantially offset by the release of $17.6 million of
valuation allowance, as described above. For 2008 and 2009, we believe a full valuation allowance is appropriate for the
deferred tax assets related to the basis difference on investments and our tax attributes. Essentially all of our deferred tax
assets relate to the U.S. jurisdiction, where we are in a net deferred tax liability position, and we do not believe we have
sufficient positive evidence to overcome the negative evidence. Changes in facts and circumstances in the future may cause
us to record additional tax benefits as further deferred tax valuation allowances are released and carry-forwards are utilized.
We continue to evaluate additional available tax positions related to the net securities losses in prior years.
The amount and expiration dates of tax loss carry-forwards (not tax effected) and credit carry-forwards as of December 31,
2009 are as follows:
(Amounts in thousands)
Expiration
Date
United States federal and state loss carry-forwards
United States federal tax credit carry-forwards
United States federal tax credit carry-forwards
2012 - 2028
2012 - 2028
Indefinite
Amount
$ 865,561
29,037
17,540
The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction and various states
and foreign jurisdictions. With a few exceptions, the Company is no longer subject to foreign or United States federal, state
and local income tax examinations for years prior to 2005. The Company is subject to foreign, United States federal and
certain state income tax examinations for 2005 through 2008, with a United States federal income tax examination for 2005
through 2007 currently in process.
F-46
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Unrecognized tax benefits are recorded in “Accounts payable and other liabilities” in the Consolidated Balance Sheets. A
reconciliation of unrecognized tax benefits for 2009 is as follows:
(Amounts in thousands)
2009
2008
2007
Beginning balance
Additions based on tax positions related to the current year
Settlements
Lapse in statute of limitations
Reductions for tax positions of prior years
Foreign currency translation
$ 13,089
832
(1,029 )
(2,181 )
—
—
$
33,669
5,711
—
(479 )
(19,204 )
(6,608 )
$ 33,351
4,527
(1,965 )
(3,399 )
(748 )
1,903
Ending balance
$ 10,711
$
13,089
$ 33,669
As of December 31, 2009, the liability for unrecognized tax benefits was $10.7 million, of which $4.2 million could impact
the effective tax rate if recognized. The Company accrues interest and penalties for unrecognized tax benefits through
“Income tax (benefit) expense” in the Consolidated Statements of Loss. For the years ended December 31, 2009, 2008 and
2007, the Company accrued approximately $0.6 million, $2.8 million and $3.5 million in interest and penalties in its
Consolidated Statements of Loss, respectively. As of December 31, 2009 and 2008, the Company had a liability of
$1.7 million and $3.6 million for interest and penalties related to its unrecognized tax benefits, respectively. As of
December 31, 2009, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax
positions over the next 12 months.
The Company does not consider its earnings in its foreign entities to be permanently reinvested. As of December 31, 2009
and 2008, a deferred tax liability of $6.2 million and $4.4 million, respectively, was recognized for the unremitted earnings
of its foreign entities.
Prior to the Company’s spin-off from Viad, income taxes were determined on a separate return basis as if MoneyGram had
not been eligible to be included in the consolidated income tax return of Viad and its affiliates. Subsequent to the spin-off,
MoneyGram is considered the divesting entity and treated as the “accounting successor” to Viad and the continuing business
of Viad is referred to as “New Viad.” As part of the Distribution, the Company entered into a Tax Sharing Agreement with
Viad which provides for, among other things, the allocation between MoneyGram and New Viad of federal, state, local and
foreign tax liabilities and tax liabilities resulting from the audit or other adjustment to previously filed tax returns. The Tax
Sharing Agreement provides that through the Distribution Date, the results of MoneyGram and its subsidiaries’ operations
are included in Viad’s consolidated United States federal income tax returns. In general, the Tax Sharing Agreement
provides that MoneyGram will be liable for all federal, state, local, and foreign tax liabilities, including such liabilities
resulting from the audit of or other adjustment to previously filed tax returns, that are attributable to the business of
MoneyGram for periods through the Distribution Date, and that Viad will be responsible for all other of these taxes.
Note 16 — Commitments and Contingencies
Operating Leases — The Company has various non-cancelable operating leases for buildings and equipment that terminate
through 2017. Certain of these leases contain rent holidays and rent escalation clauses based on pre-determined annual rate
increases. The Company recognizes rent expense under the straight-line method over the term of the lease. Any difference
between the straight-line rent amounts and amounts payable under the leases are recorded as deferred rent in “Accounts
payable and other liabilities” in the Consolidated Balance Sheets. Cash or lease incentives received under certain leases are
recorded as deferred rent when the incentive is received and amortized as a reduction to rent over the term of the lease using
the straight-line method. Incentives received relating to tenant improvements are capitalized as leasehold improvements and
depreciated over the shorter of the remaining term of the lease or 10 years. At December 31, 2009, the deferred rent liability
relating to these incentives was $2.1 million.
F-47
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Rent expense under operating leases was $13.8 million, $12.7 million and $11.4 million during 2009, 2008 and 2007,
respectively. Minimum future rental payments for all non-cancelable operating leases with an initial term of more than one
year are (amounts in thousands):
2010
2011
2012
2013
2014
Thereafter
$ 12,230
11,218
7,755
5,843
5,315
5,661
Total
$ 48,022
Legal Proceedings — We are involved in various claims, litigations and government inquiries that arise from time to time
in the ordinary course of our business. All of these matters are subject to uncertainties and outcomes that are not predictable
with certainty. We accrue for these matters as any resulting losses become probable and can be reasonably estimated.
Further, we maintain insurance coverage for many claims and litigations alleged. Management does not believe that after
final disposition any of these matters is likely to have a material adverse impact on our financial position.
Federal Securities Class Actions — The Company and certain of its present and former officers and directors are defendants
in a consolidated class action case in the United States District Court for the District of Minnesota captioned In re
MoneyGram International, Inc. Securities Litigation . The Consolidated Complaint was filed on October 3, 2008, and alleges
against each defendant violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and Rule 10b-5 under the Exchange Act and alleges against Company officers violations of Section 20(a) of the Exchange
Act. The Consolidated Complaint alleges failure to adequately disclose, in a timely manner, the nature and risks of the
Company’s investments, as well as unrealized losses and other-than-temporary impairments related to certain of the
Company’s investments. The Consolidated Complaint seeks recovery of losses incurred by stockholder class members in
connection with their purchases of the Company’s securities. On February 24, 2010, the parties entered into a non-binding
Memorandum of Understanding pursuant to which the parties agreed, subject to final approval of the parties and the court, to
settle this action for a cash payment of $80 million, all but $20 million of which would be paid by the Company’s insurance
carriers. On March 9, 2010, the parties entered into a Settlement Agreement to settle the case on terms consistent with the
Memorandum of Understanding. On March 10, 2010, the Court issued an Order that preliminarily approved the settlement.
The parties will seek final approval of the settlement at a hearing currently set for June 18, 2010. The Company recorded an
$80.0 million liability for the settlement and a $60.0 million receivable from the insurance carriers, resulting in a
$20.0 million net charge to the Consolidated Statements of Loss in 2009.
Minnesota Stockholder Derivative Claims — Certain of the Company’s present and former officers and directors are
defendants in a consolidated shareholder derivative action in the United States District Court for the District of Minnesota
captioned In re MoneyGram International, Inc. Derivative Litigation . The Consolidated Complaint in this Action, which
was filed on November 18, 2009 and arises out of the same matters at issue in the securities class action, alleges claims on
behalf of the Company for, among other things, breach of fiduciary duties, unjust enrichment, abuse of control, and gross
mismanagement. On February 24, 2010, the parties entered into a non-binding Memorandum of Understanding pursuant to
which they agreed, subject to final approval of the parties and the court, to settle this action. The Memorandum of
Understanding provides for changes to MoneyGram’s business, corporate governance and internal controls, some of which
have already been implemented in whole or in part in connection with MoneyGram’s recent recapitalization. The Company
also agreed to pay attorney fees and expenses to the plaintiff’s counsel in the amount of $1.3 million, with $1.0 million to be
paid by the Company’s insurance carriers. The Memorandum of Understanding is subject to negotiation and execution of
definitive settlement documents containing usual and customary settlement terms, notice to shareholders and approval of the
Court. The
F-48
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company recorded a $1.3 million liability and a $1.0 million receivable from the Company’s insurance carriers, resulting in
a net charge of $0.3 million to the Consolidated Statements of Loss in 2009.
ERISA Class Action — On April 22, 2008, Delilah Morrison, on behalf of herself and all other MoneyGram 401(k) Plan
participants, brought an action in the United States District Court for the District of Minnesota. The complaint alleges claims
under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including claims that the defendants
breached fiduciary duties by failing to manage the plan’s investment in Company stock, and by continuing to offer Company
stock as an investment option when the stock was no longer a prudent investment. The complaint also alleges that defendants
failed to provide complete and accurate information regarding Company stock sufficient to advise plan participants of the
risks involved with investing in Company stock and breached fiduciary duties by failing to avoid conflicts of interests and to
properly monitor the performance of plan fiduciaries and fiduciary appointees. Finally, the complaint alleges that to the
extent that the Company is not a fiduciary, it is liable for knowingly participating in the fiduciary breaches as alleged. On
August 7, 2008, plaintiff amended the complaint to add an additional plaintiff, name additional defendants and additional
allegations. For relief, the complaint seeks damages based on what the most profitable alternatives to Company stock would
have yielded, unspecified equitable relief, costs and attorneys’ fees. On March 25, 2009, the Court granted in part and denied
in part defendants’ motion to dismiss.
California Action — On January 22, 2008, Russell L. Berney filed a complaint in Los Angeles Superior Court against the
Company and its officers and directors, Thomas H. Lee Partners, L.P., and PropertyBridge, Inc. and two of its officers,
alleging false and negligent misrepresentation, violations of California securities laws and unfair business practices with
regard to disclosure of the Company’s investments. The complaint also alleges derivative claims against the Company’s
Board of Directors relating to the Board’s oversight of disclosure of the Company’s investments and with regard to the
Company’s negotiations with Thomas H. Lee Partners, L.P. and Euronet Worldwide, Inc. The complaint seeks monetary
damages, disgorgement, restitution or rescission of stock purchases, rescission of agreements with third parties, constructive
trust and declaratory and injunctive relief, as well as attorneys’ fees and costs. In July 2008, an amended complaint was filed
asserting an additional claim for declaratory relief. In September 2009, an amended complaint was filed alleging additional
facts and naming additional defendants.
SEC Inquiry — By letter dated February 4, 2008, the Company received notice from the Securities and Exchange
Commission (“SEC”) that it is conducting an informal, non-public inquiry relating to the Company’s financial statements,
reporting and disclosures related to the Company’s investment portfolio and offers and negotiations to sell the Company or
its assets. The SEC’s notice states that it has not determined that any violations of the securities laws have occurred. On
February 11, 2008 and November 5, 2008, the Company received additional letters from the SEC requesting certain
information. The Company cooperated with the SEC on a voluntary basis.
Other Matters — On September 25, 2009, the United States District Court for the Western District of Texas, Austin
returned a jury verdict in a patent suit brought against the Company by Western Union, awarding $16.5 million to Western
Union. The Company has appealed the verdict. In connection with its agreement with the Federal Trade Commission
(“FTC”), the Company is making enhancements to its consumer anti-fraud program and has paid $18.0 million into an
FTC-administered fund to refund consumers who have been victimized through third-party fraud. The Company is
continuing to cooperate with a government entity in a separate matter involving complaints that certain individuals or entities
may have used our money transfer services for fraud-induced money transfers.
Credit Facilities — At December 31, 2009, the Company has overdraft facilities through its Senior Facility consisting of
$15.5 million of letters of credit to assist in the management of investments and the clearing of payment service obligations.
All of these letters of credit are outstanding as of December 31, 2009. These overdraft facilities reduce amounts available
under the Senior Facility. Fees on the letters of credit are paid in accordance with the terms of the Senior Facility described
in Note 10 — Debt.
F-49
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Commitments — The Company has agreements with certain co-investors to provide funds related to investments in
limited partnership interests. As of December 31, 2009, the total amount of unfunded commitments related to these
agreements was $0.4 million. The Company has entered into a debt guarantee for $1.7 million on behalf of a money order
and transfer agent. This debt guarantee will be reduced as the agent makes payments on its debt. The term of the debt
guarantee is for an indefinite period. The Company accrued a liability of $0.3 million for the fair value of this debt
guarantee. A corresponding deferred asset was recorded and was fully amortized as of March 2009. The amortization
expense was recognized as part of “Transaction and operations support” expense in the Consolidated Statements of Loss.
Minimum Commission Guarantees — In limited circumstances as an incentive to new or renewing agents, the Company
may grant minimum commission guarantees for a specified period of time at a contractually specified amount. Under the
guarantees, the Company will pay to the agent the difference between the contractually specified minimum commission and
the actual commissions earned by the agent. Expense related to the guarantee is recognized in the “Fee commissions
expense” line in the Consolidated Statements of Loss.
As of December 31, 2009, the liability for minimum commission guarantees is $1.7 million and the maximum amount that
could be paid under the minimum commission guarantees is $7.9 million over a weighted average remaining term of
1.3 years. The maximum payment is calculated as the contractually guaranteed minimum commission times the remaining
term of the contract and, therefore, assumes that the agent generates no money transfer transactions during the remainder of
its contract. However, under the terms of certain agent contracts, the Company may terminate the contract if the projected or
actual volume of transactions falls beneath a contractually specified amount. With respect to minimum commission
guarantees expiring in 2009 and 2008, the Company paid $0.7 million and $0.6 million, respectively, or 18 percent and
15 percent, respectively, of the estimated maximum payment for the year.
Note 17 — Segment Information
The Company’s reporting segments are primarily organized based on the nature of products and services offered and the
type of consumer served. During the fourth quarter of 2009, the Company revised its segment reporting to reflect changes in
how it manages its business, reviews operating performance and allocates resources. The Company now manages its
business primarily through two reporting segments, Global Funds Transfer and Financial Paper Products. The Global Funds
Transfer segment provides bill payment services and global money transfers to consumers through a network of agents and,
in select markets, company-operated locations. The Financial Paper Products segment provides official check services to
financial institutions in the United States and money orders to consumers through agent and financial institution locations in
the United States and Puerto Rico. One agent of both the Global Funds Transfer segment and the Financial Paper Products
segment accounted for 29 percent, 26 percent and 20 percent of total fee and investment revenue in 2009, 2008 and 2007,
respectively. Businesses which are not operated within these segments are categorized as “Other,” and primarily relate to
discontinued products and businesses. Prior year results have been revised for comparative purposes.
The Global Funds Transfer segment is managed as two regions, the Americas and EMEAAP, to coordinate sales, agent
management and marketing activities. The Americas region is composed of the United States, Canada, Mexico, Caribbean
and Latin America. EMEAAP is composed of Europe, Middle East, Africa and Asia Pacific. We monitor performance and
allocate resources at both a regional and reporting segment level. As the two regions routinely interact in completing money
transfer transactions and share systems, processes and licenses, we view the Global Funds Transfer segment as one global
network. The nature of the consumers and products offered is the same for each region, and the regions utilize the same
agent network, systems and support functions. In addition, the regions have similar regulatory requirements and economic
characteristics. Accordingly, we aggregate the two regions into one reporting segment.
F-50
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment accounting policies are the same as those described in Note 3 — Summary of Significant Accounting Policies in the
Notes to the Consolidated Financial Statements. The Company manages its investment portfolio on a consolidated level,
with no specific investment security assigned to a particular segment. However, investment revenue is allocated to each
segment based on the average investable balances generated by that segment’s sale of payment instruments during the
period. Net securities gains (losses) are not allocated to the segments as the investment portfolio is managed at a
consolidated level. While the derivatives portfolio is also managed on a consolidated level, each derivative instrument is
utilized in a manner that can be identified to a particular segment. Interest rate swaps historically used to hedge variable rate
commissions were identified with the official check product in the Financial Paper Products segment, while forward foreign
exchange contracts are identified with the money transfer product in the Global Funds Transfer segment. Any interest rate
swaps related to the Company’s credit agreements are not allocated to the segments.
Also excluded from operating income for Global Funds Transfer and Financial Paper Products are interest and other
expenses related to the Company’s credit agreements, items related to the Company’s preferred stock, operating income
from businesses categorized as “Other,” certain pension and benefit obligation expenses, director deferred compensation
plan expenses, executive severance and related costs, and certain legal and corporate costs not related to the performance of
the segments. Unallocated expenses in 2009 include $20.3 million of legal reserves related to securities litigation and
stockholder derivative claims, a net curtailment gain on benefit plans of $14.3 million, $7.0 million of asset impairments and
$4.4 million of executive severance and related costs. Unallocated expenses in 2008 include $16.7 million of executive
severance and related costs and $7.7 million of transaction costs related to the recapitalization.
F-51
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables set forth operating results, depreciation and amortization, capital expenditures and assets by segment
for the year ended December 31:
(Amounts in thousands)
2009
Revenue
Global Funds Transfer:
Money transfer
Bill payment
$
Total Global Funds Transfer
Financial Paper Products:
Money order
Official check
Total Financial Paper Products
Other
Total revenue
$
Segment operating income:
Global Funds Transfer
Financial Paper Products
Other
$
Total segment operating income
Net securities gains (losses)
Interest expense
Valuation loss on embedded derivatives
Debt extinguishment loss
Other unallocated expenses
893,239
134,611
2008
$
$
F-52
$
736,580
122,122
1,027,850
1,013,154
858,702
74,880
47,903
86,311
151,881
155,391
314,735
122,783
21,269
238,192
(324,228 )
1,171,902
85,047
27,372
(4,316 )
(22,322 )
470,126
(1,171,291 )
$
927,118
$
157,537
$
139,428
30,169
(19,883 )
$
127,308
93,283
(11,374 )
108,103
7,790
(107,911 )
—
—
(30,304 )
Loss from continuing operations before income taxes
871,947
141,207
2007
149,714
(340,688 )
(95,020 )
(16,030 )
(1,499 )
(33,668 )
$
(337,191 )
209,217
(1,189,756 )
(11,055 )
—
—
(1,673 )
$
(993,267 )
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in thousands)
2009
Depreciation and amortization:
Global Funds Transfer
Financial Paper Products
Other
Total depreciation and amortization
Capital expenditures:
Global Funds Transfer
Financial Paper Products
Other
Total capital expenditures
Assets:
Global Funds Transfer
Financial Paper Products
Other
Total assets
2008
2007
$
43,512
12,590
989
$
44,540
11,132
1,000
$
32,851
18,310
818
$
57,091
$
56,672
$
51,979
$
32,236
6,005
17
$
35,352
5,005
—
$
42,679
28,448
15
$
38,258
$
40,357
$
71,142
$
497,929
4,838,054
593,680
$
570,463
5,430,779
641,054
$
571,630
7,329,085
34,296
$
5,929,663
$
6,642,296
$
7,935,011
Geographic areas — International operations are located principally in Europe. International revenues are defined as
revenues generated from money transfer transactions originating in a country other than the United States. Long-lived assets
are principally located in the United States. The table below presents revenue by major geographic area for the year ended
December 31:
(Amounts in thousands)
2009
United States
International
Total revenue
F-53
2008
2007
$
799,413
372,489
$ 544,885
382,233
$
(142,766 )
300,303
$
1,171,902
$ 927,118
$
157,537
Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 18 — Quarterly Financial Data (Unaudited)
The summation of quarterly earnings per share may not equate to the calculation for the full year as quarterly calculations
are performed on a discrete basis.
2009 Fiscal Quarters
(Amounts in thousands, except per share data)
Revenues
Commissions expense
First
Second (1)
Third (1)
Fourth (1)
$ 279,891
118,943
$ 291,181
122,118
$ 304,450
128,727
$ 296,380
128,679
160,948
148,544
169,063
172,653
175,723
194,427
167,701
180,133
Net revenue
Operating expenses, excluding commissions expense
Income (loss) before income taxes
$
12,404
$
(3,590 )
$
(18,704 )
$
(12,432 )
Net income (loss)
$
11,841
$
(3,317 )
$
(18,304 )
$
7,874
Loss per common share
Basic and diluted
$
$
(0.40 )
$
(0.60 )
$
(0.29 )
(0.20 )
2008 Fiscal Quarters
(Amounts in thousands, except per share data)
Revenues
Commissions expense
First (2)
$
Net (losses) revenue
Operating expenses, excluding commissions expense
17,062
214,121
Second (2)
Third (2)
Fourth (2)
$ 286,088
123,713
$ 304,999
141,365
$ 318,969
125,409
162,375
138,955
163,634
202,098
193,560
172,592
(197,059 )
146,056
(Loss) income before income taxes
$
(343,115 )
$
23,420
$
(38,464 )
$
Net (loss) income
$
(360,855 )
$
15,161
$
(38,552 )
$ 122,861
(Loss) earnings per common share
Basic
Diluted
$
$
(4.40 )
(4.40 )
$
$
$
$
(0.80 )
(0.80 )
(1)
(0.11 )
(0.11 )
$
$
20,968
0.23
0.22
Operating expenses in the second and third quarters of 2009 include legal accruals of $12.0 million and $22.5 million,
respectively. Operating expenses in the fourth quarter of 2009 include $20.3 million of legal accruals and a
$15.5 million curtailment gain on the Company’s benefit plans.
(2)
Revenue in the first quarter of 2008 includes $256.3 million of net realized losses from the realignment of the
investment portfolio, $45.3 million of other-than-temporary impairments and $5.7 million of unrealized losses on
trading investments. Revenue in the second quarter of 2008 includes $21.2 million of unrealized losses on trading
investments and $9.1 million of other than temporary impairments. Revenue in the third quarter of 2008 includes
$8.4 million of other-than-temporary impairments and $4.9 million of unrealized losses on trading investments.
Revenue in the fourth quarter of 2008 includes a $26.5 million gain from put options relating to trading investments,
$8.8 million of unrealized losses on trading investments and $7.5 million of other-than-temporary impairments.
F-54
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
MONEYGRAM INTERNATIONAL, INC.
1. The name of the corporation (which is hereinafter referred to as the Corporation) is “MoneyGram International, Inc.”
2. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on December 18, 2003.
3. A Certificate of Amendment to the Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on June 28,
2004.
4. This Amended and Restated Certificate of Incorporation has been duly proposed by resolutions adopted and declared advisable by the
Board of Directors of the Corporation, duly adopted by written consent of the sole stockholder of the Corporation in lieu of a meeting and vote
and duly executed and acknowledged by the officers of the Corporation in accordance with the provisions of Sections 103, 228, 242 and 245 of
the General Corporation Law of the State of Delaware and, upon filing with the Secretary of State in accordance with Section 103 of the
General Corporation Law of the State of Delaware shall thenceforth supercede the original Certificate of Incorporation and shall, as it may
thereafter be amended in accordance with its terms and applicable law, be the Certificate of Incorporation of the Corporation.
5. The text of the Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows:
Article I
The name of the corporation (which is hereinafter referred to as the “ Corporation ”) is:
MoneyGram International, Inc.
Article II
The address of the Corporation’s registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street in the City
of Wilmington, County of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.
Article III
The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware (the “ GCL ”).
Article IV
(A) Authorized Stock . The total number of shares of stock that the Corporation shall have authority to issue is two hundred and
fifty-seven million (257,000,000), consisting of (i) two hundred and fifty million (250,000,000) shares of Common Stock, par value $0.01 per
share (hereinafter referred to as “ Common Stock ”) and (ii) seven million (7,000,000) shares of Preferred Stock, par value $0.01 per share
(hereinafter referred to as “ Preferred Stock ”).
(B) Preferred Stock . Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized
to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the GCL (hereinafter, along with any
similar designation relating to any other class of stock that may hereafter be authorized, referred to as a “ Preferred Stock Designation ”), to
establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination of the following:
(i) The designation of the series, which may be by distinguishing number, letter or title.
(ii) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the
Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(iii) The amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if
any, shall be cumulative or noncumulative.
(iv) Dates on which dividends, if any, shall be payable.
(v) The redemption rights and price or prices, if any, for shares of the series.
(vi) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(vii) The amounts payable on and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
(viii) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other
security, of the Corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the
conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or
exchangeable and all other terms and conditions upon which such conversion or exchange may be made.
(ix) Restrictions on the issuance of shares of the same series or of any other class or series.
(x) The voting rights, if any, of the holders of shares of the series.
(C) Common Stock . The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Each shares
of Common Stock shall be equal to each
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other share of Common Stock. Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, the holders
of shares of Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders.
(D) Vote . Except as may be provided in this Certificate of Incorporation or in a Preferred Stock Designation, or as may be required by
applicable law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of
Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote.
(E) Record Holders . The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner
thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other
person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
Article V
The Board of Directors is hereby authorized to create and issue, whether or not in connection with the issuance and sale of any of stock or
other securities or property of the Corporation, rights entitling the holders thereof to purchase from the Corporation shares of stock or other
securities of the Corporation or any other corporation. The times at which and the terms upon which such rights are to be issued will be
determined by the Board of Directors and set forth in the contracts or instruments that evidence such rights. The authority of the Board of
Directors with respect to such rights shall include, but not be limited to, determination of the following:
(A) The initial purchase price per share or other unit of the stock or other securities or property to be purchased upon exercise of such rights.
(B) Provisions relating to the times at which and the circumstances under which such rights may be exercised or sold or otherwise
transferred, either together with or separately from, any other stock or other securities of the Corporation.
(C) Provisions that adjust the number or exercise price of such rights or amount or nature of the stock or other securities or property
receivable upon exercise of such rights in the event of a combination, split or recapitalization of any stock of the Corporation, a change in
ownership of the Corporation’s stock or other securities or a reorganization, merger, consolidation, sale of assets or other occurrence relating to
the Corporation or any stock of the Corporation, and provisions restricting the ability of the Corporation to enter into any such transaction
absent an assumption by the other party or parties thereto of the obligations of the Corporation under such rights.
(D) Provisions that deny the holder of a specified percentage of the outstanding stock or other securities of the Corporation the right to
exercise such rights and/or cause the rights held by such holder to become void.
(E) Provisions that permit the Corporation to redeem or exchange such rights.
(F) The appointment of a rights agent with respect to such rights.
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Article VI
(A) In furtherance of, and not in limitation of, the powers conferred by applicable law, the Board of Directors is expressly authorized and
empowered:
(i) to adopt, amend or repeal the Bylaws of the Corporation; provided , however , that the Bylaws adopted by the Board of Directors
under the powers hereby conferred may be amended or repealed by the Board of Directors or by the stockholders having voting power with
respect thereto, provided further that in the case of amendments by stockholders, the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to alter, amend or repeal
any provision of the Bylaws; and
(ii) from time to time to determine whether and to what extent, and at what times and places, and under what conditions and
regulations, the accounts and books of the Corporation, or any of them, shall be open to inspection of stockholders; and, except as so
determined, or as expressly provided in this Certificate of Incorporation or in any Preferred Stock Designation, no stockholder shall have
any right to inspect any account, book or document of the Corporation other than such rights as may be conferred by applicable law.
(B) The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers
and authorities expressly conferred upon the Board of Directors by applicable law. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt
any provision inconsistent with paragraph (A)(i) of this Article VI. For the purposes of this Certificate of Incorporation, “ Voting Stock ” shall
mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
Article VII
Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of
Incorporation to elect additional directors under specific circumstances, any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any
consent in writing in lieu of a meeting of such stockholders. Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, and in addition to approval by the Board of Directors, the affirmative vote of at least eighty percent (80%) of the voting power of the
then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this
Article VII.
Article VIII
(A) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in the Certificate of
Incorporation, to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed by the
Bylaws of the Corporation and may be increased or decreased from time to time in such a manner as may be prescribed by the Bylaws.
(B) Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not
be by written ballot.
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(C) The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock as
set forth in the Certificate of Incorporation, shall be divided into three classes, as nearly equal in number as possible. One class of directors
shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2005, another class shall be initially elected for a
term expiring at the annual meeting of stockholders to be held in 2006, and another class shall be initially elected for a term expiring at the
annual meeting of stockholders to be held in 2007. Members of each class shall hold office until their successors are elected and qualified. At
each succeeding annual meeting of the stockholders of the Corporation commencing with the 2005 annual meeting, the successors of the class
of directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following the year of their election.
(D) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock, as set forth in the Certificate of
Incorporation, to elect additional directors under specified circumstances, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of
directors, may be filled, unless the Board of Directors otherwise determines, only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, or by the sole remaining director, and not by stockholders. Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been
elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors
constituting the Board of Directors shall shorten the term of any incumbent director.
(E) Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of
Incorporation, to elect additional directors under specified circumstances, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the
then outstanding Voting Stock, voting together as a single class.
(F) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of
Directors, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as
a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article VIII.
Article IX
(A) Vote Required for Certain Business Combinations .
(i) Higher Vote for Certain Business Combinations . In addition to any affirmative vote required by applicable law or this Certificate
of Incorporation, and except as otherwise expressly provided in paragraph (B) of this Article IX:
(a) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (1) any Interested Stockholder
(as hereinafter defined) or (2) any other corporation (whether or not itself an Interested Stockholder) that is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder, including
5
all Affiliates of the Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) of $10,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder, including all Affiliates of the Interested Stockholder, in exchange for
cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $10,000,000 or more; or
(d) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliates of an Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not an Interested Stockholder is a party
thereto) that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary that are directly or indirectly owned by any Interested Stockholder or one or
more Affiliates of the Interested Stockholder;
shall require the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of the then outstanding Voting Stock,
voting together as a single class, including the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of the
then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested
Stockholder, unless the requirement of such vote is not permitted under applicable law. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser percentage may be permitted, by applicable law or in any agreement
with any national securities exchange or otherwise.
(ii) Definition of Business Combination . The term “ Business Combination ” as used in this Article IX shall mean any transaction
described in any one or more of clauses (a) through (e) of paragraph (A)(i) of this Article IX.
(B) When Higher Vote is Not Required . The provisions of paragraph (A) of this Article IX shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such affirmative vote as is required by applicable law or any other
provision of this Certificate of Incorporation, if the conditions specified in either of the following paragraphs (B)(i) or (ii) of this Article IX are
met:
(i) Approval by Continuing Directors . The Business Combination shall have been approved by a majority of the Continuing
Directors (as hereinafter defined).
(ii) Price and Procedure Requirements . All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash, to be received per share by holders of Common Stock in such Business
Combination, shall be at least equal to the highest of the following:
(1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees)
paid by the Interested
6
Stockholder for any shares of Common Stock acquired by it (x) within the two-year period immediately prior to the first public
announcement of the proposal of such Business Combination (the “ Announcement Date ”), or (y) in the transaction in which it
became an Interested Stockholder, whichever is higher;
(2) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the “ Determination Date ”), whichever is higher; and
(3) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to
paragraph (B)(ii)(a)(2) of this Article IX, multiplied by the ratio of (x) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for
any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (y) the Fair
Market Value per share of Common Stock on the first day in such two-year period upon which the Interested Stockholder acquired any
shares of Common Stock.
(b) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination
of consideration other than cash to be received per share by holders of shares of any other class, other than Common Stock or Excluded
Preferred Stock, of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements
of this paragraph (B)(ii)(b) shall be required to be met with respect to every such class of outstanding Voting Stock whether or not the
Interested Stockholder has previously acquired any shares of a particular class of Voting Stock):
(1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees)
paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (x) within the two-year period
immediately prior to the Announcement Date, or (y) in the transaction in which it became an Interested Stockholder, whichever is
higher;
(2) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;
(3) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(4) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant
to paragraph (B)(ii)(b)(3) of this Article IX, multiplied by the ratio of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class of Voting
Stock acquired by it within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of
such class of Voting Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of such
class of Voting Stock.
(c) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock and
other than Excluded Preferred Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of
7
such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of
consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number
of shares of such class of Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business
Combination: (1) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or
not cumulative) on any outstanding Preferred Stock, except as approved by a majority of the Continuing Directors; (2) there shall have
been no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the Continuing Directors; (3) there shall have been an increase in the annual rate of
dividends as necessary fully to reflect any recapitalization (including any reverse stock split), reorganization or any similar reorganization
that has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and (4) such Interested Stockholder shall not have become the Beneficial Owner of
any additional Voting Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such
Business Combination or otherwise.
(f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent
provisions).
(C) Certain Definitions . For purposes of this Article IX:
(i) “ Person ” shall mean any individual, firm, corporation or other entity.
(ii) “ Interested Stockholder ” shall mean any Person (other than the Corporation or any Subsidiary) that:
(a) itself, or along with its Affiliates, is the Beneficial Owner, directly or indirectly, of more than ten percent (10%) of the then
outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was itself,
or along with its Affiliates, the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the then outstanding Voting
Stock; or
(c) is an assignee of or has otherwise succeeded to any Voting Stock that was at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have
8
occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of
1933.
(iii) “ Beneficial Owner ” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations of the
Securities Exchange Act of 1934, as in effect on the date hereof. In addition, a Person shall be the “ Beneficial Owner ” of any Voting Stock
that such Person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, provided that, in the case of rights issued pursuant to the Rights Agreement between the Corporation and
Wells Fargo Bank, N.A., as rights agent, dated as of June 30, 2004, or any successor rights agreement, once such rights are exercisable, a
holder thereof shall not be deemed to be a “ Beneficial Owner ” for purposes of this provision of the shares of Voting Stock issuable
pursuant to such rights unless and until such holder, on or after the date that such rights become exercisable, acquires any additional such
rights or shares of Voting Stock, or (b) the right to vote pursuant to any agreement, arrangement or understanding (but neither such Person
nor any such Affiliate or Associate shall be deemed to be the Beneficial Owner of any shares of Voting Stock solely by reason of a
revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, and with
respect to which shares neither such Person nor any such Affiliate or Associate is otherwise deemed the Beneficial Owner).
(iv) For the purpose of determining whether a Person is an Interested Stockholder pursuant to paragraph (C)(ii) of this Article IX, the
number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (C)(iii) of
this Article IX but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options or otherwise.
(v) “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on the date hereof.
(vi) “ Subsidiary ” shall mean any corporation of which a majority of any share of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph (C)(ii) of this
Article IX, the term “ Subsidiary ” shall mean only a corporation of which a majority of each share of equity security is owned, directly or
indirectly, by the Corporation.
(vii) “ Continuing Director ” shall mean any member of the Board of Directors of the Corporation (the “Board of Directors”) who is
unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder
became an Interested Stockholder, and any director who is thereafter chosen to fill any vacancy on the Board of Directors or who is elected
and who, in either event, is unaffiliated with the Interested Stockholder and in connection with his or her initial assumption of office is
recommended for appointment or election by a majority of Continuing Directors then on the Board of Directors.
(viii) “ Fair Market Value ” shall mean (x) in the case of stock, the highest closing sale price during the thirty (30) day period
immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks, or,
if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the
principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such
9
stock during the thirty (30) day period preceding the date in question on the NASDAQ Stock Market or any system then in use in its stead,
or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of
Directors in accordance with paragraph (D) of this Article IX; and (y) in the case of property other than cash or stock, the fair market value
of such property on the date in question as determined by the Board of Directors in accordance with paragraph (D) of this Article IX.
(ix) In the event of any Business Combination in which the Corporation survives, the phrase “ other consideration to be received ” as
used in paragraphs (B)(ii)(a) and (b) of this Article IX shall include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
(x) “ Excluded Preferred Stock ” means any series of Preferred Stock with respect to which a majority of the Continuing Directors
have approved a Preferred Stock Designation creating such series that expressly provides that the provisions of this Article IX shall not
apply.
(D) The Continuing Directors of the Corporation shall have the power and duty to determine for the purposes of this Article IX, on the basis
of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article IX, including, without
limitation (i) whether a Person is an Interested Stockholder, (ii) the number of shares of Voting Stock beneficially owned by any Person,
(iii) whether a Person is an Affiliate or Associate of another, (iv) whether the applicable conditions set forth in paragraph (B)(ii) of this
Article IX have been met with respect to any Business Combination, (v) the Fair Market Value of stock or other property in accordance with
paragraph (C)(viii) of this Article IX, and (vi) whether the assets that are the subject of any Business Combination have, or the consideration to
be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $10,000,000 or more.
(E) No Effect on Fiduciary Obligations of Interested Stockholders . Nothing contained in this Article IX shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by applicable law.
(F) Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation
(and notwithstanding the fact that a lesser percentage may be permitted by applicable law, this Certificate of Incorporation or the Bylaws of the
Corporation), but in addition to any affirmative vote of the holders of any particular class of the Voting Stock required by applicable law or this
Certificate of Incorporation, the affirmative vote of the holders of two-thirds (66 2/3%) of the voting power of the shares of the then
outstanding Voting Stock voting together as a single class, including the affirmative vote of the holders of two-thirds (66 2/3%) of the voting
power of the then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested
Stockholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article IX of this Certificate of Incorporation.
Article X
Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or
who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as a director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (including the heirs, executor, administrators or estate of such person), shall be
indemnified by the Corporation, in accordance with the Bylaws of the Corporation, to the fullest extent permitted from time to time by the GCL
as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
10
permitted the Corporation to provide prior to such amendment) or any other applicable laws as presently or hereafter in effect. The Corporation
may, by action of the Board of Directors or through the adoption of Bylaws, provide indemnification to employees and agents of the
Corporation, and to persons serving as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, at the
request of the Corporation, with the same scope and effect as the foregoing indemnification of directors and officers. The Corporation shall be
required to indemnify any person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors or is a proceeding to enforce such person’s claim to indemnification
pursuant to the rights granted by this Certificate of Incorporation or otherwise by the Corporation. The right to indemnification conferred in this
Article X shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition, such advances to be paid by the Corporation within twenty (20) days after the receipt by the
Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided , however , that if
the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by such a person in his or her capacity
as such a director or officer of the Corporation in advance of the final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is not entitled to be indemnified under this Article X or otherwise. Without limiting the generality or the effect of
the foregoing, the Corporation may enter into one or more agreements with any person that provide for indemnification greater or different than
that provided in this Article X. Any amendment or repeal of this Article X shall not adversely affect any right or protection existing hereunder
in respect of any act or omission occurring prior to such amendment or repeal.
Article XI
To the fullest extent permitted by applicable law, a director of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment or repeal of this Article XI shall not adversely
affect any right or protection of a director of the Corporation existing hereunder in respect of any act or omission occurring prior to such
amendment or repeal.
Article XII
Except as may be expressly provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation or a Preferred Stock Designation, and any
other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter
prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or
any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted
subject to the right reserved in this Article XII; provided , however , that any amendment or repeal of Article X or Article XI of this Certificate
of Incorporation shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such
amendment or repeal; and provided further that no Preferred Stock Designation shall be amended after the issuance of any shares of the series
of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable
law; and provided further that paragraph (C) of Article IV shall not be amended except in accordance with the terms thereof and the
requirements of applicable law.
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IN WITNESS WHEREOF, said MoneyGram International, Inc. has caused this Amended and Restated Certificate of Incorporation to be
signed by its Chief Executive Officer and has caused its corporate seal to be affixed, this 28th day of June, 2004.
MONEYGRAM INTERNATIONAL, INC.
By:
/s/ Philip W. Milne
Name:
Philip W. Milne
Title:
Chief Executive Officer
12
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MONEYGRAM INTERNATIONAL, INC.
It is hereby certified that:
1. The name of the corporation (which is hereinafter referred to as the Corporation) is “MoneyGram International, Inc.”
2. Clause (A) of Article IV of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated
in its entirety, as follows:
Article IV
(A) Authorized Stock. The total number of shares of stock that the Corporation shall have authority to issue is one billion three hundred
and seven million (1,307,000,000), consisting of (i) one billion three hundred million (1,300,000,000) shares of Common Stock, par value
$0.01 per share (hereinafter referred to as “ Common Stock ”) and (ii) seven million (7,000,000) shares of Preferred Stock, par value $0.01 per
share (hereinafter referred to as “ Preferred Stock ”).
3. Clauses (C) and (D) of Article VIII of the Amended and Restated Certificate of Incorporation of the Corporation are hereby amended
and restated in their entirety as follows:
Article VIII
(C) The directors shall be elected annually at each annual meeting of stockholders of the Corporation to hold office for a term expiring at
the next annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified.
Directors elected at the 2009 annual meeting of stockholders of the Corporation shall commence their term of office upon the effectiveness of
this Amendment to the Amended and Restated Certificate of Incorporation under the General Corporation Law of the State of Delaware (the
“Effective Time”) for a term expiring at the next annual meeting of stockholders, with each such director to hold office until his or her
successor shall have been duly elected and qualified.
(D) Subject to the rights of the holders of our Series B Participating Convertible Preferred Stock and Series B-1 Participating Convertible
Preferred Stock (the “ Series B Stock ”) or any other series or class of stock, as set forth in this Amended and Restated Certificate of
Incorporation, to elect additional directors under specified circumstances, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of
directors, may be filled, unless the Board of Directors otherwise determines, only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, or by the sole remaining director, and not by stockholders. Directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders and until such director’s successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent
director.
4. Article XIII is hereby added to the Amended and Restated Certificate of Incorporation of the Corporation as follows:
Article XIII
(A) At any time the investors that are party to the Purchase Agreement (as defined below) or their respective affiliates (collectively, the “
Investors ”) have the right pursuant to Section 4.1(b) of the Purchase Agreement to appoint individuals to be nominated for election to the
Board of Directors (“ Board Representatives ”) to serve as directors of the Corporation, affiliates of Goldman, Sachs & Co. (“ Goldman Sachs
”) (or its permitted successors or assigns) shall have the right to designate one (1) Board Representative (the “ GS Board Representative ”),
which such Board Representative, if elected as a director, shall have one (1) vote, and affiliates of Thomas H. Lee Partners, L.P. (“ THL ”) (or
its permitted successors or assigns) shall have the right to designate two (2) to four (4) Board Representatives (the “ THL Board
Representatives ”), which THL Board Representatives, if elected as directors, together shall be authorized to vote (with each THL Board
Representative having equal votes) on all matters occasioning action by the Board of Directors a total number of votes equal to (x) the number
of directors that the Investors would be entitled to designate pursuant to Section 4.1(b) of the Purchase Agreement in order to have Proportional
Representation (as defined below) on the Board of Directors in the absence of this Article XIII, minus (y) the one (1) vote of the GS Board
Representative. Each director other than the THL Board Representatives shall have one (1) vote. For the purposes of this Amended and
Restated Certificate of Incorporation, “ Proportional Representation” shall mean the number of Board Representatives (rounded to the nearest
whole number) that the Investors would need to appoint (in the absence of this Article XIII) in order for the number of Board Representatives
appointed by the Investors as compared to the number of directors constituting the entire Board of Directors to be proportionate to the
Investors’ common stock ownership, calculated on a fully-converted basis (assuming all shares of Series B Stock are converted into common
stock). For the purposes of this Amended and Restated Certificate of Incorporation, the “ Purchase Agreement” shall mean that certain
Amended and Restated Purchase Agreement, dated as of March 17, 2008, between the Corporation and the purchasers named therein, including
all schedules and exhibits thereto, as the same may be amended from time to time.
(B) At any time the right of the Investors to appoint Board Representatives pursuant to this Article XIII is in effect, all references in this
Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation and any other charter document of the Corporation, each as
may be amended from time to time, to “a majority of the directors,” “a majority of the remaining directors,” “a majority of the Whole Board,”
“a majority of the total number of directors that the Corporation would have if there were no vacancies” and similar phrases shall give effect to
the proportional voting provisions of this Article XIII such that the references to a “majority” shall mean a “majority of the votes of the
directors.
5. The amendments of the Amended and Restated Certificate of Incorporation herein certified have been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said MoneyGram International, Inc. has caused this Certificate of Amendment of Amended and Restated
Certificate of Incorporation to be signed by its Executive Vice President, General Counsel and Secretary this 12th day of May, 2009.
MONEYGRAM INTERNATIONAL, INC.
By
/s/ Teresa H. Johnson
Teresa H. Johnson
Executive Vice President, General Counsel
and Secretary
2
Exhibit 10.30
Execution Version
$600,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 25, 2008
AMONG
MONEYGRAM INTERNATIONAL, INC.,
MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.,
THE LENDERS,
and
JPMORGAN CHASE BANK, N.A.
AS ADMINISTRATIVE AGENT
J.P. MORGAN SECURITIES INC.
AS LEAD ARRANGER AND SOLE BOOK RUNNER
TABLE OF CONTENTS
Page
ARTICLE I
Section 1.1
Section 1.2
Section 1.3
Section 1.4
Section 1.5
Section 1.6
Section 1.7
DEFINITIONS
Definitions
Terms Generally
Rounding
Times of Day
Timing of Payment or Performance
Accounting
Pro Forma Calculations
1
1
35
35
35
35
35
36
ARTICLE II
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 2.8
Section 2.9
Section 2.10
Section 2.11
Section 2.12
Section 2.13
Section 2.14
Section 2.15
Section 2.16
Section 2.17
Section 2.18
Section 2.19
Section 2.20
Section 2.21
Section 2.22
Section 2.23
Section 2.24
THE CREDITS
Term Loans
Term Loan Repayment
Revolving Credit Commitments
Other Required Payments
Ratable Loans
Types of Advances
Swing Line Loans
Commitment Fee; Reductions and Increases in Aggregate Revolving Credit Commitment
Minimum Amount of Each Advance
Optional and Mandatory Principal Payments
Method of Selecting Types and Interest Periods for New Advances
Conversion and Continuation of Outstanding Advances
Changes in Interest Rate, etc.
Rates Applicable After Default
Method of Payment
Noteless Agreement; Evidence of Indebtedness
Telephonic Notices
Interest Payment Dates; Interest and Fee Basis
Notification of Advances, Interest Rates, Prepayments and Revolving Credit Commitment Reductions
Lending Installations
Non-Receipt of Funds by the Administrative Agent
Letters of Credit
Replacement of Lender
Pro Rata Treatment; Intercreditor Agreements
37
37
37
38
38
38
38
38
40
42
42
44
45
45
46
46
46
47
47
47
48
48
48
53
54
ARTICLE III
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Section 3.6
YIELD PROTECTION; TAXES
Yield Protection
Changes in Capital Adequacy Regulations
Availability of Types of Advances
Funding Indemnification
Taxes
Lender Statements; Survival of Indemnity
56
56
57
57
58
58
61
i
Page
ARTICLE IV
Section 4.1
Section 4.2
CONDITIONS PRECEDENT
Effectiveness and Closing Conditions
Each Subsequent Credit Extension
61
61
65
ARTICLE V
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
Section 5.6
Section 5.7
Section 5.8
Section 5.9
Section 5.10
Section 5.11
Section 5.12
Section 5.13
Section 5.14
Section 5.15
Section 5.16
Section 5.17
Section 5.18
Section 5.19
REPRESENTATIONS AND WARRANTIES
Existence and Standing
Authorization and Validity
No Conflict: Government Consent
Financial Statements
Material Adverse Change
Taxes
Litigation
Subsidiaries; Capitalization
ERISA; Labor Matters
Accuracy of Information
Regulation U
Compliance With Laws
Ownership of Properties
Plan Assets; Prohibited Transactions
Environmental Matters
Investment Company Act
Solvency
Intellectual Property
Collateral
65
65
65
66
67
67
67
67
67
67
68
69
69
69
69
69
69
69
70
70
ARTICLE VI
Section 6.1
Section 6.2
Section 6.3
Section 6.4
Section 6.5
Section 6.6
Section 6.7
Section 6.8
Section 6.9
Section 6.10
Section 6.11
Section 6.12
Section 6.13
Section 6.14
Section 6.15
Section 6.16
Section 6.17
Section 6.18
Section 6.19
Section 6.20
Section 6.21
COVENANTS
Financial Reporting
Use of Proceeds
Notice of Default
Conduct of Business
Taxes
Insurance
Compliance with Laws
Maintenance of Properties
Inspection
Restricted Payments
Indebtedness
Merger
Sale of Assets
Investments and Acquisitions
Liens
Affiliates
Amendments to Agreements; Prepayments of Second Lien Debt
Inconsistent Agreements
Financial Covenants
Minimum Liquidity Ratio
Subsidiary Guarantees
71
71
73
73
73
73
73
74
74
74
74
78
82
84
85
88
91
92
93
94
96
96
ii
Page
Section 6.22
Section 6.23
Collateral
Holdco Covenant
97
97
ARTICLE VII
Section 7.1
Section 7.2
Section 7.3
Section 7.4
Section 7.5
Section 7.6
Section 7.7
Section 7.8
Section 7.9
Section 7.10
Section 7.11
Section 7.12
Section 7.13
Section 7.14
DEFAULTS
Representation or Warranty
Non-Payment
Specific Defaults
Other Defaults
Cross-Default
Insolvency; Voluntary Proceedings
Involuntary Proceedings
Judgments
Unfunded Liabilities; Reportable Event
Change in Control
Withdrawal Liability
Guaranty
Collateral Documents
Events Not Constituting Default
97
98
98
98
98
98
98
99
99
99
99
99
99
99
99
ARTICLE VIII
Section 8.1
Section 8.2
Section 8.3
Section 8.4
Section 8.5
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
Acceleration
Amendments
Replacement Loans
Errors
Preservation of Rights
101
101
101
102
103
103
ARTICLE IX
Section 9.1
Section 9.2
Section 9.3
Section 9.4
Section 9.5
Section 9.6
Section 9.7
Section 9.8
Section 9.9
Section 9.10
Section 9.11
Section 9 12
Section 9.13
GENERAL PROVISIONS
Survival of Representations
Governmental Regulation
Headings
Entire Agreement
Several Obligations; Benefits of this Agreement
Expenses; Indemnification
Severability of Provisions
Nonliability of Lenders
Confidentiality
Nonreliance
Disclosure
USA PATRIOT Act
Amendment and Restatement; Prior Defaults
104
104
104
104
104
104
104
105
105
106
107
107
107
107
ARTICLE X
Section 10.1
Section 10.2
Section 10.3
Section 10.4
Section 10.5
THE ADMINISTRATIVE AGENT
Appointment; Nature of Relationship
Powers
General Immunity
No Responsibility for Loans, Recitals, etc.
Action on Instructions of Lenders
108
108
108
108
108
109
iii
Page
Section 10.6
Section 10.7
Section 10.8
Section 10.9
Section 10.10
Section 10.11
Section 10.12
Section 10.13
Section 10.14
Section 10.15
Section 10.16
Section 10.17
Section 10.18
Employment of Administrative Agents and Counsel
Reliance on Documents; Counsel
Administrative Agent’s Reimbursement and Indemnification
Notice of Default
Rights as a Lender
Lender Credit Decision
Successor Administrative Agent
Administrative Agent and Arranger Fees
Delegation to Affiliates
Co-Documentation Agents, Co-Syndication Agents, etc.
Appointment of Collateral Agent
Certain Releases of Collateral and Guarantors
Intercreditor Agreement
109
109
109
110
110
110
111
111
112
112
112
112
112
ARTICLE XI
Section 11.1
Section 11.2
SETOFF; RATABLE PAYMENTS
Setoff
Ratable Payments
113
113
113
ARTICLE XII
Section 12.1
Section 12.2
Section 12.3
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
Successors and Assigns
Dissemination of Information
Tax Treatment
113
113
118
118
ARTICLE XIII
Section 13.1
NOTICES
Notices; Effectiveness; Electronic Communication
118
118
ARTICLE XIV
Section 14.1
Section 14.2
COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
Counterparts; Effectiveness
Electronic Execution of Assignments
120
120
120
ARTICLE XV
Section 15.1
Section 15.2
Section 15.3
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
CHOICE OF LAW
CONSENT TO JURISDICTION
WAIVER OF JURY TRIAL
120
120
120
121
iv
EXHIBITS AND SCHEDULES
Schedules
Commitment Schedule
Schedule 1
Schedule 2.22
Schedule 5.8
Schedule 5.13
Schedule 6.11
Schedule 6.13
Schedule 6.14(viii)
Schedule 6.14(xx)
Schedule 6.15
Schedule 6.16
—
—
—
—
—
—
—
—
—
—
Scheduled Restricted Investments (Section 1.1)/Specified Securities (Section 1.1)
Outstanding Letters of Credit (Section 2.22)
Subsidiaries (Section 5.8)
Ownership of Properties (Section 5.13)
Existing Indebtedness (Section 6. 11)
Investment Writedowns (Section 6.13)
Existing Investments (Section 6.14(viii))
Certain Acquisitions (Section 6.14(xx))
Existing Liens (Section 6.15)
Existing Affiliate Transactions (Section 6.16)
—
—
—
—
—
—
—
Form of Revolving Credit Note
Form of Term A Note
Form of Term B Note
Form of Swing Line Note
Form of Assignment and Assumption Agreement
Form of Compliance Certificate
Form of Intercreditor Agreement
Exhibits
Exhibit A
Exhibit B-l
Exhibit B-2
Exhibit C
Exhibit D
Exhibit E
Exhibit F
v
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amended and Restated Credit Agreement, dated as of March 25, 2008, is among MoneyGram International, Inc., a Delaware
corporation (“ Holdco ”), MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “ Borrower ”), the Lenders and
JPMorgan Chase Bank, N.A., a national banking association, as LC Issuer, as the Swing Line Lender, as Administrative Agent and as
Collateral Agent.
RECITALS
A. Holdco, the Administrative Agent and the financial institutions so designated on the Commitment Schedule (the “ Existing Lenders” ) are
party to that certain Amended and Restated Credit Agreement dated as of June 29, 2005 (as previously amended, the “ Existing Credit
Agreement ”).
B. Holdco, the Administrative Agent and the Existing Lenders wish to amend and restate the Existing Credit Agreement on the terms and
conditions set forth below to extend the Facility Termination Date, to add a new tranche of term loans, and to make the other changes
evidenced hereby.
C. MoneyGram Payment Systems Worldwide, Inc. wishes to become a party to this Agreement as the “Borrower” hereunder and to accept
and assume all of the rights and the obligations of the “Borrower”. Each financial institution so designated on the Commitment Schedule
wishes to become a Lender party to this Agreement and to accept and assume all the rights and obligations of a “Lender” with a Term B Loan.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements made herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Holdco, the Borrower, the Lenders and the Administrative Agent
hereby agree, subject to the terms and conditions hereof, that the Existing Credit Agreement is hereby amended and restated in its entirety as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . As used in this Agreement:
“ Accounts Receivable ” means net accounts receivable as reflected on a balance sheet in accordance with GAAP.
“ Acquisition ” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which
the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited
liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a coiporation
which have ordinary voting power for the election of directors (other than
1
securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the
outstanding ownership interests of a partnership or limited liability company.
“ Act ” is defined in Section 9.12.
“ Administrative Agent ” means JPMCB in its capacity as administrative agent of the Lenders pursuant to Article X, and not in its individual
capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article X.
“ Administrative Questionnaire ” means an administrative questionnaire in a form supplied by the Administrative Agent.
“ Advance ” means an advance of funds hereunder, (i) made by the applicable Lenders on the same Borrowing Date, or (ii) converted or
continued by the applicable Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the
several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. The term “Advance” shall include Swing
Line Loans unless otherwise expressly provided.
“ Affected Lender ” is defined in Section 2.23.
“ Affiliate ” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such
Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or
other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise; provided , that, in no event
shall any of GSMP V Onshore US, Ltd., GSMP V Offshore US, Ltd. and GSMP V Institutional US, Ltd. (“ GSMP ”) and their Subsidiaries
and other Persons engaged primarily in the investment of mezzanine securities that directly or indirectly are controlled by, or under common
control with, the same investment adviser as GSMP (collectively, “ GS Mezzanine Entities ”) or THL Credit Partners, L.P. or its Affiliates
(collectively, the “ THL Credit Entities ”), solely in the capacity of such GS Mezzanine Entity or THL Credit Entity as a holder of Second Lien
Indebtedness, be deemed to control Holdco or any of its Subsidiaries for any purposes under this Credit Agreement.
“ Aggregate Outstanding Revolving Credit Exposure ” means, at any time, the aggregate of the Outstanding Revolving Credit Exposure of
all the Lenders.
“ Aggregate Revolving Credit Commitment ” means the aggregate of the Revolving Credit Commitments of all the Lenders, as reduced or
increased from time to time pursuant to the terms hereof. The Aggregate Revolving Credit Commitment as of the date hereof is $250,000,000.
“ Aggregate Term B Loan Commitment ” means the aggregate of the Term B Loan Commitments of all the Lenders. The Aggregate Term B
Loan Commitment is $250,000,000.
2
“ Agreement ” means this credit agreement, as it may be amended, restated, amended and restated or otherwise modified and in effect from
time to time.
“ Alternate Base Rate ” means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate in effect on such day and
(ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. Any change in the Alternate Base Rate due to a change in
the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or
the Federal Funds Effective Rate, respectively.
“ Applicable Margin ” means (i) with respect to any Revolving Credit Advance which is a Floating Rate Advance and any portion of the
Term A Loan which bears interest at the Floating Rate, 2.50% per annum, (ii) with respect to any portion of the Term B Loan which bears
interest at the Floating Rate, 4.00% per annum, (iii) with respect to any Revolving Credit Advance which is a Eurodollar Advance and any
portion of the Term A Loan which bears interest at the Eurodollar Rate, 3.50% per annum, (iv) with respect to any portion of the Term B Loan
which bears interest at the Eurodollar Rate, 5.00% per annum and (v) with respect to any Swing Line Loan, 2.50% per annum.
“ Approved Fund ” is defined in Section 12.1(ii).
“ Arranger ” means J.P. Morgan Securities Inc. and its successors, in its capacities as Lead Arranger and Sole Book Runner.
“ Assignee ” is defined in Section 12.1(ii)(A).
“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Assignee (with the consent of any
party whose consent is required by Section 12.1) and accepted by the Administrative Agent, in the form of Exhibit D or any other form
approved by the Administrative Agent.
“ Authorized Officer ” means any of the Chairman, Chief Executive Officer, President, Chief Financial Officer, Treasurer, Assistant
Treasurer or Controller of the Borrower, acting singly.
“ Basket Amount ” means, at any time, the sum of:
(i) 50% of the Consolidated Net Income of the Borrower and the Borrower Subsidiaries for the period (taken as one accounting period)
from the first day of the first fiscal quarter following the Effective Date to the end of the Borrower’s most recently ended fiscal quarter for
which internal financial statements are available at such time or, in the case such Consolidated Net Income for such period is a deficit, minus
100% of such deficit (it being understood that gains from the sale or other disposition of Specified Securities are disregarded in the
computation of Consolidated Net Income); plus
(ii) 100% of the aggregate amount of cash contributed to the common equity capital of the Borrower following the Effective Date (other
than by a Borrower Subsidiary); plus
3
(iii) to the extent not already included in Consolidated Net Income, the lesser of (x) the aggregate amount received in cash by the
Borrower after the Effective Date as a result of the sale or other disposition (other than to the Borrower or a Borrower Subsidiary) of, or by
way of dividend, distribution or loan repayments on, Investments made pursuant to Section 6.14(xiv) by the Borrower and the Borrower
Subsidiaries after the Effective Date or (y) the initial amount of such Investments made in compliance with the terms of this Agreement after
the Effective Date.
“ Beneficial Owner ” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act. The terms “Beneficial
Ownership” and “Beneficially Own” have a corresponding meaning.
“ Borrower ” means MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation, and its successors and assigns.
“ Borrower Subsidiary ” means a Subsidiary of the Borrower.
“ Borrowing Date ” means a date on which a Credit Extension is made hereunder.
“ Borrowing Notice ” is defined in Section 2.11.
“ Business Combination ” means (i) any reorganization, consolidation, merger, share exchange or similar business combination transaction
involving Holdco with any Person or (ii) the sale, assignment, conveyance, transfer, lease or other disposition by Holdco of all or substantially
all of its assets.
“ Business Day ” means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Chicago and New York City for the conduct of substantially all of their commercial lending
activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and
New York for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire
system.
“ Capital Stock ” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person other than a corporation and any and all warrants, rights or options to
purchase any of the foregoing (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). The Purchase
Agreement Equity shall be Capital Stock, whether or not classified as indebtedness for purposes of GAAP.
“ Capitalized Lease ” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with GAAP.
4
“ Capitalized Lease Obligations ” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be
shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.
“ Cash and Cash Equivalents ” means:
(i) U.S. dollars or Canadian dollars;
(ii) (x) euros or any national currency of any participating member state of the EMU or (y) such local currencies held from time to time in
the ordinary course of business;
(iii) Government Securities;
(iv) securities issued by any agency of the United States or government-sponsored enterprise (such as debt securities or mortgage-backed
securities issued by Freddie Mac, Fannie Mae, Federal Home Loan Banks and other government-sponsored enteiprises), which may or may
not be backed by the full faith and credit of the United States, in each case maturing within three months or less and rated Aal or better by
Moody’s and AA+ or better by S&P;
(v) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition,
banker’s acceptances with maturities not exceeding 13 months and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500,000,000 in the case of a domestic bank and $250,000,000 (or the U.S. dollar equivalent as of the date
of determination) in the case of a foreign bank;
(vi) repurchase obligations for underlying securities of the types described in clauses (iii), (iv) and (v) entered into with any financial
institution meeting the qualifications specified in clause (iv) above;
(vii) commercial paper rated at least P-2 by Moody’s or at least A-2 by S&P and in each case maturing within 12 months after the date of
creation thereof;
(viii) investment funds investing 95% of their assets in securities of the types described in clauses (i) through (vi) above;
(ix) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having
one of the two highest rating categories obtainable from either Moody’s or S&P with maturities of 24 months or less from the date of
acquisition; and
(x) Scheduled Restricted Investments.
“ Change ” is defined in Section 3.2.
“ Change in Control ” means the occurrence of any of the following:
5
(i) any Person (other than the Sponsors) acquires Beneficial Ownership, directly or indirectly, of 50% or more of the combined voting
power of the then-outstanding voting securities of Holdco entitled to vote generally in the election of directors (“ Outstanding Corporation
Voting Stock ”);
(ii) the consummation of a Business Combination pursuant to which either (A) the Persons that were the Beneficial Owners of the
Outstanding Corporation Voting Stock immediately prior to such Business Combination Beneficially Own, directly or indirectly, less than
50% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or
equivalent) of the entity resulting from such Business Combination (including, without limitation, a company that, as a result of such
transaction, owns Holdco or all or substantially all of Holdco’s assets either directly or through one or more subsidiaries), or (B) any Person
(other than the Sponsors) Beneficially Owns, directly or indirectly, 50% or more of the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors (or equivalent) of the entity resulting from such Business Combination;
(iii) the failure by Holdco to directly own 100% of the Capital Stock of the Borrower;
(iv) the failure by the Borrower to own 100% of the Capital Stock of MoneyGram Payment Systems, Inc., a Delaware corporation; or
(v) the adoption of a plan relating to the liquidation of Holdco or the Borrower.
“ Class ”, when used in reference to any Loan or Advance, refers to whether such Loan, or the Loans comprising such Advance, are
Revolving Loans, Term A Loans, Term B Loans or Swing Line Loans.
“ Code ” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.
“ Collateral ” means all property with respect to which any security interests have been granted (or purported to be granted) to the Collateral
Agent pursuant to any Collateral Document.
“ Collateral Agent ” means JPMorgan Chase Bank, N.A., in the capacity of collateral agent for the Lenders and the other Secured Parties
named in the Collateral Documents.
“ Collateral Documents” means each security agreement, pledge agreement, mortgage and other document or instrument pursuant to which
security is granted to the Collateral Agent pursuant hereto for the benefit of the Secured Parties to secure the Obligations, including without
limitation that certain Amended and Restated Security Agreement, Amended and Restated Pledge Agreement, Amended and Restated
Trademark Security Agreement and Amended and Restated Patent Security Agreement, in each case dated as of the date hereof and made
between the Borrower, Holdco and one or more other Loan Parties and the Collateral Agent.
6
“ Commitment ” means a Revolving Credit Commitment or Term B Loan Commitment.
“ Commitment Schedule ” means the Schedule attached hereto identified as such.
“ Consolidated Depreciation and Amortization Expense ” means, with respect to any Person for any period, the total amount of depreciation
and amortization expense, including the amortization of deferred financing fees of such Person and its Subsidiaries for such period on a
consolidated basis.
“ Consolidated EBITDA ” means with respect to any Person for any period, the Consolidated Net Income of such Person for such period:
(i) increased (without duplication) to the extent deducted in computing the Consolidated Net Income of such Person for such period by:
(A) provision for taxes based on income or profits or capital gains of such Person and its Subsidiaries (including any tax sharing
arrangements); plus
(B) Consolidated Interest Expense of such Person (including costs of surety bonds in connection with financing activities, to the extent
included in Consolidated Interest Expense); plus
(C) Consolidated Depreciation and Amortization Expense of such Person; plus
(D) any fees and expenses incurred, or any amortization thereof regardless of how characterized by GAAP, in connection with the
Transactions, any acquisition, disposition, recapitalization, Investment, asset sale, issuance or repayment of Indebtedness, issuance of
Capital Stock, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction
consummated prior to the date hereof and any such transaction undertaken but not completed) and any charges or non-recurring merger
costs incurred as a result of any such transaction; plus
(E) other non-cash charges reducing the Consolidated Net Income of such Person, excluding any such charge that represents an
accrual or reserve for a cash expenditure for a future period; plus
(F) the amount of any minority interest expense deducted in calculating the Consolidated Net Income of such Person (less the amount
of any cash dividends or distributions paid to the holders of such minority interests); plus
(G) non-recurring or unusual losses or expenses (including costs and expenses of litigation included in Consolidated Net Income
pursuant to clause (ii) of the definition of Consolidated Net Income) and severance, legal settlement, relocation costs, curtailments or
modifications to pension and post-retirement employee benefit plans, the amount of any restructuring charges or reserves deducted,
including any restructuring costs incurred in connection with
7
acquisitions, costs related to the closure, opening and/or consolidation of facilities, retention charges, systems establishment costs,
spin-off costs, transition costs associated with transferring operations offshore and other transition costs, signing, retention and
completion bonuses, conversion costs and excess pension charges and consulting fees incurred in connection with any of the foregoing
and amortization of signing bonuses; plus
(H) the amount of loss on sale of receivables and related assets in connection with a Receivables Transaction;
(ii) to the extent deducted or added in computing Consolidated Net Income of such Person for such period, increased or decreased by
(without duplication) any non-cash net loss or gain resulting from currency remeasurements of indebtedness (including any non-cash net
loss or gain resulting from hedge agreements for currency exchange risk); and
(iii) decreased (without duplication) to the extent included in computing Consolidated Net Income of such Person for such period by:
(A) non-cash items increasing Consolidated Net Income of such Person and its Subsidiaries, excluding any items which represent the
reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period; plus
(B) non-recurring or unusual gains increasing Consolidated Net Income of such Person and its Subsidiaries.
“ Consolidated Interest Expense ” means with respect to any Person for any period, the sum, without duplication, of:
(i) consolidated interest expense of such Person and its Subsidiaries for such period, to the extent such expense was deducted in
computing Consolidated Net Income for such period (including (A) amortization of deferred financing fees, debt issuance costs,
commissions, fees, expenses and original issue discount resulting from the issuance of indebtedness at less than par, (B) all commissions,
discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (C) non-cash interest payments (but
excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of Rate Management Obligations or
other derivative instruments pursuant to Financial Accounting Standards Board Statement No. 133 — “Accounting for Derivative
Instruments and Rate Management Activities”), (D) the interest component of Capitalized Lease Obligations and (E) net payments, if any,
pursuant to interest rate Rate Management Obligations with respect to Indebtedness); plus
(ii) consolidated capitalized interest of such Person and its Subsidiaries for such period, whether paid or accrued.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate implicit in such
Capitalized Lease Obligation in accordance
8
with GAAP. For purposes of clarity, no obligations in respect of Purchase Agreement Equity, whether or not classified as indebtedness in
accordance with GAAP, shall constitute interest expense.
“ Consolidated Net Income ” means, with respect to any Person for any period, the Net Income of such Person and its Subsidiaries
calculated on a consolidated basis for such period; provided , however , that:
(i) to the extent included in Net Income for such period and without duplication:
(A) there shall be excluded in computing Consolidated Net Income (x) all extraordinary gains and (y) all extraordinary losses;
(B) the Net Income for such period shall not include the cumulative effect of a change in accounting principles or policies during such
period, whether effected through a cumulative effect adjustment or a retroactive application in each case in accordance with GAAP;
(C) any net after-tax income (loss) from disposed or discontinued operations and any net after-tax gains or losses on disposal of
disposed or discontinued operations shall be excluded;
(D) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the
ordinary course of business, as determined in good faith by the Borrower, shall be excluded;
(E) the Net Income for such period of any Person that is not a Subsidiary thereof or that is accounted for by the equity method of
accounting, shall be excluded, except to the extent of the amount of dividends or distributions or other payments that are actually paid in
cash (or to the extent converted into cash) to the referent Person or a Subsidiary thereof in respect of such period;
(F) solely for the purpose of determining the amount available for Restricted Payments under Section 6.10(viii), the Net Income or
loss for such period of any Subsidiary of such Person will be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable to that Subsidiary or its stockholders, unless such restriction
with respect to the payment of dividends or similar distributions has been legally waived or such income has been dividended or
distributed to the Borrower or any of its Subsidiaries without such restriction (in which case the amount of such dividends or distributions
or other payments that are actually paid in cash (or converted into cash) to the referent Person in respect of such period shall be included
in Net Income); provided , however , that for the avoidance of doubt, any restrictions based solely
9
on (1) financial maintenance requirements imposed as a matter of state regulatory requirements or (2) the type of restriction set forth in
Section 6.15 (xvii) or excluded from the definition of Liens pursuant to clause (ii) or (iv) of the definition thereof shall not result in the
exclusion of Net Income (loss); and provided , further , that any net loss of any Subsidiary of such Person shall not be excluded pursuant
to this clause (F);
(G) any net after-tax income (loss) from the early extinguishment of Indebtedness or Rate Management Obligations or other derivative
instruments shall be excluded;
(H) any Net Income (loss) for such period will be excluded to the extent it relates to the impairment or appreciation of, or it is realized
out of the income (or loss) generated by, or from the sale or disposition of, any assets included in the Scheduled Restricted Investments;
(I) any Net Income (loss) for such period will be excluded to the extent it relates to the impairment or appreciation of, or it is realized
out of the income (or loss) generated by, or from the sale or disposition of, any Specified Security or any asset included in the Restricted
Investment Portfolio;
(J) any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statement No. 142 “Goodwill and
Other Intangible Assets” or Financial Accounting Standards Board Statement No. 144 “Accounting for the Impairment or Disposal of
Long-Lived Assets” and the amortization of intangibles arising pursuant to Financial Accounting Standards Board Statement No. 141
“Business Combinations” will be excluded;
(K) any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or
other rights and any non-cash charges associated with the rollover, acceleration or payout of Capital Stock by management of the
Borrower or any direct or indirect parent of the Borrower in connection with Transactions shall be excluded; and
(L) any non-cash items included in the Consolidated Net Income of the Borrower as a result of an agreement of the Sponsors in
respect of any equity participation shall be excluded; and
(ii) to the extent not already deducted from Net Income for such period, any costs associated with any operational expenses or litigation
costs or expenses (including any judgment or settlement) made by any direct or indirect parent of the Borrower in respect of which the
Borrower has made a Restricted Payment pursuant to Sections 6.10(iv) or (v) shall be deducted from Net Income.
For purposes of clarity, any impact in respect of Purchase Agreement Equity, whether or not classified as indebtedness in accordance with
GAAP, shall be excluded from Consolidated Net Income.
10
Notwithstanding the foregoing, for the purpose of Section 6.10 only and in order to avoid double counting, there shall be excluded from
Consolidated Net Income any income arising from any sale or other disposition of Investments made by the Borrower and the Borrower
Subsidiaries, any repurchases and redemptions of Investments from the Borrower and the Borrower Subsidiaries, any repayments of loans and
advances that constitute Investments by the Borrower or any Borrower Subsidiary, in each case to the extent such amounts increase clause
(iii) of the definition of Basket Amount.
“ Consolidated Senior Secured Indebtedness ” means, at any time, the sum of indebtedness for borrowed money that is secured by Liens and
Capitalized Lease Obligations, in each case of any Person and its Subsidiaries calculated on a consolidated basis as of such time. For purposes
of clarity, (i) the Second Lien Indebtedness shall constitute Consolidated Senior Secured Indebtedness and (ii) no obligations in respect of
Purchase Agreement Equity, whether or not classified as indebtedness in accordance with GAAP, shall constitute Consolidated Senior Secured
Indebtedness.
“ Contingent Obligation ” is defined in the definition of Indebtedness.
“ Contract ” is defined in Section 5.3
“ Controlled Group ” means all members of a controlled group of corporations or other business entities and all trades or businesses
(whether or not incorporated) under common control which, together with Holdco or any of its Subsidiaries, are treated as a single employer
under Section 414 of the Code.
“ Conversion/Continuation Notice ” is defined in Section 2.12.
“ Credit Extension ” means the making of an Advance or the issuance, amendment, renewal or extension of a Letter of Credit.
“ Credit Extension Date ” means the Borrowing Date for an Advance or the date of the issuance, amendment (to the extent it increases the
amount available for draw thereunder), renewal or extension of a Letter of Credit.
“ D&T Deliverables ” means the Satisfactory Audit Opinion and Deloitte & Touche LLP’s consent to file the Satisfactory Audit Opinion in
Holdco’s Annual Report on Form 10-K.
“ Default ” means an event described in Article VII.
“ Disgorged Recovery ” means the portion, if any, of any payment or other distribution received by a Lender in satisfaction of Obligations
of a Loan Party to such Lender, that is required in any Insolvency Proceedings or otherwise to be disgorged, turned over or otherwise paid to
such Loan Party, such Loan Party’s estate or creditors of such Loan Party, whether because the transfer of such payment or other property is
avoided or otherwise, including, without limitation, because it was determined to be a fraudulent or preferential transfer.
“ Disqualified Institutions ” means those banks, financial institutions and other Persons that are competitors of the Borrower and its
Subsidiaries or Affiliates of such competitors and
11
are identified as such to the Administrative Agent on the date hereof and additional competitors or Affiliates thereof identified to the
Administrative Agent from time to time; provided that if such identified Person is a commercial bank, the global funds transfer or payment
services activities of which are merely incidental to its primary business (an “ Incidental Competitor ”) and which is not an Affiliate of a
competitor of the Borrower (other than an Incidental Competitor), the inclusion of such Person as a Disqualified Institution shall be reasonably
acceptable to the Administrative Agent.
“ Disqualified Stock ” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any
security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily
redeemable (other than as a result of a change of control or asset sale), pursuant to a sinking fund obligation or otherwise, or is redeemable at
the option of the holder thereof (other than as a result of a change of control or asset sale) in whole or in part, in each case prior to the date
91 days after the Facility Termination Date; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees,
directors, managers or consultants of Holdco or its Subsidiaries (or their direct or indirect parent) or by any such plan to such employees,
directors, managers, consultants (or their respective estates, heirs, beneficiaries, transferees, spouses or former spouses), such Capital Stock
shall not constitute Disqualified Stock solely because it may be required to be repurchased by Holdco or its Subsidiaries in order to satisfy
applicable statutory or regulatory obligations. For purposes hereof, the amount (or principal amount) of any Disqualified Stock shall be equal to
its voluntary or involuntary liquidation preference.
“ Dollars ” means lawful currency of the United States of America.
“ Domestic Subsidiary ” means any Subsidiary of the Borrower that is (i) organized under the laws of the United States of America, any
state thereof or the District of Columbia or (ii) a disregarded entity for U.S. federal income tax purposes the sole assets of which are Capital
Stock of Subsidiaries that are not organized under the laws of the United States of America, any state thereof or the District of Columbia.
“ Effective Date ” means the date on which the conditions specified in Section 4.1 have been satisfied (or waived in accordance with
Section 8.2) and the Term B Loan is funded, which is the date hereof.
“ Effective Date MAE ” means any circumstance, event, change, development or effect that, (a) is material and adverse to the financial
position, results of operations, business, assets or liabilities of Holdco and its Subsidiaries, taken as a whole, (b) would materially impair the
ability of Holdco and its Subsidiaries, taken as a whole, to perform their obligations under the Loan Documents, (c) would materially impair
the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents, taken as a whole, or (d) would materially
impair the ability of Holdco to perform its obligations under the Equity Purchase Agreement or otherwise materially threaten or materially
impede the consummation of the Purchase (as defined in the Equity Purchase Agreement) and the other transactions contemplated by the
Equity Purchase Agreement; provided , however , that the impact of the following matters shall be disregarded: (i) changes in general
economic, financial market, credit market, regulatory or political conditions (whether resulting from acts of war or terrorism, an escalation of
hostilities
12
or otherwise) generally affecting the U.S. economy, foreign economies or the industries in which Holdco or its Subsidiaries operate,
(ii) changes in generally accepted accounting principles, (iii) changes in laws of general applicability or interpretations thereof by any
Governmental Entities (as defined in the Equity Purchase Agreement), (iv) any change in Holdco’s stock price or trading volume, in and of
itself, or any failure, in and of itself, by Holdco to meet revenue or earnings guidance published or otherwise provided to the Administrative
Agent or the Lenders ( provided that any fact, condition, circumstance, event, change, development or effect underlying any such failure or
change, other than any of the foregoing that is otherwise excluded pursuant to clauses (i) through (viii) hereof, may be taken into account in
determining whether an Effective Date MAE has occurred or would reasonably be expected to occur), (v) losses resulting from any change in
the valuations of Holdco’s portfolio of securities or sales of such securities and any effect resulting from such changes or sales, (vi) actions or
omissions of Holdco or the Sponsors taken as required by the Equity Purchase Agreement or with the prior written consent of the
Administrative Agent, (vii) public announcement, in and of itself, by a third party not affiliated with Holdco of any proposal to acquire the
outstanding securities or all or substantially all of the assets of Holdco and (viii) the public announcement of the Loan Documents and the
transactions contemplated thereby (provided that this clause (viii) shall not apply with respect to Sections 1.2(c)(v), 2.2(d), 2.2(h) and 2.2(k) of
the Equity Purchase Agreement); provided further , however , that Effective Date MAE shall be deemed not to include the impact of the
foregoing clauses (i), (ii) and (iii), in each case only insofar and to the extent that such circumstances, events, changes, developments or effects
described in such clauses do not have a disproportionate effect on Holdco and its Subsidiaries (exclusive of its payments systems business)
relative to other participants in the industry.
“ EMU ” means the economic and monetary union as contemplated in the Treaty on European Union.
“ Environmental Laws ” means any Laws relating to pollution, the environment or natural resources.
“ Equity Purchase Agreement ” means that certain Amended and Restated Purchase Agreement, dated as of March 17, 2008, among Holdco
and the several “Investors” named therein, including all exhibits and schedules thereto, as in effect on the date hereof.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any applicable rule or
regulation issued thereunder.
“ Eurodollar Advance ” means an Advance which, except as otherwise provided in Section 2.14, bears interest at the applicable Eurodollar
Rate plus the Applicable Margin.
“ Eurodollar Base Rate ” means, with respect to any Eurodollar Advance for any Interest Period, the rate appearing on Telerate Page 3750
(or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable
to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits
13
with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “Eurodollar
Base Rate” with respect to such Eurodollar Advance for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a
maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such
Interest Period.
“ Eurodollar Loan ” means a Loan which, except as otherwise provided in Section 2.14, bears interest at the applicable Eurodollar Rate plus
the Applicable Margin.
“ Eurodollar Rate ” means, with respect to any Eurodollar Advance for any Interest Period, an interest rate per annum equal to the greater of
(x) the Eurodollar Base Rate for such Interest Period multiplied by the Statutory Reserve Rate (rounded upwards, if necessary, to the next 1/16
of 1%) and (y) 2.5% per annum.
“ Excess Cash Flow ” means, for any fiscal year of Holdco, the excess, if any, of:
(i) the sum, without duplication, for such period of:
(A) Consolidated EBITDA (it being understood, for avoidance of doubt, that any Specified Equity Contribution shall not increase
Consolidated EBITDA for purposes of this definition);
(B) foreign currency translation gains received in cash related to currency remeasurements of indebtedness (including any net cash
gain resulting from hedge agreements for currency exchange risk), to the extent not otherwise included in calculating Consolidated
EBITDA;
(C) net cash gains resulting in such period from Rate Management Obligations and the application of Statement of Financial
Accounting Standards No. 133 and International Accounting Standards No. 39 and their respective pronouncements and interpretations,
to the extent not otherwise included in calculating Consolidated EBITDA, including pursuant to clause (ii) of EBITDA;
(D) extraordinary, unusual or nonrecurring cash gains (other than gains on asset sales in the ordinary course of business, including
Portfolio Securities), to the extent not otherwise included in calculating Consolidated EBITDA; and
(E) to the extent not otherwise included in calculating Consolidated EBITDA, cash gains from any sale or disposition outside the
ordinary course of business (excluding gains from Prepayment Events to the extent an amount equal to the Net Proceeds therefrom was
applied to the prepayment of Term B Loans pursuant to Section 2.10(ii));
minus
(ii) the sum, without duplication, for such period of:
14
(A) the amount of any taxes, including taxes based on income, profits or capital, state, franchise and similar taxes, foreign withholding
taxes and foreign unreimbursed value added taxes (to the extent added in calculating Consolidated EBITDA), and including penalties and
interest on any of the foregoing, in each case, payable in cash by Holdco and its Subsidiaries (to the extent not otherwise deducted in
calculating Consolidated EBITDA), including payments made pursuant to any tax sharing agreements or arrangements among Holdco, its
Subsidiaries and any direct or indirect parent of Holdco (so long as such tax sharing payments are attributable to the operations of Holdco
and its Subsidiaries);
(B) Consolidated Interest Expense, including costs of surety bonds in connection with financing activities (to the extent included in
Consolidated Interest Expense), to the extent payable in cash and not otherwise deducted in calculating Consolidated EBITDA;
(C) foreign currency translation losses paid in cash related to currency remeasurements of indebtedness (including any net cash loss
resulting from hedge agreements for currency risk), to the extent not otherwise deducted in calculating Consolidated EBITDA;
(D) without duplication of amounts deducted pursuant to this clause (D) or clause (P) below in respect of a prior fiscal year, capital
expenditures of Holdco and its Subsidiaries made in cash prior to the date the applicable Excess Cash Flow prepayment is required to be
made pursuant to Section 2.10(iii);
(E) repayments of long-term Indebtedness (including (i) payments of the principal component of Capitalized Lease Obligations,
(ii) the repayment of Loans pursuant to Section 2.10 (but excluding prepayments of Loans deducted pursuant to clause (B) of
Section 2.10(iii)), (iii) the repayment of indebtedness with respect to any Receivables Transaction and (iv) the aggregate amount of any
premium, make-whole or penalties paid in connection with any such repayments of Indebtedness, made by Holdco and its Subsidiaries,
but only to the extent that, in each case, such repayments (x) by their terms cannot be reborrowed or redrawn and (y) are not financed
with the proceeds of long-term Indebtedness (other than revolving Indebtedness)) and increases in Consolidated Net Income due to a sale,
transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or condemnation or similar
proceeding) but not in excess of the amount of such increase;
(F) without duplication of amounts deducted pursuant to this clause (F) or clause (P) below in respect of a prior fiscal year, the amount
of Investments permitted by Section 6.14 (other than Investments in (x) Cash Equivalents and (y) Holdco or any of its Subsidiaries) made
by Holdco and its Subsidiaries in cash prior to the date the applicable Excess Cash Flow prepayment is required to be made pursuant to
Section 2.10(iii);
15
(G) letter of credit fees paid in cash, to the extent not otherwise deducted in calculating Consolidated EB1TDA;
(H) extraordinary, unusual or nonrecurring cash charges, to the extent not otherwise deducted in calculating Consolidated EB1TDA;
(I) cash fees and expenses incurred in connection with the Transactions, any acquisition, disposition, recapitalization, Investment,
asset sale, the issuance or repayment of any Indebtedness, issuance of Capital Stock, refinancing transaction or amendment or
modification of any debt instrument (in each case, including any such transaction consummated prior to the date hereof and any such
transaction undertaken but not completed) and any cash charges or cash non-recurring merger costs incurred during such period as a
result of any such transaction or other early extinguishment of Indebtedness permitted by this Agreement (in each case, whether or not
consummated);
(J) cash charges or losses added to Consolidated EBITDA pursuant to clauses (F), (G) and (H) and to Consolidated Net Income
pursuant to clauses (i) (B), (G), (H), (I), (J) or clause (ii);
(K) the amount of Restricted Payments made by Holdco to the extent permitted by clause (iii), (iv), (v), (vii), (ix) or (x) of
Section 6.10;
(L) cash expenditures in respect of Rate Management Obligations (including net cash losses resulting in such period from Rate
Management Obligations and the application of Statement of Financial Accounting Standards No. 133 and International Accounting
Standards No. 39 and their respective pronouncements and interpretations), to the extent not otherwise deducted in calculating
Consolidated EBITDA, including pursuant to clause (ii) or Consolidated EBITDA;
(M) to the extent added to Consolidated Net Income, cash losses from any sale or disposition outside the ordinary course of business;
(N) cash payments by Holdco and its Subsidiaries in respect of long-term liabilities (other than Indebtedness) of Holdco and its
Subsidiaries;
(O) the aggregate amount of expenditures actually made by Holdco and its Subsidiaries in cash (including expenditures for the
payment of financing fees) to the extent that such expenditures are not expensed and signing bonus expenditures;
(P) without duplication of amounts deducted from Excess Cash Flow in respect of a prior fiscal year, the aggregate consideration
required to be paid in cash by Holdco and its Subsidiaries pursuant to binding contracts (the “ Contract Consideration ”) entered into prior
to or during such fiscal year relating to Investments permitted by Section 6.14 (other than Investments in (x) Cash Equivalents and
(y) Holdco or any of its Subsidiaries) or capital expenditures to
16
be consummated or made plus cash restructuring expenses to be incurred, in each case, during the period of 4 consecutive fiscal quarters
of Holdco following the end of such fiscal year; provided that to the extent the aggregate amount actually utilized to finance such capital
expenditures or Investments during such period of 4 consecutive fiscal quarters is less than the Contract Consideration, the amount of
such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of 4 consecutive fiscal quarters;
(Q) interest which is accrued and paid in kind or as an addition to the outstanding principal amount of the Second Lien Indebtedness in
lieu of the payment of interest in cash; and
(R) to the extent added to Consolidated Net Income, Excess Specified Security Sale Proceeds.
“ Excess Specified Security Sale Proceeds ” means, in the case of Specified Securities listed under “C-2” on Schedule 1, the excess, if any,
of the aggregate Net Proceeds received by the Borrower or any Borrower Subsidiary from the sale or other disposition of, or any payment of
principal of, or return on investment in respect of, such Specified Securities listed under “C-2” after February 29, 2008 over $34,000,000 and,
in the case of Specified Securities listed under “C-3” on Schedule 1, the aggregate Net Proceeds received by the Borrower or any Borrower
Subsidiary from the sale or other disposition of, or any payment of principal of, or return on investment in respect of, such Specified Securities
listed under “C-3” after February 29, 2008.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“ Excluded Taxes ” means, in the case of each Lender, LC Issuer or applicable Lending Installation and the Administrative Agent, taxes
imposed on its overall net income, and franchise taxes and branch profits taxes imposed on it, by (i) the jurisdiction under the laws of which
such Lender, LC Issuer or the Administrative Agent is incorporated or organized or (ii) the jurisdiction in which the Administrative Agent’s or
such Lender’s or LC Issuer’s principal executive office or such Lender’s or LC Issuer’s applicable Lending Installation is located.
“ Existing Credit Agreement ” is defined in the Recitals hereto.
“ Existing Lenders” is defined in the Recitals hereto.
“ Facility Termination Date ” means the earlier of (i) March 25, 2013 and (ii) with respect to the Revolving Credit Commitment only, any
earlier date on which the Aggregate Revolving Credit Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.
“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business
Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
17
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
“ Final 10-K ” shall mean Holdco’s Annual Report on Form 10-K for the year ended December 31, 2007, in a form identical to a form that
shall have been provided to each of the Lenders and the Investors not less than one day prior to the Effective Date, which shall be in a form
acceptable to each of the Lenders and the Investors in its respective sole judgment and discretion, in compliance with all applicable rules
promulgated under the Exchange Act, excluding any rules related to filing deadlines, which such Final 10-K does not disclose or identify any
material weakness in the design or operation of internal controls which could adversely affect Holdco’s ability to record, process, summarize
and report financial data.
“ Financial Condition ” means, for any date, (i) prior to the Sell Down Date, the Leverage Ratio (as defined in the Indenture) for the
Borrower’s most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date
would be less than 3.50 to 1.00, and (ii) on or after the Sell Down Date, the Fixed Charge Coverage Ratio (as defined in the Indenture) for the
Borrower’s most recently ended four fiscal quarters for which internal financial statements are available immediately preceding such date
would be at least 2.00 to 1.00, in each case determined on a pro forma basis (including a pro forma application of the net proceeds of any
Indebtedness incurred on such date, as if the additional Indebtedness had been incurred and the application of proceeds therefrom had occurred
at the beginning of such four-quarter period.
“ Financial Officer ” means the chief financial officer, the controller, the treasurer, any assistant treasurer or any other officer with
responsibilities customarily performed by such officers.
“ Floating Rate ” means, for any day, a rate per annum equal to the Alternate Base Rate for such day, in each case changing when and as the
Alternate Base Rate changes.
“ Floating Rate Advance ” means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate plus
the Applicable Margin.
“ Floating Rate Loan ” means a Loan which, except as otherwise provided in Section 2.14, bears interest at the Floating Rate plus the
Applicable Margin.
“ Foreign Plan ” is defined in Section 5.9(iv).
“ Foreign Subsidiary ” means any Subsidiary of the Borrower that is not a Domestic Subsidiary.
“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States.
“ Government Securities ” means securities that are:
(i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or
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(ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of the
principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of the
principal of or interest on the Government Securities evidenced by such depository receipt.
“ Governmental Entity ” means any nation, sovereign or government, any state, province, territory or other political subdivision thereof, any
regulatory agency, commission, court, body, entity or authority exercising executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, including a central bank or stock exchange.
“ Guarantors ” means Holdco, MoneyGram Payment Systems, Inc., a Delaware corporation, FSMC, Inc., a Minnesota corporation,
MoneyGram Investments, LLC, a Delaware limited liability company, PropertyBridge, Inc., a Delaware corporation, MoneyGram of New
York LLC, a Delaware limited liability company, any Person which becomes a Guarantor pursuant to the last sentence of Section 6.21, and
each other Wholly-Owned Subsidiary which, after the date hereof, becomes a Material Domestic Subsidiary of the Borrower, and its successors
and assigns, other than an SPE.
“ Guaranty ” means that certain Amended and Restated Guaranty dated as of the date hereof executed by each Guarantor in favor of the
Administrative Agent, for the ratable benefit of the Lenders and the Secured Parties, as it may be amended or modified (including by joinder
agreement) and in effect from time to time.
“ Hazardous Materials ” means (i) petroleum and petroleum by-products, asbestos that is friable, radioactive materials, medical or infectious
wastes or polychlorinated biphenyls and (ii) any other material, substance or waste that is prohibited, limited or regulated by Environmental
Law because of its hazardous, toxic or deleterious properties or characteristics.
“ Holdco ” means MoneyGram International, Inc., a Delaware corporation and the parent corporation of the Borrower.
“ Holdco Patents ” means all patents and patent applications currently owned by Holdco and its Subsidiaries that are material to the business
of Holdco and its Subsidiaries, taken as a whole, as currently conducted.
“ Indebtedness ” of a Person means, without duplication, such Person’s (i) obligations for borrowed money, (ii) obligations representing the
deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person’s business), (iii) to
the
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extent not otherwise included in this definition, Indebtedness of another Person whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations (or, without double counting,
reimbursement obligations in respect thereof) which are evidenced by notes, acceptances, or other similar instruments to the extent not
collateralized with Cash and Cash Equivalents or banker’s acceptances, (v) Capitalized Lease Obligations, (vi) letters of credit or similar
instruments which are issued upon the application of such Person or upon which such Person is an account party to the extent not collateralized
with Cash and Cash Equivalents or banker’s acceptances, (vii) to the extent not otherwise included, any obligation (each, a “ Contingent
Obligation ”) by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person, other than by
endorsement of negotiable instruments for collection in the ordinary course of business, (viii) Rate Management Obligations, (ix) Receivables
Transaction Attributed Indebtedness and (x) any other obligation for borrowed money or other financial accommodation which in accordance
with GAAP would be shown as a liability on the consolidated balance sheet of such Person. For the purposes hereof, the amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by the guaranteeing Person in good faith. In respect of Indebtedness of another Person secured by a Lien on the
assets of the specified Person, the amount of such Indebtedness shall be the lesser of the fair market value of such assets at the date of
determination and the amount of the Indebtedness of the other Person secured by such asset. Notwithstanding the foregoing, the following shall
not constitute Indebtedness: (i) obligations under Repurchase Agreements, (ii) Payment Services Obligations, (iii) obligations to repay Payment
Instruments Funding Amounts, (iv) Rate Management Obligations (to the extent incurred in the ordinary course of business and not for
speculative purposes), (v) Purchase Agreement Equity, (vi) ordinary course contractual obligations with clearing banks relative to clearing
accounts and (vii) Receivables Transactions Attributed Indebtedness so long as the aggregate outstanding amount thereof at the time of
determination is not in excess of $300,000,000 (but any excess amount thereof over $300,000,000 shall constitute Indebtedness).
“ Indenture ” means that certain Indenture, to be dated as of and effective as of the Effective Date, among the Borrower, the guarantors party
thereto and Deutsche Bank Trust Company Americas, as trustee, in the form attached as an exhibit to the Note Purchase Agreement or as
amended after the Effective Date from time to time in accordance with the Intercreditor Agreement.
“ Infringe ” means, in relation to Intellectual Property, infringing upon, misappropriating or violating the rights of any third party.
“ Insolvency Proceedings ” means, with respect to any Person, any case or proceeding with respect to such Person under U.S. federal
bankruptcy laws or any other state, federal or foreign bankruptcy, insolvency, reorganization, liquidation, receivership or other similar laws, or
the appointment, whether at common law, in equity or otherwise, of any trustee, custodian, receiver, liquidator or the like for all or any material
portion of the property of such Person.
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“ Intellectual Property ” means the following and all rights pertaining thereto: (i) patents, patent applications, provisional patent applications
and statutory invention registrations (including all utility models and other patent rights under the Laws of all countries), (ii) trademarks,
service marks, trade dress, logos, trade names, service names, corporate names, domain names and other brand identifiers, registrations and
applications for registration thereof, (iii) copyrights, databases, and registrations and applications for registration thereof, (iv) confidential and
proprietary information, trade secrets, and know-how and (v) all similar rights, however denominated, throughout the world.
“ Intercreditor Agreement ” means that certain Intercreditor Agreement, to be dated as of and effective as of the Effective Date, among the
Collateral Agent, Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent for the Second Priority Secured Parties (as defined
therein), the Borrower, Holdco and the other Guarantors in substantially the form of Exhibit F hereto.
“ Interest Period ” means, with respect to a Eurodollar Advance, a period of one, two, three or six months (or, if available to all relevant
Lenders, nine or twelve months or a period shorter than one month) commencing on a Business Day selected by the Borrower pursuant to this
Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months (or other
applicable period) thereafter, provided , however , that if there is no such numerically corresponding day in such next, second, third or sixth (or
other corresponding) succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth (or other
corresponding) succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day, provided , however , that if said next succeeding Business Day falls in a new calendar month, such
Interest Period shall end on the immediately preceding Business Day.
“ Investment ” of a Person means all investments by such Person in any other Person in the form of any loan, advance (other than
commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than
accounts receivable arising in the ordinary course of business on terms customary in the trade), contribution of capital by such Person or
Capital Stock, bonds, mutual funds, notes, debentures or other securities of such other Person.
“ Investors ” has the meaning set forth in the Equity Purchase Agreement.
“ JPMCB ” means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors.
“ Law ” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, code, order, injunction, arbitration
award, writ, decree, agency requirement, license or permit of any Governmental Entity.
“ LC Disbursement ” means a payment made by the LC Issuer pursuant to a Letter of Credit which has not yet been reimbursed by or on
behalf of the Borrower.
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“ LC Exposure ” means, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(ii) the aggregate amount of all LC Disbursements at such time. The LC Exposure of any Lender at any time shall be its Pro Rata Share of the
total LC Exposure at such time.
“ LC Fee ” is defined in Section 2.22(xi).
“ LC Issuer ” means JPMorgan Chase Bank, N.A. and each other Lender that agrees in writing with the Borrower to issue Letters of Credit
(provided that notice of such agreement is given to the Administrative Agent), in each case, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.22(ix). Each LC Issuer may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of such LC Issuer, in which case the term “LC Issuer” shall include any such Affiliate with respect
to Letters of Credit issued by such Affiliate. With respect to any Letter of Credit, “LC Issuer” shall mean the issuer thereof.
“ Lenders ” means the lending institutions listed on the signature pages of this Agreement, any Person which becomes a party hereto
pursuant to Section 2.8(iii) and their respective successors and assigns. Unless otherwise specified, the term “Lenders” includes a Lender in its
capacity as the Swing Line Lender.
“ Lending Installation ” means, with respect to a Lender or the Administrative Agent, the office, branch, subsidiary or affiliate of such
Lender or the Administrative Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the
Administrative Agent pursuant to Section 2.20.
“ Letter of Credit ” means any letter of credit issued pursuant to this Agreement (including any Outstanding Letter of Credit).
“ Letter of Credit Application ” means a letter of credit application or agreement entered into or submitted by the Borrower pursuant to
Section 2.22(ii).
“ Lien ” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, encumbrance or preference, priority or other
security agreement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement). For the purposes hereof, none of the following shall be deemed to be Liens: (i) setoff
rights or statutory liens arising in the ordinary course of business, (ii) restrictive contractual obligations with respect to assets comprising the
Payment Instruments Funding Amounts or Payment Service Obligations, provided that such contractual obligations are no more restrictive in
nature than those in effect on the Effective Date, (iii) Liens purported to be created under Repurchase Agreements, provided that such Liens do
not extend to any assets other than those that are the subject of such Repurchase Agreements, (iv) ordinary course of business contractual
obligations with clearing banks relative to clearing accounts or (v) operating leases.
“ Loan ” means a Revolving Loan, a Term A Loan, Term B Loan or a Swing Line Loan.
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“ Loan Documents ” means this Agreement, any amendment hereto, any Letter of Credit Application, any Notes issued pursuant to
Section 2.16, the Guaranty and the Collateral Documents.
“ Loan Parties ” means the Borrower, Holdco and each of the other Guarantors that is a party to a Loan Document.
“ Material Adverse Effect ” means any event, condition or circumstance that has occurred since the Effective Date that could reasonably be
expected to have a material adverse effect on (i) the business, financial condition, results of operations or assets of Holdco and its Subsidiaries,
taken as a whole, (ii) the ability of the Loan Parties, taken as a whole, to perform their obligations under the Loan Documents or (iii) the rights
or remedies of the Administrative Agent or the Lenders under the Loan Documents, taken as a whole (other than, in each case, as related to:
(A) the valuation of the investment portfolio of Holdco and its Subsidiaries and (B) any shareholder or derivative litigation arising as a result of
the transactions contemplated hereby and/or the disclosure of or failure to disclose information related to the valuation of the investment
portfolio of Holdco and its Subsidiaries).
“ Material Domestic Subsidiary ” means a Domestic Subsidiary (other than an SPE) which either (i) has 5% or more of the assets (valued at
the greater of book or fair market value) of the Borrower and its Subsidiaries determined on a consolidated basis as of the fiscal quarter end
next preceding the date of determination, (ii) is responsible for 5% or more of Consolidated Net Income for the four quarter period ending on
the fiscal quarter end next preceding the date of determination or (iii) has been designated as a Material Domestic Subsidiary by the Borrower.
“ Material Indebtedness ” means Indebtedness and/or Rate Management Obligations in an outstanding principal or net payment amount of
$15,000,000 or more in the aggregate (or the equivalent thereof in any currency other than U.S. dollars).
“ Material Indebtedness Agreement ” means any agreement under which any Material Indebtedness was created or is governed or which
provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of
Indebtedness constituting Material Indebtedness is outstanding thereunder).
“ Minimum Liquidity Ratio ” means the ratio of (i) the fair value of the Restricted Investment Portfolio (other than Scheduled Restricted
Investments, which shall be valued at the lower of (x) fair value and (y) the actual par amount of each Scheduled Restricted Investment held by
the Borrower or any Borrower Subsidiary on the date of determination multiplied by (A) in respect of the Scheduled Restricted Investments set
forth under the heading C-l on Schedule 1, 0.98, (B) in respect of the Scheduled Restricted Investments set forth under the heading C-2 on
Schedule 1, 0.049525, and (C) in respect of the Scheduled Restricted Investments set forth under the heading C-3 on Schedule 1, zero; provided
, that any Scheduled Restricted Investments set forth under the heading C-l on Schedule 1 shall be valued at fair value after June 30, 2008; and
provided further , if any of such Scheduled Restricted Investments set forth under the heading C-2 or C-3 on Schedule 1 (the “ Specified SRIs
”) have been sold, the aggregate value of such remaining Specified SRIs shall be the lower of (x) fair value of such remaining Specified SRIs
and (y) the aggregate value of all Specified SRIs (determined in accordance with the valuation
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methodology described above) less the net proceeds received for the Specified SRIs sold (not to be less than zero)) to (ii) all Payment Service
Obligations.
“ Moody’s ” means Moody’s Investors Service, Inc.
“ Multiemployer Plan ” is defined in Section 5.9(iii).
“ Net Income ” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends.
“ Net Proceeds” means, with respect to any event, (i) the cash proceeds received in respect of such event, including (A) any cash received in
respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment or earn-out, but excluding any reasonable interest payments), but only as and when
received, (B) in the case of a casualty, cash insurance proceeds, and (C) in the case of a condemnation or similar event, cash condemnation
awards and similar payments received in connection therewith, minus (ii) the sum of direct costs relating to such event and the sale or
disposition of such non-cash proceeds, including, without limitation, legal, accounting and investment banking fees, brokerage and sales
commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements and, if such costs have not been incurred or invoiced, the Borrower’s good
faith estimates thereof), amounts required to be applied to the repayment of principal, premium or penalty, if any, and interest on Indebtedness
required to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Borrower as a reserve in
accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Borrower after such
sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with such transaction.
“ Non-Guarantor ” means any Subsidiary of Holdco other than the Borrower or any Guarantor.
“ Non-U.S. Lender ” is defined in Section 3.5(iv).
“ Note ” means any one or more of a Revolving Credit Note, Term A Note, Term B Note or Swing Line Note.
“ Note Purchase Agreement ” means that certain Second Amended and Restated Note Purchase Agreement, dated as of March 24, 2008,
among Holdco, the Borrower, GSMP V Onshore US, Ltd. an exempted company incorporated in the Cayman Islands with limited liability,
GSMP V Offshore US, Ltd., an exempted company incorporated in the Cayman Islands with limited liability, GSMP V Institutional US, Ltd.,
an exempted company incorporated in the Cayman Islands with limited liability, and THL Credit Partners, L.P., as in effect on the date hereof.
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“ Obligations ” means all unpaid principal of and accrued and unpaid interest on the Loans, all reimbursement obligations with respect to
LC Disbursements, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower and the
other Loan Parties to the Lenders or to any Lender, the Administrative Agent or any indemnified party arising under the Loan Documents.
“ Other Taxes ” is defined in Section 3.5(ii).
“ Outstanding Letters of Credit ” is defined in Section 2.22(xii).
“ Outstanding Revolving Credit Exposure ” means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its
Revolving Loans outstanding at such time, plus (ii) an amount equal to its LC Exposure at such time, plus (iii) an amount equal to its Swing
Line Exposure at such time.
“ Participants ” is defined in Section 12.1(iii)(A).
“ Passive Holding Company Condition ” shall be satisfied so long as Holdco or any of its Subsidiaries (other than the Borrower and any of
the Borrower Subsidiaries) does not:
(i) directly incur any Indebtedness other than Permitted Holdco Indebtedness;
(ii) create or suffer to exist any Lien upon any property or assets now owned or hereafter acquired, leased or licensed by it (except
Permitted Holdco Liens); or
(iii) own any Capital Stock in any Person (other than the Borrower and the Borrower Subsidiaries) and own any other material assets
(excluding Capital Stock) other than (A) Cash and Cash Equivalents, (B) assets under any stock incentive plans (including related
agreements), loan stock purchase programs or incentive compensation plans, (C) pre-paid assets (e.g. deferred financing costs) and
(D) deferred tax assets;
provided nothing in this definition shall restrict Holdco from performing its obligations under the Equity Purchase Agreement and the securities
issued thereunder and under the certificates of designation contemplated thereby.
“ Payment Date ” means the last day of each calendar year quarter.
“ Payment Instruments Funding Amounts ” means amounts advanced to and retained by Holdco and its Subsidiaries as advance funding for
the payment instruments or obligations arising under an official check agreement or a customer agreement entered into in the ordinary course
of business.
“ Payment Service Obligations ” means all liabilities of the Borrower and the Borrower Subsidiaries calculated in accordance with GAAP
for outstanding payment instruments (as classified and defined as Payment Service Obligations in Holdco’s latest Annual Report on Form 10-K
under the Exchange Act, and if Holdco is not subject to the reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act,
Holdco’s most recent audited financial statements).
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“ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.
“ Permits ” means all permits, licenses, authorizations, orders and approvals of, and filings, applications and registrations with,
Governmental Entities.
“ Permitted Holdco Indebtedness ” means:
(i) Indebtedness arising from agreements of Holdco providing for indemnification, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposition of any business, assets or any of its Subsidiaries; provided , however ,
that:
(A) such Indebtedness is not reflected on the balance sheet of Holdco or any of its Subsidiaries (contingent obligations referred to in a
footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet
for purposes of this clause (A)); and
(B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash
proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any
subsequent changes in value) actually received by Holdco in connection with such disposition;
(ii) obligations incurred under the Loan Documents or the Second Lien Documents;
(iii) Indebtedness incurred by Holdco in respect of interest rate hedging obligations of Holdco in existence on the Effective Date; and
(iv) guarantees of (x) other Indebtedness of the Borrower and the Subsidiary Guarantors permitted under Sections 6.1 l(i), (iii) (to the
extent existing at the Effective Date), (iv), (v), (x) (to the extent the debt so extended, refunded, refinanced, renewed, replaced or defeased
was guaranteed by Holdco in accordance with this Agreement), (xvii) or (xviii) and (y) Rate Management Obligations of the Borrower and
the Subsidiary Guarantors permitted under this Agreement.
“ Permitted Holdco Liens ” means, any Permitted Liens other than Liens incurred pursuant to clauses (x), (xi), (xx), (xxiii) or (xxv) of
Section 6.15.
“ Permitted Liens ” means Liens permitted by Section 6.15.
“ Person ” means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or
other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.
“ Plan ” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code as to which Holdco or any member of the Controlled Group may have any liability.
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“ Portfolio Securities ” means, collectively, portfolio securities (i) designated as “trading investments” on Holdco’s consolidated financial
statements, (ii) designated as “available for sale investments” on Holdco’s consolidated financial statements or (iii) otherwise designated as
investments on Holdco’s consolidated financial statements, in each case valued at fair value in accordance with GAAP.
“ Prepayment Event ” means:
(i) any sale, transfer or other disposition pursuant to Section 6.13(x) or (xxi) other than dispositions resulting in aggregate Net Proceeds
not exceeding (1) $5,000,000 in the case of any single transaction or series of related transactions or (2) $10,000,000 for all such
transactions during any fiscal year of Holdco; or
(ii) the incurrence by Holdco, the Borrower or any Domestic Subsidiary after the Effective Date of any Indebtedness other than
Indebtedness permitted under Section 6.11 or any Permitted Holdco Indebtedness.
“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate
in effect at its office located at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.
“ Property ” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
“ Pro Rata Share ” means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender’s Revolving Credit
Commitment (or, if the Aggregate Revolving Credit Commitment has expired or been terminated, such Lender’s Revolving Credit
Commitment immediately prior to such expiration or termination, giving effect to any subsequent assignments made pursuant to the terms
hereof and any subsequent repayments of such Lender’s Revolving Loans and reductions in such Lender’s participation exposure relative to
Letters of Credit and Swing Line Loans) and the denominator of which is the Aggregate Revolving Credit Commitments (or, if the Aggregate
Revolving Credit Commitment has expired or been terminated, the Aggregate Revolving Credit Commitment immediately prior to such
expiration or termination, giving effect to any subsequent repayments of the Revolving Loans and reductions in the aggregate participation
exposure relative to Letters of Credit and Swing Line Loans).
“ Purchase Agreement Equity ” means Capital Stock of Holdco issued to the Sponsors pursuant to the terms of the Equity Purchase
Agreement, including any Capital Stock into which such equity is converted or any additional Capital Stock issued after the Effective Date
pursuant to the terms of the certificates of designation referred to in, and attached as exhibits to, the Equity Purchase Agreement.
“ Rate Management Counterparties ” means Lenders and their Affiliates (or Persons which were Lenders or their Affiliates at the time the
applicable Rate Management Transaction was entered into) which have entered into Rate Management Transactions with Holdco or any of its
Subsidiaries.
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“ Rate Management Obligations ” of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or
assignments of any Rate Management Transactions.
“ Rate Management Transaction ” means any transaction (including an agreement with respect thereto) now existing or hereafter entered
into by Holdco or any of its Subsidiaries which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.
“ Receivables Transaction ” means any transaction or series of transactions entered into by the Borrower or any Borrower Subsidiary
pursuant to which the Borrower or any Borrower Subsidiary may sell, convey or otherwise transfer to a Person accounts or notes receivable and
rights related thereto.
“ Receivables Transaction Attributed Indebtedness ” means, at any time, the amount of obligations outstanding at such time under the legal
documents entered into as part of any Receivables Transaction that would be characterized as principal if such Receivables Transaction were
structured as a secured lending transaction rather than as a purchase.
“ Refinanced Commitment ”, “ Refinanced Term A Loans ” and “ Refinanced Term B Loans ” are each defined in Section 8.3.
“ Refinancing Indebtedness ” is defined in Section 6.1 l(x).
“ Register ” is defined in Section 12.1(ii)(D).
“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any
successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.
“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any
successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.
“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person’s Affiliates.
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“ Release ” means any release, spill, emission, leaking, pumping, emitting, discharging, injecting, escaping, leaching, dumping, disposing or
migrating into or through the environment in derogation of Environmental Law.
“ Rentals ” of a Person means the aggregate fixed amounts payable by such Person under any Operating Lease.
“ Replacement Commitments ”, “ Replacement Term A Loans ” and “Replacement Term B Loans ” are each defined in Section 8.3.
“ Reportable Event ” means a reportable event as defined in Section 4043(c) of ERISA and the regulations issued under such section, with
respect to a Single Employer Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided , however , that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such
waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.
“ Repurchase Agreement ” means an agreement of a Person to purchase securities arising out of or in connection with the sale of the same or
substantially similar securities.
“ Required B Lenders ” means, at any time, Lenders holding more than 50% of the Term B Balance at such time, but if there shall be more
than one Lender with a Term B Balance, not less than two Lenders (which Lenders, unless all Lenders with a Term B Loan are Affiliates of one
another, shall include not less than two Lenders which are not Affiliates of one another).
“ Required Lenders ” means, at any time, Lenders having in the aggregate more than 50% of the sum of (i) the Term A Balance at such time
plus (ii) the Aggregate Term B Loan Commitment or, after the Effective Date, the Term B Balance at such time plus (iii) the sum of the
Aggregate Outstanding Revolving Credit Exposure and the unused Revolving Credit Commitments at such time.
“ Required Specified Lenders ” means, at any time, Lenders having in the aggregate more than 50% of the sum of (i) the Term A Balance at
such time plus (ii) the sum of the Aggregate Outstanding Revolving Credit Exposure and the unused Revolving Credit Commitments at such
time.
“ Restricted Investment Portfolio ” means assets of Holdco and its Subsidiaries which are restricted by state law, contract or otherwise
designated by the Borrower for the payment of Payment Service Obligations.
“ Restricted Payment ” means (i) any dividend or distribution in respect of the Capital Stock of the Borrower or Holdco, (ii) any redemption,
repurchase, acquisition or other retirement of the Capital Stock of the Borrower or Holdco and (iii) any principal or other payment on, or any
redemption, repurchase, defeasance, acquisition or other retirement of any Subordinated Indebtedness (other than Indebtedness permitted under
Section 6.1 l(xix)) in each case prior to any scheduled repayment, sinking fund or maturity.
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“ Revolving Credit Advance ” means an Advance made by the Revolving Lenders pursuant to Section 2.3, including any Advance
previously made by the Revolving Lenders to Holdco pursuant to Section 2.3 of the Existing Credit Agreement.
“ Revolving Credit Commitment ” means, for each Revolving Lender, the obligation of such Lender to make Revolving Loans and
participate in Letters of Credit and Swing Line Loans in an aggregate amount at any one time outstanding not exceeding the amount set forth
opposite its name under the heading “Revolving Credit Commitment” on the Commitment Schedule, as such amount may be increased or
reduced from time to time pursuant to the terms of this Agreement.
“ Revolving Credit Note ” means a promissory note in substantially the form of Exhibit A hereto, with appropriate insertions, and payable to
the order of a Lender in the amount of its Revolving Credit Commitment, including any amendment, modification, renewal or replacement of
such promissory note.
“ Revolving Lender ” means a Lender having a Revolving Credit Commitment.
“ Revolving Loan ” means, with respect to a Revolving Lender, such Lender’s loans made pursuant to Section 2.3 hereof and all “Revolving
Loans” of such Lender outstanding under the Existing Credit Agreement as of the Effective Date.
“ S&P ” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.
“ Satisfactory Audit Opinion ” means either combined or separate unqualified reports on the audit of Holdco, and its Subsidiaries, financial
statements and internal controls over financial reporting as of and for the year ended December 31, 2007 as illustrated within paragraphs 87 and
88 of the Public Company Accounting Oversight Board Bylaws and Rules, Auditing Standard No. 5, “An Audit of Internal Control Over
Financial Reporting That Is Integrated with An Audit of Financial Statements,” prepared in accordance with GAAP (neither the Deloitte &
Touche LLP financial statement opinion as of and for the year ended December 31, 2007 nor the Notes to Consolidated Financial Statements
attached to the audited financial statements, nor Items 1 through 15 of Holdco’s December 31, 2007 Annual report on Form 10-K, shall include
any reference to Holdco’s ability to operate as a going concern).
“ Scheduled Restricted Investments ” means the securities listed on Schedule 1 hereto.
“ SEC ” means the United States Securities and Exchange Commission.
“ Second Lien Documents ” means the Note Purchase Agreement, the Indenture, the notes issued thereunder and all documents delivered in
connection therewith.
“ Second Lien Indebtedness ” means the senior second lien indebtedness incurred by the Borrower pursuant to the Indenture.
“ Secured Parties ” means the Administrative Agent, the Collateral Agent, the Lenders and the Rate Management Counterparties.
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“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“ Sell Down Date ” means the “Sell Down Date” as defined in the Indenture.
“ Senior Secured Debt Ratio ” means, at any time, the ratio of (i) Consolidated Senior Secured Indebtedness of the Borrower and its
Subsidiaries at such time to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries for the then most-recently ended four fiscal
quarters.
“ Separation Agreements ” means one or more of the Separation and Distribution Agreement, the Tax Sharing Agreement, the Interim
Services Agreement and the Employee Benefit Agreement each dated as of June 30, 2004 and entered into between Holdco and Viad.
“ Similar Business ” means (i) the global funds transfer and payment services business conducted by Holdco and its Subsidiaries, (ii) any
other business described under the heading “Business” in Holdco’s Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 2006, and (iii) any business that is similar, reasonably related, incidental, complementary or ancillary thereto or any
reasonable extension thereof.
“ Single Employer Plan ” means a Plan (other than a Multiemployer Plan) maintained by Holdco or any member of the Controlled Group for
employees of Holdco or any member of the Controlled Group.
“ Specified Equity Contribution ” is defined in Section 6.19.2.
“ Specified Securities ” means the securities set forth on Schedule 1 listed under “C-2” and “C-3”.
“ SPEs ” means Ferrum Trust, a Delaware business trust, Tsavorite Trust, a Delaware business trust, Hematite Trust, a Delaware business
trust, Monazite Trust, a Delaware business trust, and, to the extent the formation thereof is not prohibited hereunder, any Wholly-Owed
Subsidiary of the Borrower or trust (which is consolidated with the Borrower for financial statement purposes), in each case formed for the
limited organizational purpose of isolating and transferring a limited and specified pool of assets and related rights and obligations with respect
to Payment Service Obligations, which assets shall consist solely of (i) Cash and Cash Equivalents, (ii) Portfolio Securities (including, for
purposes of clarity, Scheduled Restricted Investments), (iii) Accounts Receivable, (iv) Rate Management Obligations (with respect to interest
rate hedging) that relate to Portfolio Securities and Payment Service Obligations.
“ Sponsor Capital ” is defined in Section 4.1(xvi).
“ Sponsors ” means the affiliates of Thomas H. Lee Partners L.P., Goldman Sachs Credit Partners L.P. and Goldman Sachs Mezzanine
Partners.
“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or
supplemental
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reserves) expressed as a decimal established by the Board of Governors of the Federal Reserve System to which the Administrative Agent is
subject with respect to the Eurodollar Rate, for eurocurrency funding (currently referred to as “ Eurocurrency Liabilities ” in Regulation D).
Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may
be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any reserve percentage.
“ Subordinated Indebtedness ” means any Indebtedness which is by its terms subordinated in right of payment or in respect of the proceeds
of any collateral to the Obligations (other than the Second Lien Indebtedness).
“ Subsidiary ” of a Person means:
(i) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar
entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof;
(ii) any partnership, joint venture, limited liability company or similar entity of which:
(A) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership
interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(B) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity; and
(iii) with respect to Holdco, the Borrower and any Borrower Subsidiary which owns such SPE, any SPE.
Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.
“ Subsidiary Guarantor ” means each Guarantor other than Holdco.
“ Substantial Portion ” means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10%
of the consolidated assets (excluding Portfolio Securities) of the Borrower and its Subsidiaries, as would be shown in the consolidated financial
statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such
determination is made (or if financial statements
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have not been delivered hereunder for that month which begins the twelve-month period, then the financial statements delivered hereunder for
the quarter ending immediately prior to that month).
“ Swine Line Borrowing Notice ” is defined in Section 2.7(ii).
“ Swine Line Commitment ” means, with respect to the Swing Line Lender, its commitment to make Swing Line Loans to the Borrower
pursuant to Section 2.7 in an aggregate outstanding amount at no time exceeding its Swing Line Commitment amount specified on the
Commitment Schedule.
“ Swing Line Exposure ” means, at any time, the aggregate principal amount of all Swing Line Loans outstanding at such time. The Swing
Line Exposure of any Lender at any time shall be its Pro Rata Share of the total Swing Line Exposure at such time.
“ Swing Line Lender ” means JPMCB.
“ Swing Line Loan ” means a Loan made available to the Borrower by the Swing Line Lender pursuant to Section 2.7.
“ Swing Line Note ” means a promissory note, in substantially the form of Exhibit C hereto, with appropriate insertions, and payable to the
order of the Swing Line Lender in the principal amount of its Swing Line Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
“ Taxes ” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities
with respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
“ Term A Balance ” means, at any time, the then aggregate outstanding principal amount of the Term A Loans.
“ Term A Loan ” means, with respect to each Lender, such Lender’s “Term Loan” (as defined in the Existing Credit Agreement)
outstanding as of the Effective Date and, with respect to all Lenders, the aggregate of all such term loans. The aggregate amount of the Term A
Loans of all Lenders as of the date hereof is $100,000,000.
“ Term A Note ” means a promissory note, in substantially the form of Exhibit B-1 hereto, with appropriate insertions, and payable to the
order of a Lender in the amount of such Lender’s Term A Loan, including any amendment, modification, renewal or replacement of such
promissory note.
“ Term B Balance ” means, at any time, the then aggregate outstanding principal amount of the Term B Loans.
“ Term B Loan ” means, with respect to each Lender, such Lender’s pro-rata portion of any term Advance made by the Lenders on the
Effective Date pursuant to Section 2.1 (ii) and, with respect to all Lenders, the aggregate of all such pro-rata portions.
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“ Term B Loan Commitment ” means, for each Lender, the obligation of such Lender to make a Term B Loan to the Borrower pursuant to
Section 2.1(ii) in an amount not exceeding the amount set forth opposite its name under the heading “Term B Loan Commitment” on the
Commitment Schedule.
“ Term B Note” means a promissory note, in substantially the form of Exhibit B-2 hereto, with appropriate insertions, and payable to the
order of a Lender in the amount of such Lender’s Term B Loan, including any amendment, modification, renewal or replacement of such
promissory note.
“ Term Loan ” means each of the Term A Loan and the Term B Loan.
“ Transactions ” means the transactions contemplated by this Agreement and the other Loan Documents, the Second Lien Documents and
the Equity Purchase Agreement.
“ Transferee ” is defined in Section 12.2.
“ Travelers ” means Travelers Express Company, Inc., a Minnesota corporation.
“ Type ” means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan,
its nature as a Floating Rate Loan or a Eurodollar Loan.
“ Unfunded Liabilities ” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single
Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plans based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87.
“ Unmatured Default ” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.
“ Viad ” means Viad Corp, a Delaware corporation.
“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness, Disqualified Stock or preferred stock, as the case may be,
at any date, the quotient obtained by dividing:
(i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal
payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or preferred stock multiplied by the
amount of such payment, by
(ii) the sum of all such payments.
“ Wholly-Owned Subsidiary ” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership
interests of which (other than directors’
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qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.
Section 1.2 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the
same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time
amended, restated, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s permitted successors and
permitted assigns, (c) the words “herein”, “hereof and “hereunder”, and words of similar import, shall be construed to refer to this Agreement
in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
Section 1.3 Rounding . The calculation of any financial ratios under this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-down if there is no nearest number).
Section 1.4 Times of Day . Unless otherwise specified, all references herein to times of day shall be references to New York time (daylight
or standard, as applicable).
Section 1.5 Timing of Payment or Performance . When the payment of any obligation or the performance of any covenant, duty or
obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment or performance shall
extend to the immediately succeeding Business Day and such extension of time shall be reflected in computing interest or fees, as the case may
be; provided that with respect to any payment of interest on or principal of Eurodollar Loans, if such extension would cause any such payment
to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.
Section 1.6 Accounting . Except as provided to the contrary herein, all accounting terms used herein shall be inteipreted and all accounting
determinations hereunder shall be made in accordance with GAAP, except that any calculation or determination which is to be made on a
consolidated basis shall be made for the Borrower and all of its Subsidiaries, including those Subsidiaries, if any, which are unconsolidated on
the Borrower’s audited financial statements. If at any time any change in GAAP or application thereof would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and the Borrower, the Administrative Agent or the Required Lenders shall so
request, the Administrative Agent, the
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Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such
change in GAAP or the application thereof (subject to the approval of the Required Lenders), provided that, until so amended, such ratio or
requirement shall continue to be computed in accordance with GAAP or application thereof prior to such change therein and the Borrower shall
provide to the Administrative Agent and the Lenders reconciliation statements showing the difference in such calculation, together with the
delivery of quarterly and annual financial statements required hereunder.
Section 1.7 Pro Forma Calculations . For purposes of determining compliance with any ratio set forth herein, such ratio shall be calculated
in each case on a pro forma basis as follows:
(i) In the event that the Borrower or any Borrower Subsidiary incurs, assumes, guarantees or redeems any Indebtedness subsequent to the
commencement of the period for which such ratio is being calculated but on or prior to or simultaneously with the event for which the
calculation of such ratio is made (the “ Calculation Date ”), then such ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, as if the same had occurred at the beginning of the applicable reference period.
(ii) For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers and consolidations that
have been made by the Borrower or any Borrower Subsidiary during the reference period or subsequent to the reference period and on or
prior to or simultaneously with the Calculation Date shall be given pro forma effect as if all such Investments, acquisitions, dispositions,
mergers and consolidations (and all related financing transactions) had occurred on the first day of the reference period. Additionally, if
since the beginning of such reference period any Person that subsequently became a Borrower Subsidiary or was merged with or into the
Borrower or any Borrower Subsidiaiy since the beginning of such reference period shall have made any Investment, acquisition, disposition,
merger or consolidation that would have required adjustment pursuant to this definition, then such ratio shall be calculated giving pro forma
effect thereto for such reference period as if such Investment, acquisition, disposition, merger or consolidation (and all related financing
transactions) had occurred at the beginning of the reference period.
(iii) For purposes of the calculations referred to herein, whenever pro forma effect is to be given to a transaction, the pro forma
calculations (including any cost savings associated therewith) shall be made in accordance with Regulation S-X under the Securities Act. In
addition, any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Borrower, to reflect
any operating expense reductions and other operating improvements or synergies projected in good faith to result from any acquisition,
amalgamation, merger or operational change (including, to the extent applicable, from the Transactions); provided that (x) such operating
expense reductions and other operating improvements or synergies are reasonably identifiable and factually supportable, (y) with respect to
operational changes (not resulting from an acquisition), such actions are taken or committed to be taken no later than 24 months after the
Effective Date and (z) the aggregate amount of projected
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operating expense reductions, operating improvements and synergies in respect of operational changes (not resulting from an acquisition)
included in any pro forma calculation shall not exceed $20,000,000 for any four consecutive fiscal quarter period unless otherwise approved
by the Administrative Agent.
(iv) If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be
calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Rate
Management Obligations applicable to such Indebtedness). For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of
such Indebtedness during the reference period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate
actually chosen, or, if none, then based upon such optional rate as the Borrower may designate.
(v) Any Person that is a Borrower Subsidiary on the Calculation Date will be deemed to have been a Borrower Subsidiary at all times
during the reference period, and any Person that is not a Borrower Subsidiary on the Calculation Date will be deemed not to have been a
Borrower Subsidiary at any time during the reference period.
ARTICLE II
THE CREDITS
Section 2.1 Term Loans .
(i) Each Existing Lender has made a Term A Loan to Holdco in the aggregate amount set forth opposite its name on the Commitment
Schedule. As of the Effective Date each such term loan shall be continued as a Term A Loan hereunder and the Borrower accepts, assumes
and agrees to perform all obligations as the borrower and primary obligor in respect thereof. No amount of the Term A Loan which is repaid
or prepaid by the Borrower may be reborrowed hereunder.
(ii) Each Lender severally (and not jointly) agrees, on the terms and conditions set forth in this Agreement, to make a Term B Loan to the
Borrower on the Effective Date in the amount of its respective Term B Loan Commitment. No amount of the Term B Loan which is repaid
or prepaid by the Borrower may be reborrowed hereunder. Not later than 1:00 p.m., New York City time, on the Effective Date, each Lender
shall make available funds equal to its Term B Loan Commitment in immediately available funds in Chicago to the Administrative Agent at
its address specified pursuant to Article XIII.
Section 2.2 Term Loan Repayment . Except as otherwise expressly provided herein, the principal amount of the Term A Loan shall be paid
in full by the Borrower on the Facility
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Termination Date. Except as otherwise expressly provided herein, the principal amount of the Term B Loan shall be paid in full by the
Borrower as follows:
(i) on each Payment Date from and including June 30, 2008 to and including December 31, 2012, the Borrower shall make an aggregate
payment of $625,000; and
(ii) on the Facility Termination Date, the Borrower shall pay the entire remaining unpaid principal amount of the Term B Loan.
Section 2.3 Revolving Credit Commitments . From and including the Effective Date and prior to the Facility Termination Date, each Lender
severally agrees, on the terms and conditions set forth in this Agreement, to (i) make or continue Revolving Loans to the Borrower from time to
time and (ii) participate in Letters of Credit issued upon the request of the Borrower, provided that, after giving effect to the making of each
such Loan and the issuance of each such Letter of Credit, such Lender’s Outstanding Revolving Credit Exposure shall not exceed in the
aggregate the amount of its Revolving Credit Commitment and the Aggregate Outstanding Revolving Credit Exposure shall not exceed the
Aggregate Revolving Credit Commitment. As of the Effective Date each revolving loan made under the Existing Credit Agreement shall be
continued as a Revolving Loan hereunder and the Borrower accepts, assumes and agrees to perform all obligations as the borrower and primary
obligor in respect thereof. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Revolving Loans, in whole or
in part, at any time prior to the Facility Termination Date. The Revolving Credit Commitments to extend credit hereunder shall expire on the
Facility Termination Date.
Section 2.4 Other Required Payments . All outstanding Revolving Loans, Swing Line Loans, unreimbursed LC Disbursements and all other
unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date.
Section 2.5 Ratable Loans . Each Revolving Credit Advance hereunder shall consist of Revolving Loans made from the several Revolving
Lenders ratably according to their Pro Rata Shares.
Section 2.6 Types of Advances . The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected
by the Borrower in accordance with Sections 2.11 and 2.12, or Swing Line Loans selected by the Borrower in accordance with Section 2.7.
Section 2.7 Swing Line Loans .
(i) Subject to the terms and conditions set forth herein, the Swing Line Lender agrees to make Swing Line Loans to the Borrower from
time to time from and including the Effective Date and prior to the Facility Termination Date, in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate principal amount of outstanding Swing Line Loans exceeding $25,000,000, (ii) the
aggregate principal amount of the Swing Line Lender’s outstanding Swing Line Loans exceeding its Swing Line Commitment, or (iii) the
sum of the Aggregate Outstanding Revolving Credit Exposure exceeding the Aggregate Revolving Credit Commitment; provided that
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the Swing Line Lender shall not be required to make a Swing Line Loan to refinance an outstanding Swing Line Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swing Line Loans. The
Borrower will repay in full each Swing Line Loan on or before the fifth (5 th ) Business Day after the Borrowing Date for such Swing Line
Loan.
(ii) To request a Swing Line Loan, the Borrower shall notify the Administrative Agent of such request by telephone or electronic mail (to
such electronic mail addresses as the Administrative Agent shall specify) (in each case confirmed by telecopy), not later than 1:00 p.m.,
New York City time, on the day of a proposed Swing Line Loan. Each such notice (a “ Swing Line Borrowing Notice ”) shall be irrevocable
and shall specify the requested date (which shall be a Business Day) and amount of the requested Swing Line Loan, which shall be an
amount not less than $1,000,000. The Administrative Agent will promptly advise the Swing Line Lender of any such notice received from
the Borrower. The Swing Line Lender shall make each Swing Line Loan available to the Borrower by means of a credit to a general deposit
account of the Borrower with the Swing Line Lender or wire transfer to an account designated by the Borrower (or, in the case of a Swing
Line Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.22(v), by remittance to the LC Issuer) by
3:00 p.m., New York City time, on the requested date of such Swing Line Loan.
(iii) The Swing Line Lender may (and shall on the fifth (5 th ) Business Day after the Borrowing Date of each Swing Line Loan made by
it that is then still outstanding) by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of its Swing Line Loans
outstanding. Such notice shall specify the aggregate amount of Swing Line Loans in which Revolving Lenders will participate. Promptly
upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such
Lender’s Pro Rata Share of such Swing Line Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swing Line Lender, such Lender’s Pro Rata
Share of such Swing Line Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in
Swing Line Loans pursuant to this paragraph is unconditional, continuing, irrevocable and absolute and shall not be affected by any
circumstances, including, without limitation, (a) any setoff, counterclaim, recoupment, defense or other right which such Lender may have
against the Administrative Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance, prior to or after the funding
of any Swing Line Loan, of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of the
Borrower or (d) any other circumstance, happening or event whatsoever, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire
transfer of immediately available funds, in the same manner as provided in Section 2.11 with respect to Loans made by such Lender (and
Sections 2.11 and 2.21 shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the
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Swing Line Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swing Line Loan acquired pursuant to this paragraph. Any amounts received by the Swing Line Lender from the
Borrower (or other party on behalf of the Borrower) in respect of a Swing Line Loan after receipt by the Swing Line Lender of the proceeds
of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph
and to the Swing Line Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swing Line
Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any
reason. The purchase of participations in a Swing Line Loan pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.
Section 2.8 Commitment Fee; Reductions and Increases in Aggregate Revolving Credit Commitment .
(i) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee, which shall
accrue at the rate of .50% per annum on the daily amount of the difference between the Revolving Credit Commitment of such Lender and
the Outstanding Revolving Credit Exposure (excluding Swing Line Exposure) of such Lender during the period from and including the date
hereof to but excluding the date on which such Revolving Credit Commitment terminates. Accrued commitment fees shall be payable in
arrears on the last day of March, June, September and December of each year and on the date on which the Revolving Credit Commitments
terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(ii) The Borrower may permanently reduce the Aggregate Revolving Credit Commitment in whole, or in part ratably among the
Revolving Lenders in minimum amounts of $10,000,000 and integral multiples of $1,000,000 in excess thereof, upon at least three Business
Days’ written notice to the Administrative Agent, which notice shall specify the amount of any such reduction, provided , however , that the
amount of the Aggregate Revolving Credit Commitment may not be reduced below the Aggregate Outstanding Revolving Credit Exposure
and further provided that a notice of a reduction of the Aggregate Revolving Credit Commitment delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. All accrued commitment fees
shall be payable on the effective date of any termination of the obligations of the Lenders to make Credit Extensions hereunder.
Notwithstanding the foregoing, the Borrower shall not voluntarily reduce the Aggregate Revolving Credit Commitment unless at the time of
such reduction the Term B Balance is zero.
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(iii) The Borrower may, at its option, on up to three occasions, seek to increase the Aggregate Revolving Credit Commitment and/or the
Aggregate Term B Loan Commitment or aggregate Term A Loans by up to an aggregate amount of $50,000,000 in a minimum amount of
$10,000,000 and in integral multiples of $5,000,000 in excess thereof, upon at least three (3) Business Days’ prior written notice to the
Administrative Agent, which notice shall specify the amount of any such increase and whether such increase is in the Aggregate Revolving
Credit Commitment, the Aggregate Term B Loan Commitment, the Term A Loans or a combination of any thereof and shall be delivered at
a time when no Default or Unmatured Default has occurred and is continuing. Notwithstanding anything herein to the contrary, no Term B
Loan shall be permitted to be borrowed pursuant to this clause (iii) if, after giving effect thereto, the Term B Balance would exceed
$250,000,000. The Borrower may, after giving such notice, offer the increase (which may be declined by any Lender in its sole discretion)
in the Commitments or Term A Loans on either a ratable basis to the Lenders or on a non pro-rata basis to one or more Lenders and/or to
other Lenders or entities reasonably acceptable to the Administrative Agent. No increase in the Commitments or Term A Loans shall
become effective until the existing or new Lenders extending such incremental Revolving Credit Commitment, Term B Loan Commitment
or Term A Loans and the Borrower shall have delivered to the Administrative Agent a document in form and substance reasonably
satisfactory to the Administrative Agent pursuant to which each such existing Lender states the amount of its Commitment or Loan increase,
each such new Lender becomes a party hereto, states its Commitment or Loan amount and agrees to assume and accept the obligations and
rights of a Lender hereunder and the Borrower accepts such incremental Commitments or Loans. In the event of an increase in the
Aggregate Revolving Credit Commitment pursuant to this Section, the Revolving Lenders (new or existing) shall accept an assignment from
the existing Revolving Lenders, and the existing Revolving Lenders shall make an assignment to the new or existing Revolving Lender
accepting a new or increased Revolving Credit Commitment, of an interest in each then outstanding Revolving Credit Advance, Swing Line
Loan, Letter of Credit and LC Disbursement such that, after giving effect thereto, all Revolving Credit Advances, Swing Line Loans, Letters
of Credit and LC Disbursements are held ratably by the Revolving Lenders in proportion to their respective Revolving Credit Commitments.
Assignments pursuant to the preceding sentence shall be made in exchange for the principal amount assigned plus accrued and unpaid
interest and shall not be subject to the assignment fee set forth in Section 12.1(ii)(B)(3). The Borrower shall make any payments under
Section 3.4 resulting from such assignments. In the event of an increase in the Aggregate Term B Loan Commitment or Term A Loans
pursuant to this Section, each Lender accepting a portion of such increased Aggregate Term B Loan Commitment or Term A Loans shall, on
the effective date of the increase in such Aggregate Term B Loan Commitment or Term A Loans, make a loan to the Borrower (which shall
be deemed to be, as applicable, a “Term A Loan” or a “Term B Loan” hereunder for all purposes hereof, including Section 2.24) in the
amount of its portion of such increase. Any such increase of the Aggregate Revolving Credit Commitment, Aggregate Term B Loan
Commitment or Term A Loans shall be subject to receipt by the Administrative Agent from the Borrower of such supplemental opinions,
resolutions, certificates and other documents as the Administrative Agent may reasonably request.
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Section 2.9 Minimum Amount of Each Advance . Each Eurodollar Advance (other than an Advance to repay Swing Line Loans) shall be in
the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof), and each Floating Rate Advance (other than a Swing
Line Loan) shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof), provided , however , that any
Revolving Credit Advance which is a Floating Rate Advance may be in the amount of the unused Aggregate Revolving Credit Commitment.
Section 2.10 Optional and Mandatory Principal Payments .
(i) The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances (other than Swing
Line Loans), or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the
outstanding Floating Rate Advances (other than Swing Line Loans) upon one Business Day’s prior notice to the Administrative Agent. The
Borrower may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $1,000,000 and
increments of $500,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Administrative Agent and the
Swing Line Lender by 12:00 p.m., New York City time, on the date of repayment. The Borrower may from time to time pay, subject to the
payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar
Advances, or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the
outstanding Eurodollar Advances upon three Business Days’ prior notice to the Administrative Agent. All voluntary principal payments in
respect of the Term B Loan shall be applied to the principal installments thereof in such order as the Borrower may elect, or if not so
specified on or prior to the date of such optional prepayment, in the direct order of maturity. All mandatory principal payments in respect of
the Term B Loan shall be applied to the principal installments thereof under Section 2.2 in the direct order of maturity. Notwithstanding the
foregoing, the Borrower shall not voluntarily prepay the Term A Loan unless at the time of such prepayment the Term B Balance is zero.
(ii) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdco or any of its Subsidiaries in respect of
any Prepayment Event, the Borrower shall, within five Business Days after such Net Proceeds are received, prepay the Term B Loan until
paid in full; provided that in the case of any such event described in clause (i) of the definition of the term “Prepayment Event,” if the
Borrower or any Subsidiary applies (or commits to apply) the Net Proceeds from such event (or a portion thereof) within fifteen months
after receipt of such Net Proceeds to pay all or a portion of the purchase price in connection with an Acquisition permitted hereunder of a
Similar Business or to acquire, restore, replace, rebuild, develop, maintain or upgrade real property, equipment or other capital assets useful
or to be used in the business of the Borrower and the Subsidiaries (and, in each case, the Borrower has delivered to the Administrative Agent
within five Business Days after such Net Proceeds are received a certificate of its Financial Officer stating its intention to do so and
certifying that no Default has occurred and is continuing), then, so long as no Default has occurred and is
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continuing at the time of the giving of such notice and at the time of the proposed reinvestment, no prepayment shall be required pursuant to
this paragraph in respect of the Net Proceeds in respect of such event (or the portion of such Net Proceeds specified in such certificate, if
applicable) except to the extent of any such Net Proceeds therefrom that have not been so applied (or committed to be so applied) by the end
of such fifteen month period, (or if committed to be so applied within such fifteen month period, have not been so applied within 180 days
after such fifteen month period has expired). The Borrower shall provide to the Administrative Agent any such evidence reasonably
requested by the Administrative Agent with respect to any commitment of the Borrower or any Subsidiary to apply Net Proceeds in
accordance with this Section 2.10(ii). Notwithstanding the foregoing, if on any Business Day there exist “Net Proceeds” (as defined in the
Indenture) which (assuming no investment or application thereof is made within the following five Business Days) would constitute “Excess
Proceeds” (as defined in the Indenture) in an amount in excess of $25,000,000 on such fifth following Business Day, then prior to such fifth
following Business Day the Borrower shall prepay the Term B Loan until paid in full in an aggregate amount equal to such “Excess
Proceeds” amount in excess of $25,000,000. Upon making such prepayment, the Borrower shall be relieved of any further obligation under
this Section 2.10(ii) to make any prepayment with respect to such Net Proceeds.
(iii) Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2009, the Borrower
shall prepay the Term B Loan in an aggregate amount equal to the Excess Cash Flow for such fiscal year multiplied by 50%. Each
prepayment pursuant to this clause shall be made on or before the date that is five Business Days after the date on which annual financial
statements are required to be delivered pursuant to Section 6.1(i) with respect to the fiscal year for which Excess Cash Flow is being
calculated. Notwithstanding the foregoing, (A) no prepayment shall be required by this clause with respect to any fiscal year of the Borrower
as to which the Senior Secured Debt Ratio is less than 3.0 to 1.0 as of the end of such fiscal year and (B) the amount required to be prepaid
pursuant to this clause with respect to any fiscal year shall be reduced dollar for dollar by the amount of (1) voluntary prepayments of
Revolving Loans which were accompanied by corresponding permanent reductions in the Aggregate Revolving Credit Commitment, (2) all
optional prepayments of the Term A Loan or Term B Loan, (3) mandatory prepayments of the Term B Loan, in each case only to the extent
that such prepayments, expenditures or investments (x) were made by the Borrower or its Subsidiaries after the start of the applicable fiscal
year and prior to the due date for (or, if earlier, the actual payment date of) the prepayment under this clause with respect to such fiscal year
and (y) have not resulted in a reduction of Excess Cash Flow or prepayments pursuant to this clause with respect to any prior fiscal year and
(C) no prepayment shall be required with respect to the portion of Excess Cash Flow attributable to a Subsidiary that is required to maintain
a minimum net worth or similar requirement under applicable law, rule or regulation or by order, decree or power of any Governmental
Entity, to the extent (and only to the extent) that the payment of cash by such Subsidiary to the Borrower in respect of such portion of
Excess Cash Flow (by way of dividend, intercompany loan or otherwise) would result in such Subsidiary’s failure to comply with such
requirement.
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(iv) In the event that the Borrower or any Borrower Subsidiary desires to make any Restricted Payment pursuant to Section 6.10(xi), the
Borrower shall prepay the Term B Loan with any Excess Specified Security Sale Proceeds in the amount of $50,000,000, such prepayment
to be made prior to any such Restricted Payment under Section 6.10(xi) (it being understood that after the Borrower has prepaid the Term B
Loan in the amount of $50,000,000 with Excess Specified Security Sale Proceeds, it shall have no further obligation to prepay the Term B
Loan under this clause (iv)).
(v) In the event and on each occasion that the Borrower or any Borrower Subsidiary makes any Restricted Payment pursuant to
Section 6.10(xi) in an amount which, when aggregated with all other Restricted Payments made pursuant to Section 6.10(xi) after the
Effective Date, is greater than $62,500,000, the Borrower shall, on the date such Restricted Payment is made, prepay the Term Loans in an
amount equal to the amount of such Restricted Payment or, if less, the portion thereof which resulted in such aggregate Restricted Payment
amount exceeding $62,500,000, which prepayment shall be applied to the Term B Loan until paid in full and thereafter applied to the Term
A Loan.
(vi) In the event of any voluntary or mandatory prepayment (other than pursuant to Section 2.10(iv)) of the Term B Loan, on the date of
prepayment the Borrower shall pay the Administrative Agent for the ratable benefit of the holders of the Term B Loan a prepayment
premium in an amount equal to (A) 2% of the principal amount prepaid in the case of a prepayment on or prior to the first anniversary of the
Effective Date, (B) 1% in the case of a prepayment after the first anniversary of the Effective Date but on or prior to the second anniversary
of the Effective Date and (C) 0% thereafter.
Section 2.11 Method of Selecting Types and Interest Periods for New Advances . The Borrower shall select the Type of Advance and, in the
case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Administrative Agent
irrevocable notice (a “ Borrowing Notice ”) not later than 12:00 noon, New York City time, on the Borrowing Date of each Floating Rate
Advance (other than a Swing Line Loan) and three Business Days before the Borrowing Date for each Eurodollar Advance. Each such notice
shall specify:
(i) the Borrowing Date, which shall be a Business Day, of such Advance,
(ii) the aggregate amount of such Advance,
(iii)the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto.
Not later than 1:00 p.m., New York City time, on each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving
Loans in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to Article XIII. The
Administrative Agent will make the funds so received from the Lenders available to the Borrower in an account designated in writing by the
Borrower.
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Section 2.12 Conversion and Continuation of Outstanding Advances . Floating Rate Advances (other than Swing Line Loans) shall continue
as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.12
or are repaid in accordance with Section 2.10. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance
unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.10 or (y) the Borrower shall have given the Administrative
Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance
continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.9, the Borrower may elect from
time to time to convert all or any part of a Floating Rate Advance (other than Swing Line Loans) into a Eurodollar Advance. The Borrower
shall give the Administrative Agent irrevocable notice (a “ Conversion/Continuation Notice ”) of each conversion of a Floating Rate Advance
into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 2:00 p.m., New York City time, at least three Business Days
prior to the date of the requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be converted or continued, and
(iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest
Period applicable thereto.
Section 2.13 Changes in Interest Rate, etc . Each Floating Rate Advance (other than Swing Line Loans) shall bear interest on the
outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.12, to but excluding the date it is paid or is converted into a Eurodollar
Advance pursuant to Section 2.12 hereof, at a rate per annum equal to the Floating Rate plus the Applicable Margin for such day. Each Swing
Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is
made to but excluding the date it is paid hereof, at a rate per annum equal to the Floating Rate plus the Applicable Margin for such day.
Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each
change in the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including
the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by
the Administrative Agent as applicable to such Eurodollar Advance based upon the Borrower’s selections under Sections 2.11 and 2.12 and
otherwise in accordance with the terms hereof, plus the Applicable Margin. No Interest Period may end after the Facility Termination Date.
Interest on Loans outstanding on the Effective Date shall be calculated (x) for periods up to and including the Effective Date at the rates set
forth on the Pricing Schedule in the Existing Credit Agreement and (y) for periods after the Effective Date at the rates set forth in this
Agreement.
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Section 2.14 Rates Applicable After Default . Notwithstanding anything to the contrary contained in Section 2.11, 2.12 or 2.13, during the
continuance of a Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of
the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates),
declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default under
Section 7.2, unless waived by the Required Lenders or until such defaulted amount shall have been paid in full, (i) each overdue Eurodollar
Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable hereunder to such Interest Period
plus 2% per annum and (ii) each overdue Floating Rate Advance and all overdue fees and other overdue amounts payable hereunder shall bear
interest at a rate per annum equal to the Floating Rate in effect from time to time plus the Applicable Margin plus 2% per annum, in each case
without any election or action on the part of the Administrative Agent or any Lender.
Section 2.15 Method of Payment . All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Administrative Agent at the Administrative Agent’s address specified pursuant to Article XIII, or at any
other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by noon (local time)
on the date when due and shall (except with respect to repayments of Swing Line Loans and except in the case of reimbursement obligations
with respect to LC Disbursements for which the LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required
hereunder) be applied ratably by the Administrative Agent among the applicable Lenders. Each payment delivered to the Administrative Agent
for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by
the Administrative Agent from such Lender. Each reference to the Administrative Agent in this Section 2.15 shall also be deemed to refer, and
shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.22(v).
Section 2.16 Noteless Agreement; Evidence of Indebtedness , (i) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to
time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(i) The Administrative Agent shall also maintain the Register as set forth in Section 12.1(ii)(D).
(ii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded absent manifest error; provided , however , that the failure of the Administrative
Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay
the Obligations in accordance with their terms.
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(iii) Any Lender may request that its Loans be evidenced by a promissory note in substantially the form of a Revolving Credit Note, a
Term A Note, a Term B Note or a Swing Line Note, in each case as applicable. In such event, the Borrower shall prepare, execute and
deliver to such Lender such Note payable to the order of such Lender. Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (prior to any assignment pursuant to Section 12.1) be represented by one or more Notes payable to the order of the payee
named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans
once again be evidenced as described in paragraphs (i) and (ii) above.
Section 2.17 Telephonic Notices . The Borrower hereby authorizes the Lenders and the Administrative Agent to extend, convert or continue
Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the
Administrative Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing
authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The
Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the
Administrative Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders
shall govern absent manifest error.
Section 2.18 Interest Payment Dates; Interest and Fee Basis . Interest accrued on each Floating Rate Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Floating Rate Advance is prepaid,
whether due to acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance shall be payable on the last day of its
applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest on Eurodollar Advances, commitment fees and LC Fees shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a
365/366-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment
is received prior to noon, New York City time, at the place of payment. If any payment of principal of or interest on an Advance or other
amount hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment.
Section 2.19 Notification of Advances, Interest Rates, Prepayments and Revolving Credit Commitment Reductions . Promptly after receipt
thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Revolving Credit Commitment reduction notice,
Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly
after notice from the LC Issuer, the Administrative Agent will notify each Lender of the contents of each request for issuance of a Letter of
Credit hereunder. The Administrative Agent will notify each Lender of the interest rate
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applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each
change in the Alternate Base Rate.
Section 2.20 Lending Installations . Each Lender may book its Loans and its participation in any LC Exposure and the LC Issuer may book
the Letters of Credit at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Letters of Credit,
participations in LC Exposure and any Notes issued hereunder shall be deemed held by each Lender or the LC Issuer, as the case may be, for
the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Administrative Agent and the
Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or
Letters of Credit will be issued by it and for whose account Loan payments or payments with respect to Letters of Credit are to be made.
Section 2.21 Non-Receipt of Funds by the Administrative Agent . Unless the Borrower or a Lender, as the case may be, notifies the
Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the
Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon
such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the
recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a
Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or
(y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan.
Section 2.22 Letters of Credit .
(i) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own
account, in a form reasonably acceptable to the applicable LC Issuer, at any time and from time to time from and including the Effective
Date and prior to the Facility Termination Date. In the event of any inconsistency between the terms and conditions of this Agreement and
the terms and conditions of any Letter of Credit Application or other agreement submitted by the Borrower to, or entered into by the
Borrower with, the LC Issuer relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(ii) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall mail, hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved
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by the LC Issuer) to the LC Issuer and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (iii) of this Section), the amount of such Letter of Credit, the name and
address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.
If requested by the LC Issuer, the Borrower also shall submit a letter of credit application on the LC Issuer’s standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit, the Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (x) the LC Exposure shall not exceed $100,000,000 and (y) the Aggregate Outstanding
Revolving Credit Exposure shall not exceed the Aggregate Revolving Credit Commitment.
(iii) Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the earlier of (x) the date one year after the
date of the issuance of such Letter of Credit and (y) the Facility Termination Date; provided that any Letter of Credit with a one year period
may provide for the renewal thereof for additional one year periods but in no event shall the date of such Letters of Credit extend beyond the
period in clause (y) hereof.
(iv) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the LC Issuer or the Lenders, the LC Issuer hereby grants to each Lender, and each Lender hereby
acquires from the LC Issuer, a participation in such Letter of Credit equal to such Lender’s Pro Rata Share of the aggregate amount available
to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of the LC Issuer, such Lender’s Pro Rata Share of each LC
Disbursement made by the LC Issuer and not reimbursed by the Borrower on the date due as provided in paragraph (v) of this Section, or of
any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
(v) Reimbursement . If the LC Issuer shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York
City time, on the Business Day next following the date notice of such drawing is given to the Borrower (any such notice received after 1:00
p.m.,
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New York City time, shall be deemed received by the Borrower on the next Business Day); provided that, the Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with Section 2.7 or 2.11 that such payment be financed with a Revolving
Credit Advance which is a Floating Rate Advance or Swing Line Loan in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Revolving Credit Advance or Swing Line
Loan. If the Borrower fails to reimburse an LC Disbursement when due, the Administrative Agent shall notify each Lender of the applicable
LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Pro Rata Share thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its Pro Rata Share of the payment then due from the Borrower, in
the same manner as provided in Section 2.11 with respect to Loans made by such Lender (and Sections 2.11 and 2.21 shall apply, mutatis
mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the LC Issuer the amounts so
received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the LC Issuer or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the LC Issuer, then to such Lenders and the LC Issuer as their interests may appear. Any payment
made by a Lender pursuant to this paragraph to reimburse the LC Issuer for any LC Disbursement (other than the funding of a Revolving
Credit Advance or a Swing Line Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation
to reimburse such LC Disbursement.
(vi) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (v) of this Section shall
be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (A) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any
term or provision therein, (B) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect, (C) payment by the LC Issuer under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (D) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal
or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the
Lenders nor the LC Issuer, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the LC Issuer;
provided that the foregoing shall not be construed to excuse the LC Issuer from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are
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hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the LC Issuer’s
failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross negligence, willful misconduct or bad faith, in each case on the part
of the LC Issuer, the LC Issuer shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the LC Issuer may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(vii) Disbursement Procedures . The LC Issuer shall, promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under a Letter of Credit. The LC Issuer shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the LC Issuer has made or will make an LC Disbursement
thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the
LC Issuer and the Lenders with respect to any such LC Disbursement.
(viii) Interim Interest . If the LC Issuer shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC
Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made (or, if notice of such LC Disbursement is given later than 1:00 p.m., New York City time,
on the date of such LC Disbursement, then from and including the next Business Day) to but excluding the date that the Borrower
reimburses such LC Disbursement, at the Floating Rate plus the Applicable Margin; provided that, if the Borrower fails to reimburse such
LC Disbursement within five Business Days of the date when due pursuant to paragraph (v) of this Section, then the unpaid amount thereof
shall bear interest, for each day from and including the date when due to and including the date that the Borrower reimburses such LC
Disbursement, at the Floating Rate plus the Applicable Margin plus 2% per annum. Interest accrued pursuant to this paragraph shall be for
the account of the LC Issuer with respect to the applicable Letter of Credit, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (v) of this Section to reimburse such LC Issuer shall be for the account of such Lender to the extent of
such payment.
(ix) Replacement of the LC Issuer . An LC Issuer may be replaced at any time by written agreement among the Borrower, the
Administrative Agent and the successor LC Issuer. The Administrative Agent shall notify the Lenders of any such replacement of an LC
Issuer. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the
replaced LC Issuer pursuant to paragraph (xi) of this Section. From and after the effective date of any such replacement, (x) the successor
LC Issuer shall have all the rights and obligations of an LC Issuer under
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this Agreement with respect to Letters of Credit to be issued thereafter and (y) references herein to the term “LC Issuer” shall be deemed to
refer to such successor or to any previous LC Issuer, or to such successor and all previous LC Issuers, as the context shall require. After the
replacement of an LC Issuer hereunder, the replaced LC Issuer shall remain a party hereto and shall continue to have all the rights and
obligations of an LC Issuer under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(x) Cash Collateralization . If any Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph (which notice
shall be delivered no earlier than the earlier of the fifth Business Day of such Default continuing and the date of any acceleration of the
Obligations with respect to such Default), the Borrower shall deposit in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Revolving Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and
such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Default
with respect to the Borrower described in Section 7.6 or 7.7. Such deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of
such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Administrative Agent to reimburse the LC Issuer for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure
representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the
Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of a Default, such amount (to the extent
not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Defaults have been cured or waived.
(xi) Fees . The Borrower agrees to pay (A) to the Administrative Agent for the account of each Revolving Lender a participation fee (the
“ LC Fee ”) with respect to its participations in Letters of Credit, which shall accrue at a per annum rate equal to the Applicable Margin then
in effect with respect to Revolving Loans that are Eurodollar Loans on the face amount of such Letters of Credit during the period from and
including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which
such Lender ceases to have any LC Exposure, and (B) to each LC Issuer a fronting fee, which shall accrue at the rate per
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annum separately agreed upon (but no more than 0.125% per annum) between the Borrower and such LC Issuer on the average daily amount
of the LC Exposure with respect to Letters of Credit issued by such LC Issuer (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the
Revolving Credit Commitments and the date on which there ceases to be any LC Exposure, as well as such LC Issuer’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. LC Fees and fronting
fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third
Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall
be payable on the date on which the Revolving Credit Commitments terminate and any such fees accruing after the date on which the
Revolving Credit Commitments terminate shall be payable on demand. Any other fees payable to the LC Issuers pursuant to this paragraph
shall be payable within 30 days after demand. All LC Fees and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but excluding the last day).
(xii) Outstanding Letters of Credit . The letters of credit set forth on Schedule 2.22 hereto (the “ Outstanding Letters of Credit ”) were
issued or deemed issued pursuant to the Existing Credit Agreement and remain outstanding as of the date of this Agreement. The Borrower,
the LC Issuer and each of the Revolving Lenders hereby agree with respect to the Outstanding Letters of Credit that effective upon the
Effective Date (A) such Outstanding Letters of Credit shall be deemed to be Letters of Credit issued under and governed in all respects by
the terms and conditions of this Agreement and (B) each Lender shall participate in each Outstanding Letter of Credit in an amount equal to
its Pro Rata Share of the face amount of such Outstanding Letter of Credit.
Section 2.23 Replacement of Lender . If (i) the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to
any Lender, (ii) any Lender’s obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be
suspended pursuant to Section 3.3, (iii) any Lender shall default in its obligation to fund Loans hereunder, (iv) any Lender shall become
insolvent or the subject of a bankruptcy or insolvency proceeding or (v) any Lender shall fail to consent to a departure or waiver of any
provision of the Loan Documents or fail to agree to any amendment thereto, which waiver, consent or amendment requires the consent of all
Lenders or of all Lenders directly affected thereby and has been consented to by the Required Lenders (any Lender described in clause (i), (ii),
(iii), (iv) or (v) being an “ Affected Lender ”), the Borrower may (a) elect to replace such Affected Lender as a Lender party to this Agreement;
provided that the Borrower shall have such right only if (A) concurrently with such replacement, (1) another bank or other entity (other than a
Disqualified Institution) which is reasonably satisfactory to the Borrower and the Administrative Agent shall agree, as of such date, to purchase
for cash the Loans and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit D and to
become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date
and to comply with the requirements of Section 12.1 applicable to assignments, and (2) the Borrower shall pay to such
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Affected Lender in same day funds on the day of such replacement (x) all interest, fees and other amounts then accrued but unpaid to such
Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such
Affected Lender under Sections 3.1, 3.2 and 3.5, and (y) an amount, if any, equal to the payment which would have been due to such Lender on
the day of such replacement under Section 3.4 had the Loans or other Obligations of such Affected Lender been prepaid on such date rather
than sold to the replacement Lender, (B) in the case of clause (i) or (ii) above, such additional payments continue to be required or such
suspension is still effective and will be reduced or negated by such assignment and (C) in the case of clause (iv) above, the applicable Assignee
shall have agreed to the applicable departure, waiver or amendment of the Loan Documents or (b) terminate all Commitments of such Affected
Lender and repay all Obligations of the Borrower owing to such Lender as of such termination date (including any amounts owing pursuant to
Section 3.4 as a result of such repayment).
Section 2.24 Pro Rata Treatment; Intercreditor Agreements .
(i) Except as provided below in this Section 2.24 and as required under Section 2.7, 2.10, 2.13, 3.1, 3.2, 3.4, 3.5 or 11.2, each Advance,
each payment or prepayment of principal of any Advance, each payment of interest on the Loans, each payment of the commitment fee set
forth in Section 2.8 and the LC Fee, each reduction of the Revolving Credit Commitment and each conversion of any Advance to or
continuation of any Advance as an Advance of any Type shall be allocated pro rata among the Lenders in accordance with their respective
applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal
amounts of their respective applicable outstanding Loans).
(ii) Notwithstanding anything to the contrary contained in this Agreement, any payment or other distribution (whether from proceeds of
Collateral or any other source, whether in the form of cash, securities or otherwise, and whether made by any Loan Party or in connection
with any exercise of remedies by the Administrative Agent, the Collateral Agent or any Lender) made or applied in respect of any of the
Obligations (a) following any acceleration of the Obligations, (b) during the existence of a Default under Section 7.2 or (c) during or in
connection with Insolvency Proceedings involving any Loan Party (or any plan of liquidation, distribution or reorganization in connection
therewith), shall be made or applied, as the case may be, in the following order of priority (with higher priority Obligations to be paid in full
prior to any payment or other distribution in respect of lower priority Obligations): (i) first , to payment of that portion of the Obligations
constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as
such, the LC Issuer in its capacity as such and the Collateral Agent in its capacity as such (ratably among the Administrative Agent, the LC
Issuer and the Collateral Agent in proportion to the respective amounts described in this clause first payable to them); (ii) second , to
payment of that portion of the Obligations constituting indemnities and other amounts (other than principal, interest and fees) payable to the
Lenders, including attorney fees (ratably among such Lenders in proportion to the respective amounts described in this clause second
payable to them); (iii) third , to payment of that portion of the Obligations constituting accrued and unpaid interest (including any default
interest) on the Term B
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Loans and any Replacement Term B Loans (ratably among such Lenders in proportion to the respective amounts described in this clause
third payable to them), including interest accruing after the filing or commencement of any Insolvency Proceedings in respect of any Loan
Party, whether or not any claim for post-filing or post-petition interest is or would be allowed, allowable or otherwise enforceable in any
such Insolvency Proceedings; (iv) fourth , to payment of that portion of the Obligations constituting unpaid principal of the Term B Loans
and any Replacement Term B Loans (ratably among such Lenders in proportion to the respective amounts described in this clause fourth
held by them); (v) fifth , to payment of that portion of the Obligations constituting accrued and unpaid fees or interest (including any
default interest) on or relating to the Revolving Loans, Term A Loans, Swing Line Loans and LC Exposure (ratably among such Lenders in
proportion to the respective amounts described in this clause fifth payable to them), including interest accruing after the filing or
commencement of Insolvency Proceedings in respect of any Loan Party, whether or not any claim for post-filing or post-petition interest is
or would be allowed, allowable or otherwise enforceable in any such Insolvency Proceedings; (vi) sixth , to payment of that portion of the
Obligations constituting unpaid principal of the Revolving Loans, Term A Loans, Swing Line Loans and LC Exposure (including any
termination payments and any accrued and unpaid interest thereon) (ratably among such Lenders in proportion to the respective amounts
described in this clause sixth held by them) and amounts constituting Rate Management Obligations (but only to the extent such Rate
Management Obligations are secured by the Collateral and the source of the applicable payment is Collateral proceeds); (vii) seventh on or
after (A) the Facility Termination Date, (B) the occurrence of any Default with respect to any Loan Party described in Section 7.6 or 7.7 or
(C) the declaration by the Administrative Agent or the Required Lenders that the Loans are due and payable pursuant to Article VII, to pay
an amount to the Administrative Agent for the account of the LC Issuer equal to one hundred one percent (101%) of the aggregate undrawn
face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid LC Disbursements to be held as cash collateral;
(viii) eighth, to payment of any other Obligations due to the Administrative Agent or any Lender by the Borrower, ratably; and (ix) last, in
the case of proceeds of Collateral, the balance, if any, thereof, after all of the Obligations (including, without limitation, all Obligations in
respect of LC Exposure but excluding any contingent obligations) have been paid in full, to the Borrower or as otherwise required by a court
of competent jurisdiction. Each Lender agrees that the provisions of this Section 2.24 (including, without limitation, the priority of the
Obligations as set forth herein) constitute an intercreditor agreement among them for value received that is independent of any value
received from the Loan Parties, and that such agreement shall be enforceable as against each Lender, including, without limitation, in any
Insolvency Proceedings in respect of any Loan Party (including without limitation with respect to interests and costs regardless of whether
or not such interest or costs are allowed as a claim in any such Insolvency Proceedings or enforceable or recoverable against the Loan Party
or its bankruptcy estate), to the same extent that such agreement is enforceable under applicable non-bankruptcy law (including, without
limitation, pursuant to Section 510(a) of the U.S. federal Bankruptcy Code or any comparable provision of applicable insolvency law), and
that, if any Lender receives any payment or distribution in respect of any Obligation (including, without limitation, in
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connection with any Insolvency Proceedings or any plan of liquidation, distribution or reorganization therein) to which such Lender is not
entitled in accordance with the priorities set forth in this Section 2.24, such amount shall be held in trust by such Lender for the benefit of
the Person or Persons entitled to such payment or distribution hereunder, and promptly shall be turned over by such Lender to the
Administrative Agent for distribution to the Person or Persons entitled to such payment or distribution in accordance with this Section 2.24.
(iii) In the event there is any Disgorged Recovery in respect of any Lender’s Revolving Loans, Term Loans, Swing Line Loans or LC
Exposure in any Insolvency Proceedings of any Loan Party, such Revolving Loans, Term Loans, Swing Line Loans and LC Exposure shall
be deemed to be outstanding as if such Disgorged Recovery had never been received by such Lender, and each Lender agrees that the
intercreditor agreements and priorities set forth in this Section 2.24 shall be enforced in accordance with their terms in respect of such
Revolving Loans, Term Loans, Swing Line Loans or LC Exposure, including, without limitation, for purposes of the allocation of payments
and distributions made or applied in respect of the Obligations (whether from proceeds of Collateral or otherwise), as well as for purposes of
determining whether such other Lender must turn over all or any portion of any payment or other distribution received by such other Lender
(whether before or after occurrence of such Disgorged Recovery) to the Administrative Agent for redistribution in accordance with the last
sentence of Section 2.24(ii).
ARTICLE III
YIELD PROTECTION; TAXES
Section 3.1 Yield Protection . If, after the date of this Agreement (or, in the case of any assignee, after the date it became a party to this
Agreement), the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority,
central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable
Lending Installation or any LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank
or comparable agency:
(i) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or
(ii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or any LC
Issuer of making, funding or maintaining its Eurodollar Loans, or of issuing or participating in Letters of Credit, or reduces any amount
receivable by any Lender or any applicable Lending Installation in connection with its Eurodollar Loans, Letters of Credit or participations
therein, or
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requires any Lender or any applicable Lending Installation or any LC Issuer to make any payment calculated by reference to the amount of
Eurodollar Loans, Letters of Credit or participations therein held or interest or LC Fees received by it, in each case by an amount deemed
material by such Lender or such LC Issuer as the case may be,
and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or such LC Issuer, as the case
may be, of making or maintaining its Eurodollar Loans or Commitment or of issuing or participating in Letters of Credit or to reduce the return
received by such Lender or applicable Lending Installation or such LC Issuer, as the case may be, in connection with such Eurodollar Loans,
Commitment, Letters of Credit or participations therein, then, within 30 days of written demand by such Lender or such LC Issuer, as the case
may be, the Borrower shall pay such Lender or such LC Issuer, as the case may be, such additional amount or amounts as will compensate such
Lender or such LC Issuer, as the case may be, for such increased cost or reduction in amount received. Notwithstanding the foregoing, this
Section 3.1 shall not apply to any tax-related matters.
Section 3.2 Changes in Capital Adequacy Regulations . If a Lender or an LC Issuer determines the amount of capital required or expected to
be maintained by such Lender, any Lending Installation of such Lender or such LC Issuer, or any corporation controlling such Lender or such
LC Issuer is increased as a result of a Change, then, within 30 days of written demand by such Lender or such LC Issuer, the Borrower shall
pay such Lender or such LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased
capital which such Lender or such LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment
to make Loans and issue or participate in Letters of Credit, as the case may be, hereunder (after taking into account such Lender’s or such LC
Issuer’s policies as to capital adequacy). “ Change ” means (i) any change after the date of this Agreement in the Risk-Based Capital
Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required
or expected to be maintained by any Lender or any LC Issuer or any Lending Installation or any corporation controlling any Lender or any LC
Issuer. “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basel Committee on Banking Regulation and Supervisory Practices Entitled “International
Convergence of Capital Measurements and Capital Standards,” including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement.
Section 3.3 Availability of Types of Advances . If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders
determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate
applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Administrative
Agent shall suspend the availability of Eurodollar Advances and require any
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affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification
amounts required by Section 3.4.
Section 3.4 Funding Indemnification . If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the
Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such
Eurodollar Advance.
Section 3.5 Taxes .
(i) All payments by the Borrower to or for the account of any Lender, any LC Issuer or the Administrative Agent hereunder or under any
Note or Letter of Credit Application shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be
required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder to any Lender, any LC Issuer or the
Administrative Agent, (A) the sum payable shall be increased as necessary so that after making all required deductions or withholdings
(including deductions applicable to additional sums payable under this Section 3.5) such Lender, such LC Issuer or the Administrative
Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made,
(B) the Borrower shall make such deductions or withholdings, (C) the Borrower shall pay the full amount deducted or withheld to the
relevant authority in accordance with applicable law and (D) the Borrower shall furnish to the Administrative Agent the original or a
certified copy of a receipt evidencing payment thereof within 30 days after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or under any Loan Document or from the execution or
delivery of, or otherwise with respect to, this Agreement or any Loan Document (“ Other Taxes ”).
(iii) The Borrower hereby agrees to indemnify the Administrative Agent, such LC Issuer and each Lender for the full amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the
Administrative Agent, such LC Issuer or such Lender as a result of its Commitment, any Loans made by it hereunder, or otherwise in
connection with its participation in this Agreement and any liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Administrative Agent, such LC Issuer
or such Lender makes written demand therefor pursuant to Section 3.6.
(iv) Each Lender and LC Issuer that is not incorporated under the laws of the United States of America, a state thereof or the District of
Columbia (each a “ Non-U.S. Lender ”) agrees that it will, on or before the date that it becomes party to this Agreement,
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(A) deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form
W-8BEN or W-8ECI, certifying in either case that such Non-U.S. Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, and (B) deliver to the Borrower and the Administrative Agent a United
States Internal Revenue Form W-8 and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S.
Lender further undertakes to deliver to each of the Borrower and the Administrative Agent (x) renewals or additional copies of such form (or
any successor form) on or before the date that such form expires or becomes obsolete or upon the reasonable request of the Borrower or the
Administrative Agent, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto. All forms or amendments described in the preceding sentence shall certify that such Non-U.S.
Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Non-U.S. Lender from duly
completing and delivering any such form or amendment with respect to it and such Non-U.S. Lender advises the Borrower and the
Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.
(v) Each Lender and LC Issuer that is incorporated under the laws of the United States of America, a state thereof or the District of
Columbia (each a “U.S. Lender”) agrees that it will, on or before the date that it becomes a party to this Agreement, deliver to the Borrower
and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-9, certifying that it is entitled
to an exemption from United States backup withholding tax. Each U.S. Lender further undertakes to deliver to each of the Borrower and the
Administrative Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or
becomes obsolete or upon the reasonable request of the Borrower or the Administrative Agent, and (y) after the occurrence of any event
requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto. All forms or amendments
described in the preceding sentence shall certify that such U.S. Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such U.S. Lender from duly completing and delivering any such form or amendment with respect to it
and such U.S. Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
(vi) For any period during which a Lender or LC Issuer has failed to provide the Borrower with an appropriate form pursuant to clause
(iv) or (v) of this Section 3.5 (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or
administration thereof by any governmental authority, occurring
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subsequent to the date on which a form originally was required to be provided), such Lender or LC Issuer shall not be entitled to
indemnification or gross-up under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Lender or LC
Issuer that is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver
a form required under clause (iv) or (v) of this Section 3.5, the Borrower shall take such steps at such Lender’s or LC Issuer’s expense as
such Lender or LC Issuer shall reasonably request to assist such Lender or LC Issuer to recover such Taxes.
(vii) Any Lender or LC Issuer that is entitled to an exemption from or reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed
by applicable law as will permit such payments to be made without withholding or at a reduced rate.
(viii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political
subdivision thereof asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Administrative
Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall
indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the
Administrative Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges
of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent). The obligations of the Lenders
under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement.
(ix) If a Lender or LC Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has
been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 3.5, it shall
pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section 3.5 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the
Lender or LC Issuer and without interest (other than any interest paid by the relevant Governmental Entity with respect to such refund),
provided that (i) the Borrower, upon the request of the Lender or LC Issuer, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental Entity) to the Lender or LC Issuer in the event the Lender or LC
Issuer is required to repay such refund to such Governmental Entity and (ii) nothing herein contained shall interfere with the right of a
Lender or LC Issuer to arrange its tax affairs in whatever manner it thinks fit nor oblige any Lender or LC Issuer to claim any tax refund or
to make available its tax returns or disclose any information relating to its tax affairs or any computations in respect thereof or require any
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Lender or LC Issuer to do anything that would prejudice its ability to benefit from any other refunds, credits, reliefs, remissions or
repayments to which it may be entitled.
Section 3.6 Lender Statements; Survival of Indemnity . To the extent reasonably possible, each Lender shall designate an alternate Lending
Installation to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar
Advances under Section 3.3, so long as such designation is not, in the commercially reasonable judgment of such Lender, materially
disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the
Administrative Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of
manifest error. Determination of amounts payable under Sections 3.1, 3.2, 3.4 or 3.5 in connection with a Eurodollar Loan shall be calculated
as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written
statement. The Borrower shall not be required to indemnify any Lender pursuant to Section 3.1, 3.2, 3.4 or 3.5 for any amounts paid or losses
incurred by such Lender as to which such Lender has not made demand hereunder within 120 days after the date such Lender has actual
knowledge of such amounts or losses and their applicability to the lending transactions contemplated hereby. The obligations of the Borrower
under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Effectiveness and Closing Conditions . The amendments to the Existing Credit Agreement embodied herein shall not become
effective (in which ease the Existing Credit Agreement shall remain in full force and effect) and the Lenders shall not be required to make the
Term B Loan hereunder unless and until the following conditions precedent (other than clause (xi)) have been satisfied (or waived pursuant to
Section 8.2 hereof) and, in the case of clause (xi), the Term B Loan proceeds shall be funded simultaneously with the satisfaction of such
condition, in each case on or before March 27, 2008:
(i) Each Loan Party, each Existing Lender, each Lender with a Term B Loan Commitment, the Administrative Agent and the Collateral
Agent shall each have executed and delivered each of the Loan Documents to which it is a party.
(ii) All shareholder, governmental and third party approvals necessary in connection with the financing and other transactions
contemplated hereby and the continuing operations of Holdco and its Subsidiaries shall have been obtained and be in full force and effect
and all waiting periods applicable to the transactions contemplated hereby shall have expired or been terminated, in each case, to the extent
required to be delivered under the Equity Purchase Agreement.
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(iii) The Administrative Agent shall have received (x) satisfactory audited consolidated financial statements of Holdco for the two most
recent fiscal years ended prior to the Effective Date as to which such financial statements are available and (y) satisfactory unaudited interim
consolidated financial statements of Holdco for each quarterly period ended subsequent to the date of the latest financial statements
delivered pursuant to clause (x) of this paragraph as to which such financial statements are available.
(iv) Liens creating a first (subject only to Permitted Liens) priority security interest in the Collateral shall have been perfected or
documents required to perfect such security interest shall have been delivered to the Administrative Agent or arrangements have been made
with respect thereto satisfactory to the Administrative Agent.
(v) The Administrative Agent shall have received such corporate records, officer’s certificates and other instruments as are customary for
transactions of this type or as it may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent.
(vi) The Collateral Agent, the Trustee and Collateral Agent for the holders of the Second Lien Indebtedness and the other parties thereto
shall have entered into the Intercreditor Agreement.
(vii) The Administrative Agent shall be reasonably satisfied that adequate bank clearing arrangements of MoneyGram Payment Systems,
Inc. are in effect on the Effective Date.
(viii) The Administrative Agent shall be reasonably satisfied that adequate contractual arrangements pursuant to which surety bonds are
made available to support the businesses of the Borrower’s Subsidiaries are in effect.
(ix) The Lenders shall be satisfied with the investment policy adopted by the board of directors of Holdco with respect to the portfolio
investments of its Subsidiaries and with the rate hedging and foreign exchange arrangements and outstanding amounts thereof of Holdco and
its Subsidiaries.
(x) Except as Previously Disclosed (as defined in the Equity Purchase Agreement), since September 30, 2007, no change or event shall
have occurred and no circumstances shall exist which have had, or would reasonably be expected to have, individually or in the aggregate,
an Effective Date MAE. With respect to matters which have been Previously Disclosed, in determining whether this condition is satisfied,
any circumstance, event or condition occurring after the date of the Equity Purchase Agreement shall be taken into account, including any
deterioration, worsening or adverse consequence of such Previously Disclosed matters occurring after the date of the Equity Purchase
Agreement.
(xi) (A) (i) Holdco’s receipt from Deloitte & Touche LLP of the D&T Deliverables, which shall be delivered if the amounts set forth on
Schedule F to the Equity Purchase Agreement shall have been placed into an escrow account pursuant to an
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escrow agreement reasonably acceptable to each of the Investors, Holdco, Deloitte & Touche LLP, the parties hereto and the parties to the
Note Purchase Agreement with irrevocable instructions to be released to Holdco on the Effective Date upon Holdco’s receipt of the D&T
Deliverables, or (ii) if the amounts set forth on Schedule F to the Equity Purchase Agreement shall not have been placed into an escrow
account with irrevocable instructions to be released to Holdco on the Effective Date upon Holdco’s receipt of the D&T Deliverables, then
Holdco shall have committed to the Investors, the Administrative Agent, the Collateral Agent and the Lenders on the Effective Date that,
after both Holdco and Deloitte & Touche LLP shall have verified that the amounts set forth on Schedule F to the Equity Purchase
Agreement have been credited to the bank account set forth across from such amount on Schedule F to the Equity Purchase Agreement,
Holdco will receive from Deloitte & Touche LLP the D&T Deliverables and (B) Holdco’s financial printer Bowne shall have notified the
Investors and the Administrative Agent (on the Effective Date) that Holdco has delivered the Final 10-K to Bowne with the irrevocable
instruction that Bowne file the Final 10-K on behalf of Holdco, and that Bowne is prepared to file and will file the Final 10-K with the SEC,
in each case, immediately upon notification from Holdco that the amounts set forth on Schedule F to the Equity Purchase Agreement have
been successfully credited to Holdco bank account set forth across from such amount on Schedule F to the Equity Purchase Agreement.
(xii) On the Effective Date (A) all representations and warranties in the Loan Documents (including, without limitation, the
representation in Section 5.5(i) as to the absence of an Effective Date MAE) are true and correct in all material respects after giving effect to
the substantially contemporaneous consummation of the transactions contemplated hereby on the Effective Date, (B) after giving effect to
the Credit Extensions and other substantially contemporaneous transactions consummated on the Effective Date, no Default or Unmatured
Default has occurred and is continuing, and (C) the Administrative Agent shall have received a satisfactory certificate to such effect dated
the Effective Date and signed by the Chief Financial Officer or Treasurer of Holdco and the Borrower.
(xiii) On the Effective Date, any waiver period under the Existing Credit Agreement shall no longer exist and each waived Default or
Unmatured Default shall have been permanently waived.
(xiv) The Lenders, the Administrative Agent and the Arranger shall have received all fees required to be paid, and all expenses for which
invoices have been presented, on or before the Effective Date.
(xv) After giving effect to the making and application of the proceeds of the Effective Date transactions contemplated hereby, there shall
exist unused Aggregate Revolving Credit Commitments of at least $100,000,000 and Aggregate Revolving Credit Commitment shall be
$250,000,000.
(xvi) The Administrative Agent shall have received evidence reasonably satisfactory to it that substantially contemporaneously with the
funding of the Term B
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Loans, (i) Holdco shall have received gross cash proceeds of at least $760,000,000 from the issuance by Holdco of common and preferred
stock (the “ Sponsor Capital ”) to the Sponsors on the terms and conditions set forth in the Equity Purchase Agreement (giving effect to any
waivers of closing conditions therein deemed immaterial by the Administrative Agent) and (ii) the Borrower shall have received gross cash
proceeds of at least $500,000,000 from the incurrence by the Borrower of the Second Lien Indebtedness, in each case on the terms and
conditions set forth in the Note Purchase Agreement and the Indenture, as applicable (giving effect to any waivers of closing conditions
therein deemed immaterial by the Administrative Agent), and in each case as such amounts may be reduced in accordance with the Equity
Purchase Agreement.
(xvii) That certain $150,000,000 364-day Credit Agreement dated as of November 15, 2007, as amended, by and among Holdco,
JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto shall have been terminated and on the Effective Date
there shall be no amounts outstanding thereunder.
(xviii) Substantially contemporaneously with the funding of the Term B Loan, (A) the proceeds to Holdco of the issuance of the Sponsor
Capital (net of (1) transactional fees and expenses and (2) a reserve for general corporate purposes in an aggregate amount not to exceed
$15,000,000) shall be contributed by Holdco to the common equity of the Borrower (such contribution being a material inducement to the
Borrower to accept and assume existing obligations of Holdco as contemplated hereby) and (B) such contributed amount, together with an
amount equal to the proceeds to the Borrower of the incurrence of the Second Lien Indebtedness (net of (1) transactional fees and expenses,
(2) a reserve for general corporate purposes in an aggregate amount not to exceed $15,000,000 and (3) a repayment of $100,000,000 of the
Revolving Loans outstanding under the Existing Credit Facility) shall be contributed by the Borrower to the common equity of MoneyGram
Payment Systems, Inc.
(xix) Neither Deloitte & Touche LLP nor any other accounting firm shall have issued to Holdco any opinion regarding the consolidated
financial statements of Holdco and its Subsidiaries as of and for the year ended December 31, 2007 which is not a Satisfactory Audit
Opinion.
(xx) Any Notes requested by a Lender pursuant to Section 2.16 shall have been issued by the Borrower payable to the order of each such
requesting Lender.
(xxi) The Administrative Agent shall have received such legal opinions as are customary for transactions of this type or as it may
reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent.
(xxii) Wal-Mart Stores, Inc. shall have confirmed in writing to Holdco (A) that the Money Services Agreement by and among
MoneyGram Payment Systems, Inc. and Wal-Mart Stores, Inc. (as amended through that certain Amendment 3 to Money Services
Agreement dated as of February 11, 2008 but not amended by any subsequent amendments other than, if necessary, to make effective the
extension of the term of the Money Services Agreement through January 31, 2013) will be in full force and effect
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after the consummation of the transactions contemplated hereby (which shall include an effective extension of the term of the Money
Services Agreement through January 31, 2013) and (B) that the Equity Purchase Agreement and the transactions contemplated thereby and
hereby do not give Wal-Mart Stores, Inc. the right to terminate the Money Services Agreement.
Section 4.2 Each Subsequent Credit Extension . The Lenders shall not be required to make any Credit Extension (except as otherwise set
forth in Section 2.7 with respect to Revolving Loans for the purpose of repaying Swing Line Loans) after the Effective Date unless on the
applicable Credit Extension Date:
(i) There exists no Default or Unmatured Default; provided , however , that solely for purposes of this Section 4.2(i), no Default or
Unmatured Default under Section 7.1 shall be deemed to exist with respect to the material falsity of any representation or warranty made on
the Effective Date unless the same evidenced or had a Material Adverse Effect.
(ii) The representations and warranties contained in Article V are true and correct as of such Credit Extension Date in all material
respects except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation
or warranty shall have been true and correct on and as of such earlier date.
Each Borrowing Notice, Swing Line Borrowing Notice, or request for issuance of a Letter of Credit, as the case may be, with respect to each
such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and
(ii) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower and Holdco represent and warrant to the Lenders that:
Section 5.1 Existence and Standing . Each of the Borrower, Holdco and its Material Domestic Subsidiaries is a corporation, partnership,
trust or limited liability company duly and properly incorporated or organized, as the case may be, and validly existing, duly qualified or
licensed to do business and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted in
each case (other than as to the valid existence of the Borrower), except where, individually or in the aggregate, the failure to exist, qualify, be
licensed or be in good standing or have such power and authority could not reasonably be expected to result in a Material Adverse Effect.
Section 5.2 Authorization and Validity . Each of the Borrower, Holdco and its Material Domestic Subsidiaries has the power and authority
and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and
delivery by each of the Borrower, Holdco and its Material Domestic Subsidiaries
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of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate
or other organizational proceedings, and the Loan Documents to which each of the Borrower, Holdco and its Material Domestic Subsidiaries is
a party constitute legal, valid and binding obligations of each of the Borrower, Holdco and its Material Domestic Subsidiaries enforceable
against each of the Borrower, Holdco and its Material Domestic Subsidiaries in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
Except for the shareholder approval set forth in Section 4.1(g) of the Equity Purchase Agreement, no stockholder vote of the Borrower, Holdco
or any Subsidiary is required to authorize, approve or consummate any of the Transactions.
Section 5.3 No Conflict; Government Consent . Neither the execution and delivery by any Loan Party of the Loan Documents to which it is
a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any
applicable law, rule, regulation, ruling, order, writ, judgment, injunction, decree or award binding on Holdco or any of its Subsidiaries or any
Property of such Person or (ii) Holdco’s or any Material Domestic Subsidiary’s articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, or substantially
equivalent governing document, as the case may be, or (iii) the provisions of any note, bond, mortgage, deed of trust, license, lease indenture,
instrument, agreement or other obligation (each a “ Contract ”) to which Holdco or any Subsidiary is a party or is subject, or by which it, or its
Property, is bound, or conflict with, result in a breach of any provision thereof or constitute a default thereunder (or result in an event which,
with notice or lapse of time or both, would constitute a default thereunder), or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration of, or (except for the Liens created by the Loan Documents and the Second Lien
Documents, Permitted Liens and Permitted Holdco Liens) result in, or require, the creation or imposition of any Lien in, of or on the Property
of Holdco or any of its Subsidiaries pursuant to the terms of any such note, bond, mortgage, deed of trust, license, lease indenture, instrument,
agreement or other obligation, except with respect to clauses (i) or (iii), to the extent, individually or in the aggregate, that such violation,
conflict, breach, default or creation or imposition of any lien could not reasonably be expect to result in a Material Adverse Effect. No order,
consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by Holdco or any of its
Material Domestic Subsidiaries, is required to be obtained by Holdco or any Material Domestic Subsidiary in connection with the execution
and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations
or the legality, validity, binding effect or enforceability of any of the Loan Documents.
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Section 5.4 Financial Statements . The consolidated financial statements of Holdco and its Subsidiaries heretofore delivered to the Lenders
as of and for the fiscal year ended December 31, 2006 and as of and for the fiscal quarter and portion of the fiscal year ended September 30,
2007 were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly
present in all material respects the consolidated financial condition and operations of Holdco and its Subsidiaries at such date and the
consolidated results of their operations for the period then ended.
Section 5.5 Material Adverse Change . (i) As of the Effective Date, there exists no event or circumstance which constitutes or could
reasonably be expected to result in an Effective Date MAE, and (ii) since the Effective Date, there has been no event or circumstance which
constitutes or could reasonably be expected to have a Material Adverse Effect.
Section 5.6 Taxes . Holdco and its Subsidiaries have filed or caused to be filed all United States federal tax returns and all other material tax
returns and reports required to be filed and have paid or caused to be paid all taxes due pursuant to said returns or pursuant to any assessment
received by such Persons, except such taxes, if any, which are not overdue by more than 30 days or which (i) are being contested in good faith
and as to which adequate reserves have been provided in accordance with GAAP or (ii) the non-payment of which could not reasonably be
expected to have a Material Adverse Effect. The United States federal income tax returns of MoneyGram Payment Systems, Inc. and its
Subsidiaries have been audited by the Internal Revenue Service (or the statute of limitations applicable to audits of such tax returns has run)
through the fiscal year ended December 31, 2003. As of the Effective Date, neither Holdco nor any of its Subsidiaries has entered into any
“listed transaction” as defined under Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the Code.
Section 5.7 Litigation . There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of
any of their senior officers, threatened against or affecting Holdco or any of its Subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Neither Holdco nor any of its Subsidiaries is subject to any order, judgment or
decree that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.8 Subsidiaries; Capitalization . Schedule 5.8 contains an accurate list of all Subsidiaries of Holdco and identifies all Material
Domestic Subsidiaries all as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their
respective Capital Stock or other ownership interests owned by Holdco, the Borrower or other Subsidiaries. All of the issued and outstanding
shares of Capital Stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to
such ownership interests) duly authorized and issued and are fully paid and non-assessable and are owned by Holdco, the Borrower or the
applicable Subsidiary free and clear of any Lien, except for Permitted Liens.
Section 5.9 ERISA; Labor Matters .
(i) The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $125,000,000. No Reportable Event has
occurred with respect to any
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Single Employer Plan, neither Holdco, any of its Subsidiaries nor any other member of the Controlled Group has withdrawn from any
Multiemployer Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Single Employer Plan.
(ii) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (A) Holdco and each
of its Subsidiaries has made all required contributions to each Plan in accordance with its terms; (B) there is not now, nor do any
circumstances exist that are likely to give rise to any requirement for the posting of security with respect to a Plan or the imposition of any
material liability or material lien on the assets of Holdco or any of its Subsidiaries under ERISA or the Code in respect of any Plan, and no
liability (other than for premiums to the Pension Benefit Guaranty Corporation) under Title IV of ERISA or under Sections 412 or 4971 of
the Code has been or is reasonably expected to be incurred by Holdco or any of its Subsidiaries; and (C) there are no pending or, to the
knowledge of Holdco or Borrower, threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations which
have been asserted or instituted against the Plans or the assets of any of the trusts under any of the Plans.
(iii) None of Holdco, any of its Subsidiaries or any other person or entity under common control with Holdco within the meaning of
Section 414(b), (c), (m) or (o) of the Code participates in, or is required to contribute to, any “multiemployer plan” (within the meaning of
Section 3(37) of ERISA) (a “ Multiemployer Plan ”).
(iv) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, with respect to any
employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by Holdco or any of its Subsidiaries with
respect to employees employed outside the United States (a “ Foreign Plan ”), (A) each Foreign Plan required to be registered has been
registered and has been maintained in good standing with applicable regulatory authorities; and (B) all Foreign Plans that are required to be
funded are funded in accordance with applicable Laws, and with respect to all other Foreign Plans, adequate reserves therefore have been
established on the accounting statements of Holdco or its applicable Subsidiary.
Section 5.10 Accuracy of Information .
(i) As of the Effective Date, no information, exhibit or report (as modified or supplemented by other information so furnished) furnished
by Holdco or any of its Subsidiaries to the Administrative Agent or to any Lender (other than projections and other forward looking
information and information of a general economic or industry specific nature) in connection with the negotiation of, or compliance with,
the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading.
(ii) As of the Effective Date, any projections and other financial estimates and forecasts furnished by Holdco to the Administrative Agent
or to any Lender on or prior to the Effective Date in connection with the negotiation of, or compliance with, this Agreement were based on
good faith estimates and assumptions believed by Holdco to be
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reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and
that actual results during the period or periods covered by any such projections may differ from the projected results.
Section 5.11 Regulation U . Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of Holdco and
its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.
Section 5.12 Compliance With Laws . Holdco and its Subsidiaries have complied with all applicable Laws of any Governmental Entity
having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except for any failure to
comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.
Section 5.13 Ownership of Properties . Except as set forth on Schedule 5.13, Holdco and its Subsidiaries have good and indefeasible title to
or valid leasehold interests in, free of all Liens other than Permitted Liens, to all of the Property and assets reflected in Holdco’s most recent
consolidated financial statements provided to the Administrative Agent as owned by Holdco and its Subsidiaries.
Section 5.14 Plan Assets; Prohibited Transactions . Neither Holdco nor any of its Subsidiaries is an entity deemed to hold “plan assets”
within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of
ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of the Loans
or Letters of Credit hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.
Section 5.15 Environmental Matters . Except for those matters that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, (a) each of Holdco and its Subsidiaries is in compliance with all applicable Environmental Laws, and neither
Holdco nor any of its Subsidiaries has received any written communication alleging that Holdco is in violation of, or has any liability under,
any Environmental Law, (b) each of Holdco and its Subsidiaries validly possesses and is in compliance with all Permits required under
Environmental Laws to conduct its business as presently conducted, and all such Permits are valid and in good standing, (c) there are no claims
relating to Environmental Laws pending or, to the knowledge of Holdco or the Borrower, threatened against Holdco or any of its Subsidiaries
and (d) none of Holdco or any of its Subsidiaries has Released any Hazardous Materials in a manner that would reasonably be expected to
result in any claim relating to Environmental Laws against Holdco or any of its Subsidiaries.
Section 5.16 Investment Company Act . Neither Holdco nor any of its Subsidiaries is an “investment company” or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.
Section 5.17 Solvency . On the Effective Date, after giving effect to any Credit Extensions made on such date, proceeds of the notes issued
pursuant to the Second Lien
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Documents, the proceeds of the equity issued in accordance with the Equity Purchase Agreement, the sale of securities contemplated by the
Equity Purchase Agreement and the other Transactions, and after giving effect to the application of the proceeds of the foregoing, (A) the fair
value of the assets of Holdco and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of Holdco and its Subsidiaries on a consolidated basis; (B) the present fair saleable value of the Property of Holdco
and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of Holdco and its
Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (C) Holdco and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (D) Holdco and its Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses
are now conducted and are proposed to be conducted after the Effective Date.
Section 5.18 Intellectual Property . As of the date hereof:
(i) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (A) to the knowledge
of Holdco and the Borrower, Holdco and its Subsidiaries own, free of all encumbrances except Permitted Liens, or have the valid right to
use all the Intellectual Property used in the conduct of the business of Holdco and its Subsidiaries as currently conducted and (B) to the
knowledge of Holdco and the Borrower the conduct of the business of Holdco and its Subsidiaries as currently conducted does not Infringe
any Intellectual Property rights of any third party. Except as would not reasonably be expected to have a Material Adverse Effect, no claim
or demand has been given in writing to Holdco or any of its Subsidiaries to the effect that the conduct of the business of Holdco or such
Subsidiary Infringes upon the Intellectual Property rights of any third party to the knowledge of Holdco and the Borrower. Except as would
not reasonably be expected to have a Material Adverse Effect, to the knowledge of Holdco and the Borrower, no third parties are infringing
the Intellectual Property rights of Holdco or the Borrower.
(ii) To the knowledge of Holdco and the Borrower, all material registered trademarks and registered service marks, trademark and service
mark applications and all Holdco Patents have been duly registered or application filed with the U.S. Patent and Trademark Office or
applicable foreign governmental authority. Except as would not reasonably be expected to have a Material Adverse Effect, (A) none of the
Holdco Patents have been adjudged to be invalid or unenforceable in whole or in part and (B) there are no actual or, to the knowledge of
Holdco or the Borrower, threatened opposition proceedings, cancellation proceedings, interference proceedings or other similar action
challenging the validity or ownership of any Holdco Patents.
Section 5.19 Collateral . As of the Effective Date, the Collateral Documents will be effective to create (to the extent described therein), in
favor of and for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein,
except as may be limited by applicable domestic or foreign bankruptcy, insolvency,
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fraudulent transfer, reorganization, receivership, moratorium and other similar laws of general applicability relating to or affecting creditors’
rights generally and general equitable principles (whether considered in a proceeding in equity or at law). When the actions specified in each
Collateral Document have been duly taken, the security interests granted pursuant thereto shall constitute (to the extent described therein) a
perfected security interest (subject only to Permitted Liens) in all right, title and interest of each pledgor party thereto in the Collateral
described therein with respect to such pledgor if and to the extent perfection can be achieved by taking such actions.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:
Section 6.1 Financial Reporting . Borrower will maintain, for itself and each Subsidiary, a system of accounting established and
administered in accordance with generally accepted accounting principles, and the Borrower will furnish to the Lenders the following:
(i) within 90 days after the close of Holdco’s fiscal year (in the case of the fiscal year ending on December 31, 2007) and the Borrower’s
fiscal year in the case of each fiscal year ending on or after December 31, 2008, an audit report certified by Deloitte & Touche USA LLP or
other independent certified public accountants of recognized national standing (which in each case shall be without a “going concern” or like
qualification or exception and without any qualification or exception as to the scope of such audit), prepared in accordance with GAAP on a
consolidated and consolidating basis (consolidating statements need not be certified by such accountants) for Holdco and its Subsidiaries (in
the case of fiscal year 2007 only) and the Borrower and its Subsidiaries (in the case of each subsequent fiscal year), including balance sheets
as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows on a consolidated
and consolidating basis, accompanied by any final management letter prepared by said accountants to Holdco or the Borrower, as
applicable; provided, however, that such audit report with respect to Holdco’s fiscal year ending December 31, 2007 shall be furnished as
soon as practicable, but in any event on or before the date required pursuant to this clause for delivery of the audited financial statements for
the Borrower’s fiscal year ending December 31, 2008;
(ii) within 45 days after the close of the first three quarterly periods of each of the Borrower’s fiscal years, for the Borrower and its
Subsidiaries, consolidated and consolidating unaudited balance sheets as at the close of each such period, consolidated and consolidating
profit and loss and reconciliation of surplus statements and a consolidated and consolidating statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, and a balance sheet as at the close of such period and such profit and loss and
reconciliation of surplus statements and statement of cash flows for the Borrower individually, certified by a Financial Officer of the
Borrower as in each case fairly presenting, in all material respects, the consolidated financial
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condition of the Borrower and its consolidated Subsidiaries (or the Borrower individually, as applicable) (subject to normal year-end
adjustments and the absence of footnotes) and having been prepared in reasonable detail;
(iii) so long as corresponding financial statements are required to be delivered under the Note Purchase Agreement or the Indenture,
within 30 days after the end of each of the first two months of each fiscal quarter of the Borrower, a company-prepared consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of such period and related company-prepared statements of income in a
form customarily prepared by management for the Borrower and its consolidated Subsidiaries for such monthly period, certified by a
Financial Officer of the Borrower as fairly presenting, in all material respects, the consolidated financial condition of the Borrower and its
consolidated Subsidiaries (subject to normal year-end adjustments and the absence of footnotes) and having been prepared in reasonable
detail;
(iv) together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of
Exhibit E signed by a Financial Officer showing the calculations necessary to determine compliance with this Agreement (including
Sections 6.19.1, 6.19.2 and 6.20) and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof;
(v) within 60 days after the commencement of each fiscal year of the Borrower and its Subsidiaries (commencing with the fiscal year
ending December 31, 2008), a budget of the Borrower and its Subsidiaries for such fiscal year in the form approved by the board of directors
of the Borrower;
(vi) within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA;
(vii) within 10 Business Days after the Borrower knows that any Reportable Event has occurred with respect to any Single Employer
Plan, a statement, signed by a Financial Officer of the Borrower describing said Reportable Event and the action which the Borrower
proposes to take with respect thereto.
(viii) promptly upon the filing thereof, electronic notice to the Administrative Agent of the filing of all proxy statements, registration
statements and periodic and current reports on forms 10K, 10Q and 8K which the Borrower or any of its Subsidiaries files with the SEC;
(ix) as soon as possible and in any event on the later of (i) 30 days following the occurrence of the following events or (ii) the first date
required for delivery of the financial statements pursuant to Section 6.1(i) or (ii) after the occurrence of the following events, written notice
of the creation, establishment or acquisition of any Subsidiary or the issuance by or to the Borrower or any of its Subsidiaries of any Capital
Stock; and
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(x) such other information (including non-financial information) as the Administrative Agent or any Lender may from time to time
reasonably request.
Information required to be delivered pursuant to this Section 6.1 shall be deemed to have been delivered if such information, or one or more
annual or quarterly reports containing such information, shall have been posted by the Administrative Agent on an IntraLinks or similar site to
which the Lenders have been granted access or such reports shall be available on the website of the SEC at http://www.sec.gov or on the
website of Holdco at http://www.moneygram.com and the Borrower has given notice that such reports are so available. Information required to
be delivered pursuant to this Section may also be delivered by electronic communications pursuant to procedures approved by the
Administrative Agent. If any information which is required to be furnished to the Lenders under this Section 6.1 is required by law or
regulation to be filed by Holdco or the Borrower with a government body on an earlier date (other than the December 31, 2007 financial
statements and any filings required by the SEC for the fiscal year then ended), then the information required hereunder shall be furnished to the
Lenders at such earlier date.
Section 6.2 Use of Proceeds . The Borrower will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general
corporate purposes and acquisitions permitted hereunder. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds
of the Advances to purchase or carry any “margin stock” (as defined in Regulation U).
Section 6.3 Notice of Default . The Borrower will give prompt notice in writing to the Lenders of the occurrence of any Default or
Unmatured Default, the occurrence of any “Default” or “Event of Default” under the Second Lien Documents and of any other development,
financial or otherwise, which could reasonably be expected to have a Material Adverse Effect.
Section 6.4 Conduct of Business . The Borrower will, and will cause each Borrower Subsidiary to, carry on and conduct its business in the
financial or payment services industry or the support thereof and do all things necessary to remain duly incorporated or organized, validly
existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability
company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted except as permitted by Sections 6.12 and 6.13 or where the failure to maintain such
authority could not reasonably be expected to have a Material Adverse Effect.
Section 6.5 Taxes . Holdco will, and will cause each of its Subsidiaries to, timely file complete and correct United States federal and
applicable foreign, state and local tax returns required by law (after giving effect to extensions thereof) and pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or Property, except (i) those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP or (ii) those which the
failure to pay or discharge could not reasonably be expected to have a Material Adverse Effect.
Section 6.6 Insurance . Holdco will maintain or cause to be maintained, with financially sound and reputable insurers, insurance on all its
Property as may customarily be
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carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses of similar sizes, in each
case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as
shall be customary for such Persons. The Borrower will furnish to any Lender upon request full information as to the insurance carried (but no
more often than once per year absent a Default).
Section 6.7 Compliance with Laws . Holdco will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, the
noncompliance with which could reasonably be expected to have a Material Adverse Effect.
Section 6.8 Maintenance of Properties . Holdco will, and will cause each of its Subsidiaries to, do all things necessary to maintain, preserve,
protect and keep its Property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business,
routine obsolescence and casualty or condemnation), and from time to time make or cause to be made, all necessary and proper repairs,
renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times, in each case, except
to the extent such non-compliance could not reasonably be expected to have a Material Adverse Effect.
Section 6.9 Inspection . Holdco will, and will cause each of its Subsidiaries to, keep adequate books of record and accounts to allow
preparation of financial statements in accordance with GAAP and permit the Administrative Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Property, books and financial records of Holdco and each of its Subsidiaries, to examine and
make copies of the books of accounts and other financial records of Holdco and each of its Subsidiaries, and to discuss the affairs, finances and
accounts of Holdco and each of its Subsidiaries with, and to be advised as to the same by, their respective officers at such reasonable times and
intervals as the Administrative Agent or any Lender may designate. The costs of such inspections shall be for the account of the Borrower,
except in the case of (i) a Lender inspection in the absence of the occurrence and continuation of a Default, which shall be done at such
Lender’s expense, or (ii) any Administrative Agent inspections in excess of one inspection during any 12-month period in the absence of the
occurrence and continuation of a Default, each of which shall be done at Administrative Agent’s expense.
Section 6.10 Restricted Payments . The Borrower will not, nor will it permit any Borrower Subsidiary to, declare or pay any Restricted
Payments except that, so long as (other than with respect to clauses (iv)(A), (B), (C), (D), (E) and (I) below) no Default or Unmatured Default
then exists or would result therefrom, the following shall be permitted:
(i) the payment by the Borrower or any Borrower Subsidiary of dividends payable in its own Capital Stock (other than Disqualified
Stock);
(ii) the making of any Restricted Payment in exchange for, or out of the proceeds of, the substantially concurrent contribution of common
equity capital to the
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Borrower; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from
clause (ii) of the definition of Basket Amount;
(iii) repurchases of Capital Stock deemed to occur upon exercise of stock options or warrants if such Capital Stock represents a portion of
the exercise price of such options or warrants;
(iv) the declaration and payment of dividends or distributions by the Borrower, or the making of loans by the Borrower, to its direct or
indirect parent, in amounts required for either of their respective direct or indirect parent to actually pay the following:
(A) franchise and excise taxes and other fees, taxes and expenses required to maintain their corporate existence;
(B) foreign, federal, state and local income or franchise taxes, to the extent such income or franchise taxes are attributable to the
income of the Borrower and the Borrower Subsidiaries;
(C) general corporate expenses related to third party audit, insurance legal and similar administrative expenses of any direct or indirect
parent of the Borrower, including customary expenses for a public holding company;
(D) customary salary, bonus, contributions to pension and 401(k) plans, deferred compensation and other benefits payable to directors,
officers and employees of any direct or indirect parent of the Borrower to the extent such amounts are attributable to the ownership or
operation of the Borrower and the Borrower Subsidiaries (other than pursuant to clause (vii) of this Section 6.10);
(E) indemnification obligations of any direct or indirect parent of the Borrower owing to directors, officers, employees or other
Persons (including, without limitation, the Sponsors) under its charter or by-laws or pursuant to written agreements with such Person, or
obligations in respect of director and officer insurance (including any premiums therefor); provided, however, that any indemnities owing
to the Sponsors pursuant to the Equity Purchase Agreement shall only be permitted under this clause (E) to the extent such indemnities
are as a result of third party claims relating to the Transactions; and provided, further, that no Restricted Payment may be made pursuant
to this clause (E) to the extent such Restricted Payments are covered by clause (v)(B) below;
(F) fees and expenses incurred in connection with the Transactions;
(G) amounts required to be paid by Holdco in connection with clause (iv) of the definition of Permitted Holdco Indebtedness;
(H) cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities
convertible into or
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exchangeable for Capital Stock of the Borrower or any direct or indirect parent of the Borrower; and
(I) amounts paid to Borrower by or withheld by Borrower from Borrower employees’ and officers’ compensation to the minimum
extent necessary to settle Borrower employees’ and officers’ (1) federal, state and income tax liabilities (if any) related to restricted stock
units and similar stock based awards under Holdco’s stock incentive plan or (2) option price payments owed by employees and officers
with respect thereto, and Holdco shall apply such amounts to make required federal, state and income tax payments or to settle option
price payments owed by Borrower employees and officers with respect thereto;
(v) a Restricted Payment with respect to the payment of (A) any litigation expenses, judgments or settlement of any litigation of any
direct or indirect parent of the Borrower or (B) indemnification obligations of any direct or indirect parent of the Borrower owing to
directors, officers or employees under its charter or by-laws, in respect of a settlement to the extent such payments represent indirect
payment obligations of the parent; provided , however , that after giving effect to each Restricted Payment under this clause (v) the
Borrower would be in pro forma compliance with Sections 6.19.1 (or, prior to March 31, 2009, as if the ratio specified in such Section were
at such time in effect and required to be no less than 1.50 to 1.0), 6.19.2 (or, prior to March 31, 2009, as if the Senior Secured Debt Ratio
were at such time in effect and required to be no greater than 7.0 to 1.0) and 6.20;
(vi) the defeasance, redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Borrower made by
exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Borrower, as the case may be, that is
incurred in compliance with Section 6.11 so long as:
(A) the principal amount (or accreted value, if applicable) of such new Indebtedness does not exceed the principal amount plus any
accrued and unpaid interest on the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value, plus the
amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired and any fees and expenses incurred in the issuance of such new Indebtedness;
(B) such Indebtedness is subordinated to the Obligations at least to the same extent as such Subordinated Indebtedness so purchased,
exchanged, redeemed, repurchased, acquired or retired for value;
(C) such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired; and
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(D) such Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to
Maturity of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired;
(vii) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Capital Stock of the
Borrower or any direct or indirect parent of the Borrower held by any current or former employee, director, manager or consultant of the
Borrower, any Borrower Subsidiary or any direct or indirect parent of the Borrower (or their respective estates, heirs, beneficiaries,
transferees, spouses or former spouses) pursuant to any management equity plan or stock option plan or any other management or employee
benefit plan or similar agreement; provided, that the aggregate amount of Restricted Payments made pursuant to this clause (vii) in any
four-fiscal quarter period shall not exceed $5,000,000 as of the last day of such four-fiscal quarter period;
(viii) a Restricted Payment by the Borrower or the Borrower Subsidiaries which together with (A) the aggregate amount of all other
Restricted Payments made by the Borrower and the Borrower Subsidiaries after the date hereof (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (v)(A), (vi), (vii), (x) and (xi) of this Section 6.10), (B) the aggregate amount of all Investments made by the Borrower
and the Borrower Subsidiaries pursuant to Section 6.14(xiv) after the date hereof and (C) the aggregate amount of all payments of Second
Lien Indebtedness made pursuant to Section 6.17(ii)(C) after the date hereof, is less than the Basket Amount at such time;
(ix) other Restricted Payments which, when aggregated with all other Restricted Payments made pursuant to this clause (ix) after the date
hereof and all payments of Second Lien Indebtedness made pursuant to Section 6.17(ii)(D) after the date hereof, do not exceed $25,000,000;
(x) the declaration and payment of dividends or distributions to holders of any class or series of preferred stock of any Borrower
Subsidiary issued in accordance with Section 6.11; and
(xi) so long as the Term B Balance is at such time no greater than $200,000,000, Restricted Payments which, when aggregated with all
other Restricted Payments made pursuant to this clause (xi) after the date hereof, do not exceed the sum of (A) the lesser of (1) the aggregate
Excess Specified Security Sale Proceeds received by the Borrower or a Borrower Subsidiary after February 29, 2008 minus $50,000,000 and
(2) $62,500,000 plus (B) 50% of the difference (if greater than zero) of (1) the aggregate Excess Specified Security Sale Proceeds received
by the Borrower or a Borrower Subsidiary after February 29, 2008 minus (2) $112,500,000.
Notwithstanding the foregoing, the making of any dividend or distribution or the consummation of any irrevocable redemption within
60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as applicable, will not be prohibited if, at
the date of declaration or notice such payment or redemption would have complied with the provisions of this Agreement.
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In addition, Holdco will not make any Restricted Payment in excess of the sum of (A) the aggregate amount of Restricted Payments
received by Holdco from the Borrower in accordance with this Section 6.10 after the Effective Date, (B) the aggregate amount of capital
contributions or proceeds from issuances of Capital Stock (valued in each case at fair market value at the time received in case of non-cash
contributions) received by Holdco after the Effective Date and (C) the aggregate amount of interest or gains of Holdco on investments by
Holdco of such Restricted Payments, contributions or proceeds permitted by the Passive Holding Company Condition; provided , however ,
that Holdco may also make Restricted Payments of the types permitted by the Borrower pursuant to Sections 6.10(i), (ii) and (iii).
Section 6.11 Indebtedness . The Borrower will not, nor will it permit any Borrower Subsidiary to, create, incur or suffer to exist any
Indebtedness, nor will it permit any Borrower Subsidiary to issue preferred stock (other than shares of preferred stock of a Borrower Subsidiary
issued to the Borrower or a Subsidiary Guarantor), except:
(i) Obligations of the Loan Parties under the Loan Documents;
(ii) Indebtedness existing on the Effective Date and described in all material respects in Schedule 6.11;
(iii) Indebtedness arising under the Second Lien Documents not exceeding (A) $500,000,000 in aggregate principal amount (or, if less,
the initial aggregate principal amount of such Indebtedness on the Effective Date) minus (B) the aggregate amount of all principal
repayments of such Indebtedness after the Effective Date;
(iv) after the first anniversary of the Effective Date, and provided the Financial Condition is satisfied at such time, the Borrower may
incur Indebtedness and any Subsidiary Guarantor or any Non-Guarantor may incur Indebtedness (in respect of all Non-Guarantors in an
aggregate amount of Indebtedness outstanding not to exceed at any time $10,000,000);
(v) Indebtedness or preferred stock of (A) the Borrower or a Guarantor incurred to finance an acquisition permitted hereunder or
(B) Persons that are acquired by the Borrower or a Guarantor or merged into the Borrower or a Guarantor in accordance with the terms of
this Agreement; provided, however, that after giving effect to such acquisition or merger, the Borrower is in pro forma compliance with the
Senior Secured Debt Ratio set forth in Section 6.19.2 (or, prior to March 31, 2009, the Senior Secured Debt Ratio shall not exceed 7.0 to
1.0);
(vi) Indebtedness incurred by the Borrower or any Borrower Subsidiary constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business in respect of workers’ compensation claims, or other Indebtedness with respect to
reimbursement type obligations regarding workers’ compensation claims; provided, however, that upon the drawing of such letters of credit
or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;
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(vii) Indebtedness arising from agreements of the Borrower or a Borrower Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a
Borrower Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or
Borrower Subsidiary for the purpose of financing such acquisition; provided, however, that:
(A) such Indebtedness is not reflected on the balance sheet of the Borrower or any Borrower Subsidiary (contingent obligations
referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will be deemed to be reflected on such
balance sheet for purposes of this clause (vii)(A)); and
(B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash
proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any
subsequent changes in value) actually received by the Borrower or any Borrower Subsidiary in connection with such disposition;
(viii) (A) Indebtedness of the Borrower to a Guarantor or (B) Indebtedness of a Subsidiary Guarantor to the Borrower or another
Subsidiary Guarantor; provided that any such Indebtedness is made pursuant to an intercompany note; provided, further, that any subsequent
transfer of any such Indebtedness (except to the Borrower or another Subsidiary Guarantor) shall be deemed, in each case, to be an
incurrence of such Indebtedness that was not permitted by this clause (viii);
(ix) the guarantee by the Borrower or any of the Subsidiary Guarantors of Indebtedness of the Borrower or a Borrower Subsidiary that
was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to the
Obligations, then the guarantee shall be subordinated to the same extent as the Indebtedness guaranteed;
(x) the incurrence by the Borrower or any Borrower Subsidiary of Indebtedness or issuance of preferred stock that serves to extend,
refund, refinance, renew, replace or defease any Indebtedness or preferred stock incurred or issued as permitted under clause (ii) or
(iv) above, this clause (x) or any Indebtedness or preferred stock incurred or issued to so refund or refinance such Indebtedness or preferred
stock (the “ Refinancing Indebtedness ”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:
(A) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness or preferred stock being refunded or refinanced;
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(B) to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated or pari passu to the Obligations, such
Refinancing Indebtedness is subordinated or pari passu to the Obligations at least to the same extent as the Indebtedness being refinanced
or refunded; or (ii) preferred stock, such Refinancing Indebtedness must be preferred stock;
(C) shall not include:
(1) Indebtedness or preferred stock of a Borrower Subsidiary that refinances Indebtedness or preferred stock of the Borrower; or
(2) Indebtedness or preferred stock of a Borrower Subsidiary that is not a Guarantor that refinances Indebtedness or preferred stock
of a Guarantor; and
(D) is in a principal amount not in excess of the principal amount of Indebtedness being refunded or refinanced (including additional
Indebtedness incurred to pay premiums, fees and expenses in connection therewith);
(xi) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; provided such Indebtedness is extinguished within five Business Days of its incurrence;
(xii) the incurrence by the Borrower or any Borrower Subsidiary of Indebtedness in respect of workers’ compensation claims, payment
obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance
obligations in the ordinary course of business;
(xiii) Indebtedness that may be deemed to exist pursuant to any performance, completion or similar guarantees, performance, surety,
statutory, appeal, bid, payment (other than payment of Indebtedness) or reclamation bonds, statutory obligations or similar obligations
(including any bonds or letters of credit issued with respect thereto and all guarantee, reimbursement and indemnity agreements entered into
in connection therewith) incurred in the ordinary course of business;
(xiv) obligations incurred in connection with any management or director deferred compensation plan;
(xv) Indebtedness in respect of (A) employee credit card programs and (B) netting services, cash pooling arrangements or similar
arrangements in connection with cash management and deposit accounts; provided that, with respect to any such arrangements, the total
amount of all deposits subject to such arrangement at all times equals or exceeds the total amount of overdrafts subject to such arrangement;
(xvi) overnight Repurchase Agreements incurred in the ordinary course of business;
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(xvii) Repurchase Agreements with maturities of less than 30 days (and excluding Indebtedness incurred pursuant to clause (xvi) above)
which at any one time outstanding do not exceed $100,000,000;
(xviii) Indebtedness (including Capitalized Lease Obligations) and preferred stock incurred by the Borrower or any Subsidiary Guarantor,
the proceeds of which are applied to finance the development, construction, purchase, lease, repairs, additions or improvement of property
(real or personal), equipment or other fixed or capital assets that are used or useful in a Similar Business, whether through the direct
purchase of assets or the Capital Stock of any Person owning such assets, in an aggregate principal amount which, when aggregated with the
principal amount of all other Indebtedness and preferred stock then outstanding and incurred pursuant to this clause (xviii) and including all
Indebtedness and preferred stock incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xviii), does
not exceed $10,000,000;
(xix) (A) Indebtedness or preferred stock in an aggregate amount outstanding at any time not to exceed $75,000,000 of the Borrower or
of a Subsidiary Guarantor owing to a Non-Guarantor (other than an SPE) that is subordinated in right of payment to the Obligations of such
Borrower or Subsidiary Guarantor and (B) Indebtedness or preferred stock in an aggregate amount outstanding at any time not to exceed
$75,000,000 of a Non-Guarantor (other than an SPE) owing to the Borrower or to a Subsidiary Guarantor; provided , that any subsequent
transfer of any such Indebtedness or preferred stock (except to the Borrower or a Borrower Subsidiary) shall be deemed, in each case, to be
an incurrence of such Indebtedness that was not permitted by this clause (xix); and
(xx) Indebtedness or preferred stock of the Borrower or any Subsidiary Guarantor not otherwise permitted hereunder in an aggregate
principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other
Indebtedness or preferred stock then outstanding and incurred pursuant to this clause (xx), does not at any one time outstanding exceed
$100,000,000.
Without limiting the generality of the foregoing, neither the Borrower nor any Borrower Subsidiary shall incur or have outstanding any
Indebtedness to the SPEs.
For purposes of determining compliance with this Section 6.11: (i) in the event that an item of Indebtedness or preferred stock (or any
portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness or preferred stock described in clauses
(i) through (xx) above, the Borrower, in its sole discretion, may classify or reclassify such item of Indebtedness or preferred stock (or any
portion thereof) and will only be required to include the amount and type of such Indebtedness or preferred stock in one of the above clauses;
and (ii) at the time of incurrence or reclassification, the Borrower will be entitled to divide and classify an item of Indebtedness or preferred
stock in more than one of the types of Indebtedness or preferred stock described in clauses (i) through (xx) above.
Accrual of interest, the accretion of accreted value and the payment of interest or dividends in the form of additional Indebtedness will not
be deemed to be an incurrence of Indebtedness for purposes of this Section 6.11.
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For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency
exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit
debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing
would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal
amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.
The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness
being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is
denominated that is in effect on the date of such refinancing.
Section 6.12 Merger .
(i) The Borrower will not consolidate or merge with or into (whether or not the Borrower is the surviving entity), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all the properties or assets of the Borrower and the Borrower Subsidiaries, taken as
a whole, in one or more related transactions, to another Person, unless:
(A) either:
(1) the Borrower is the surviving company; or
(2) the Person formed by or surviving any such consolidation or merger (if other than the Borrower) or to which such sale, assignment,
transfer, conveyance or other disposition has been made is an entity organized or existing under the laws of the United States, any state
thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “ Successor Company
”):
(B) the Successor Company, if other than the Borrower, expressly assumes all the Obligations of the Borrower under the Loan
Documents pursuant to documents in form reasonably satisfactory to the Administrative Agent;
(C) immediately before and after such transaction, no Default or Unmatured Default exists;
(D) the Successor Company would be in pro forma compliance, as if such transaction had occurred at the beginning of the applicable
four-quarter period, with Sections 6.19.1 (or, prior to March 31, 2009, as if the ratio specified in such Section were at such time in effect
and required to be no less than 1.50 to
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1.0) and 6.19.2 (or, prior to March 31, 2009, as if the Senior Secured Debt Ratio were at such time in effect and required to be no greater
than 7.0 to 1.0);
(E) each Guarantor, unless it is the other party to the transactions described above, in which case clause (ii) below applies, shall have
confirmed that its Obligations under the applicable Loan Documents to which it is a party remain outstanding pursuant to documentation
reasonably satisfactory to the Administrative Agent; and
(F) the Borrower shall have delivered to the Administrative Agent an officer’s certificate stating that such consolidation, merger or
transfer complies with the provisions described in this clause (i).
The Successor Company will succeed to, and be substituted for the Borrower under this Agreement and each other Loan Document.
Notwithstanding the foregoing (but subject to clause (ii) below), any Borrower Subsidiary may consolidate with, merge into or transfer all
or part of its properties and assets to the Borrower or to another Borrower Subsidiary.
(ii) No Guarantor will, and the Borrower will not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or
not such Guarantor is the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all its properties
or assets in one or more related transactions, to any Person unless:
(A) (1) such Guarantor is the surviving entity or the Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, conveyance or other disposition will have been made is an entity
organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such
Guarantor or such Person, as the case may be, being herein called the “ Successor Person ”); and
(2) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under the Loan
Documents pursuant to documents in form reasonably satisfactory to the Administrative Agent; and
(3) immediately before and after such transaction, no Default or Unmatured Default exists; or
(B) such transaction is made in compliance with Section 6.13 (without regard to Section 6.13(xi)) or constitutes an Investment
permitted by Section 6.14.
The Successor Person will succeed to, and be substituted for such Guarantor under the Guaranty and each other Loan Document.
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Notwithstanding the foregoing, any Subsidiary Guarantor may consolidate with, merge into or transfer all or part of its properties and assets
to the Borrower or to another Subsidiary Guarantor.
Section 6.13 Sale of Assets . The Borrower will not, nor will it permit any Borrower Subsidiary to, lease, sell or otherwise dispose of its
Property to any other Person, except:
(i) the disposition of (A) Cash and Cash Equivalents in the ordinary course of business, (B) obsolete or worn out equipment or other
tangible personal property or (C) inventory sales in the ordinary course of business;
(ii) transfers of property subject to casualty, condemnation or similar events (including in lieu thereof) upon receipt of the Net Proceeds
in respect thereof;
(iii) (x) the disposition of Portfolio Securities (other than Specified Securities) for Cash and Cash Equivalents or securities contained in
the Restricted Investment Portfolio and (y) the disposition of Portfolio Securities on or before the Effective Date contemplated by the Equity
Purchase Agreement;
(iv) the making of any Restricted Payment or Investment that is permitted to be made, and is made, under Section 6.10 or 6.14, as
applicable;
(v) the unwinding of any Rate Management Transaction;
(vi) any transfer to MoneyGram International Holdings Limited of the loan from MoneyGram Payment Systems, Inc. to MoneyGram
International Holdings Limited in the amount of €92,500,000 pursuant to the Loan Agreement dated January 17, 2003 made to effectuate the
forgiveness of such loan;
(vii) sales of securities pursuant to Repurchase Agreements;
(viii) sales, transfers or other dispositions of its Property to an SPE made in compliance with Section 6.14(v);
(ix) transfers from a Subsidiary to the Borrower, from the Borrower to any Guarantor, from a Guarantor to any other Guarantor or from a
Non-Guarantor to the Borrower or a Borrower Subsidiary;
(x) sales or dispositions of the official check business or FSMC, Inc. (or any successor) by the Borrower and the Borrower Subsidiaries;
(xi) the disposition of all or substantially all the assets of the Borrower or any Borrower Subsidiary in a manner permitted pursuant to
Section 6.12;
(xii) to the extent allowable under Section 1031 of the Code, any exchange of like property (excluding any boot thereon) for use in a
Similar Business;
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(xiii) surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims;
(xiv) the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;
(xv) foreclosures on assets;
(xvi) sales of assets pursuant to any financing transaction otherwise permitted by this Agreement with respect to property built or
acquired by the Borrower or a Borrower Subsidiary after the Effective Date, including sale and leaseback transactions;
(xvii) the granting of Liens otherwise permitted by this Agreement;
(xviii) sales of accounts receivable in connection with the collection or compromise thereof;
(xix) the abandonment of intellectual property rights in the ordinary course of business, which in the reasonable good faith determination
of the Borrower, are not material to the conduct of the business of Holdco and its Subsidiaries taken as a whole;
(xx) sales of accounts or notes receivable, or participations therein, and related assets as part of a Receivables Transaction permitted
hereunder which does not give rise to Indebtedness;
(xxi) leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and Borrower Subsidiaries
previously leased, sold or disposed of as permitted by this clause (xxi) during the twelve-month period ending with the month in which any
such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and the Borrower
Subsidiaries;
(xxii) the abandonment of the Investments described on Schedule 6.13; and
(xxiii) the sale or other disposition of Specified Securities so long as the Net Proceeds thereof are applied in accordance with this
Agreement.
For purposes of this Section 6.13, Property of a Borrower Subsidiary shall be deemed to include Capital Stock (other than preferred stock) of
such Borrower Subsidiary issued or sold to any Person other than (x) a Loan Party, (y) in the case of a Foreign Subsidiary, a Wholly-Owned
Subsidiary of the Borrower, or (z) any Capital Stock issued to an equity holder other than the Borrower or a Borrower Subsidiary to
maintain its pro rata ownership.
Section 6.14 Investments and Acquisitions . The Borrower will not, nor will it permit any Borrower Subsidiary to, make any Acquisition of
any Person or make any Investment in any Person, except:
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(i) Acquisitions of (or all or substantially all of the assets of) entities engaged in a Similar Business, so long as (A) the acquired entity
(x) becomes a Guarantor in compliance with Section 6.21 and complies with the requirement in Section 6.22 to pledge its assets as
Collateral or (y) is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all its assets to, or is liquidated
into, the Borrower or a Guarantor; (B) after giving effect to such acquisition, the Borrower shall be in compliance with, and, on a pro forma
basis, the Borrower would be in compliance therewith for the previous four fiscal quarters, its covenants in Sections 6.19.1 (or, prior to
March 31, 2009, as if the ratio specified in such Section were at such time in effect and required to be no less than 1.50 to 1.0) and 6.19.2
(or, prior to March 31, 2009, as if the Senior Secured Debt Ratio were at such time in effect and required to be no greater than 7.0 to 1.0);
(C) for any Acquisition with aggregate consideration in excess of $50,000,000, the Borrower shall have delivered to the Administrative
Agent a certificate executed by an Authorized Officer setting forth the calculations demonstrating such compliance and (D) both before and
after giving effect to such acquisition no Default or Unmatured Default exists;
(ii) any Investment arising out of the forgiveness of the loan from MoneyGram Payment Systems, Inc. to MoneyGram International
Holdings Limited in the amount of 92,500,000 Euros pursuant to the Loan Agreement dated January 17, 2003;
(iii) any Investment in the Borrower or any Guarantor;
(iv) any Investments in any Non-Guarantor (other than any SPE) that together with all Investments made pursuant to this clause (iv) after
the date hereof shall not exceed $150,000,000;
(v) any Investments (including Investments outstanding as of the date hereof) in SPEs provided that the total assets of all SPEs shall not
exceed $2,000,000,000 at any one time outstanding;
(vi) any Investment in Cash or Cash Equivalents;
(vii) any Investment in the Restricted Investment Portfolio;
(viii) any Investment existing on the date hereof (excluding assets held by any SPE) or made pursuant to legally binding written
commitments in existence on the date hereof which, in either case, is set forth in all material respects on Schedule 6.14(viii), and any
Investment that replaces, refinances or refunds any such Investment; provided that such replacing, refinancing or refunding Investment is in
an amount that does not exceed the amount replaced, refinanced or refunded, and is made in the same Person as the Investment replaced,
refinanced or refunded;
(ix) loans and advances to employees, directors, managers or consultants of Holdco, the Borrower or any of the Borrower Subsidiaries for
reasonable and customary business related travel expenses, moving expenses and similar expenses, in each case incurred in the ordinary
course of business whether or not consistent with past practice, and payroll advances;
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(x) any Investment acquired by the Borrower or any Borrower Subsidiary:
(A) in exchange for any other Investment or accounts receivable held by the Borrower or any Borrower Subsidiary in connection with
or as a result of a bankruptcy, workout, reorganization or recapitalization of such other Investment or accounts receivable; or
(B) as a result of a foreclosure by the Borrower or any Borrower Subsidiary with respect to any secured Investment or other transfer of
title with respect to any secured Investment in default;
(xi) Investments to the extent the payment for which consists of Capital Stock (other than Disqualified Stock) of the Borrower or any
direct or indirect parent of the Borrower;
(xii) Indebtedness (including Subordinated Indebtedness) permitted under Section 6.11 or any Restricted Payment permitted under
Section 6.10, in each case to the extent it constitutes an Investment;
(xiii) any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the
ordinary course of business of the Borrower or any Borrower Subsidiaries, including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons
who are not Affiliates;
(xiv) any Investment by the Borrower or the Borrower Subsidiaries which together with (A) the aggregate amount of all Restricted
Payments made by the Borrower and the Borrower Subsidiaries after the date hereof pursuant to Section 6.10 (excluding Restricted
Payments permitted by Sections 6.10 (ii), (iii), (iv), (v)(A), (vi), (vii), (x) and (xi)), (B) the aggregate amount of all other Investments made
by the Borrower and the Borrower Subsidiaries pursuant to this clause (xiv) after the date hereof and (C) the aggregate amount of all
payments of Second Lien Indebtedness made pursuant to Section 6.17(ii)(C) after the date hereof, is less than the Basket Amount at such
time;
(xv) any Investment in securities or other assets not constituting Cash or Cash Equivalents and received in connection with an asset sale
made pursuant to Section 6.13;
(xvi) Rate Management Obligations permitted hereunder;
(xvii) receivables owing to the Borrower or any of its Subsidiaries created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(xviii) Investments in the Second Lien Indebtedness to the extent not prohibited by Section 6.17(ii);
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(xix) upfront payments, signing bonuses and similar payments paid to agents and guaranties of agent commissions, in each case in the
ordinary course of business and consistent with past practice;
(xx) Acquisitions, for aggregate consideration not to exceed $28,000,000 in the aggregate, on terms substantially consistent with the
terms set forth on Schedule 6.14(xx); and
(xxi) additional Investments in an aggregate amount, taken together with all other Investments previously made pursuant to this clause
(xxi) not to exceed $25,000,000 (with the fair market value of each Investment being measured at the time made and without giving effect to
subsequent changes in value).
Section 6.15 Liens . The Borrower will not, nor will it permit any Borrower Subsidiary to, create, incur, or suffer to exist any Lien in, of or
on the Property of the Borrower or any of the Borrower Subsidiaries, except:
(i) second-priority Liens securing obligations under the Second Lien Documents;
(ii) Liens created pursuant to the Collateral Documents (which Liens shall equally and ratably secure Rate Management Obligations
owing to Rate Management Counterparties);
(iii) Liens for taxes, assessments or governmental charges, claims or levies not yet overdue for a period of more than 30 days or subject
to penalties for nonpayment, or which are being contested in good faith and by appropriate proceedings;
(iv) Liens imposed by law, such as landlord’s, carriers’, warehousemen’s and mechanics’ Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than 30 days past due or which are being contested in good faith
by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall
then be proceeding in good faith with an appeal or other proceeding for review so long as no such Lien secures claims constituting a Default
under Section 7.8;
(v) Liens arising out of pledges or deposits under worker’s compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(vi) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the ownership of its properties;
(vii) Liens in existence on the Effective Date and identified in all material respects on Schedule 6.15 hereto;
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(viii) ordinary course pledges or deposits to secure bids, tenders, contracts (other than for the payment of Indebtedness for borrowed
money) or leases to which such Person is a party or deposits as security for contested taxes, import duties or the payment of rent;
(ix) Liens in favor of the issuer of stay, customs, appeal, performance and surety bonds or bid bonds or with respect to other regulatory
requirements or securing bonds required by applicable state regulatory licensing requirements or letters of credit or bank guarantees or
similar instruments in lieu of such items or to support the issuance thereof issued pursuant to the request of and for the account of such
Person in the ordinary course of its business;
(x) Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not
created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided further that such
Liens may not extend to any other property owned by the Borrower or any Borrower Subsidiary and that such Liens are released within
30 days of such Person becoming a Subsidiary;
(xi) Liens on property at the time the Borrower or a Borrower Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Borrower or any Borrower Subsidiary; provided, however, that such Liens are not created or
incurred in connection with, or in contemplation of, such acquisition; and provided further that the Liens may not extend to any other
property owned by the Borrower or any Borrower Subsidiary;
(xii) licenses, sublicenses, leases or subleases entered into in the ordinary course of business that do not materially impair their use in the
operation of the business of Holdco, the Borrower and the Borrower Subsidiaries, taken as a whole;
(xiii) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal
property entered into in the ordinary course of business;
(xiv) deposits made in the ordinary course of business to secure liability to insurance carriers;
(xv) Liens (A) of a collection bank arising under Section 4-210 of the UCC on items in the course of collection, (B) encumbering
reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage
accounts incurred in the ordinary course of business and (C) in favor of banking institutions arising as a matter of law encumbering deposits
(including the right of set-off) and which are within the general parameters customary in the banking industry;
(xvi) any attachment or judgment Lien against Holdco, the Borrower or any Borrower Subsidiary, or any property of Holdco, the
Borrower or any Borrower
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Subsidiary, so long as such Lien secures claims not constituting a Default under Section 7.8;
(xvii) the deposit or pre-funding of amounts in escrow pursuant to contractual obligations contained in customer agreements securing
obligations not exceeding $50,000,000 in the aggregate;
(xviii) Liens securing Indebtedness permitted to be incurred pursuant to Section 6.1 l(v)(B) or (xviii); provided , that Liens securing
Indebtedness permitted to be incurred pursuant to Section 6.11(v)(B) or (xviii) are solely on the assets financed, purchased, constructed,
improved or acquired or assets of the acquired entity as the case may be, and the proceeds and products thereof and accessions thereto;
(xix) Liens securing Rate Management Obligations not exceeding $50,000,000 outstanding at any time;
(xx) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of
bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or
other goods;
(xxi) any Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions,
renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien of the type referred to in clause (i), (ii), (vii), (x),
(xi) or (xviii); provided , however , that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien
(plus improvements on such property and the proceeds and products thereof), and (y) the Indebtedness secured by such Lien at such time is
not increased to any amount greater than the sum of (A) the outstanding principal amount of the Indebtedness permitted pursuant to such
clause (i), (ii), (vii), (x), (xi) or (xviii) and (B) an amount necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement;
(xxii) Liens in favor of the Borrower or any Subsidiary Guarantor;
(xxiii) Liens solely on any cash earnest money deposits relating to asset sales or acquisitions not in the ordinary course in connection
with any letter of intent or purchase agreement not prohibited by this Agreement;
(xxiv) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any
real property;
(xxv) Liens securing Indebtedness or other obligations of a Borrower Subsidiary owing to the Borrower or a Subsidiary Guarantor
permitted to be incurred in accordance with Section 6.11;
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(xxvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection
with the importation of goods in the ordinary course of business;
(xxvii) Liens securing not in excess of $300,000,000 of Receivables Transaction Attributed Indebtedness; and
(xxviii) other Liens not otherwise permitted by this Section 6.15 securing obligations not at any time exceeding $100,000,000 in the
aggregate.
Section 6.16 Affiliates . The Borrower will not, and will not permit any Borrower Subsidiary to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Borrower, except:
(i) on terms not materially less favorable to the Borrower or such Borrower Subsidiary as the Borrower or such Borrower Subsidiary
would obtain in a comparable arms-length transaction, and in connection with such transaction or series of related transactions involving
aggregate payments or consideration in excess of $5,000,000 the Borrower delivers to the Administrative Agent a resolution adopted by the
disinterested members of the board of directors of the Borrower approving such transaction and set forth in an officer’s certificate certifying
that such transaction complies with this clause (i);
(ii) the forgiveness of Indebtedness referred to in Section 6.14(ii);
(iii) reimbursement of the Sponsors or their Affiliates for expenses in accordance with the provisions of the Equity Purchase Agreement
as in effect on the date hereof and payment of fees and indemnification obligations payable to the Sponsors or their Affiliates in connection
with the consummation of the Transactions pursuant to the Equity Purchase Agreement or Note Purchase Agreement, each as in effect on
the date hereof; provided, however, that notwithstanding anything contained in this Agreement to the contrary, neither Holdco nor the
Borrower will, nor will they permit any Subsidiary to, pay any management fees to the Sponsors or their Affiliates;
(iv) reasonable and customary fees, expenses and indemnities provided in the ordinary course of business to officers, directors, managers,
employees or consultants of the Borrower, any direct or indirect parent of the Borrower or any Borrower Subsidiary;
(v) customary tax sharing arrangements among Holdco and its Subsidiaries entered into in the ordinary course of business;
(vi) transactions among Holdco and its Subsidiaries not expressly prohibited under this Agreement;
(vii) any transaction or series of transactions involving consideration of less than $1,000,000;
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(viii) transactions in existence as of the Effective Date set forth in all material respects on Schedule 6.16;
(ix) payments or loans (or cancellation of loans) to employees of the Borrower, employees of any direct or indirect parent of the
Borrower or employees of any Borrower Subsidiary and employment agreements, severance agreements, stock option plans and other
similar arrangements with such employees which, in each case are approved by the disinterested members of the board of directors of the
Borrower in good faith that are not otherwise prohibited by this Agreement;
(x) the Transactions and the payment of all fees and expenses related to the Transactions;
(xi) the payment of reasonable charges for travel in the ordinary course of business by any officer, director, manager, employee, agent,
consultant, Affiliate or advisor of the Borrower or any Borrower Subsidiary;
(xii) any Restricted Payments permitted under Section 6.10 (other than pursuant to Section 6.10(viii)); and
(xiii) sales of accounts receivable, or participations therein, in connection with any Receivables Transaction permitted by this Agreement.
Section 6.17 Amendments to Agreements; Prepayments of Second Lien Debt .
(i) Holdco will not, and will not permit any of its Subsidiaries to, amend or terminate the Separation Agreements, the Equity Purchase
Agreement, the Note Purchase Agreement, the Indenture, the certificates of designation with respect to the Series B Preferred Stock, the
Series B-l Preferred Stock or the Series D Preferred Stock, in each case as defined in, and attached as an exhibit to, the Equity Purchase
Agreement, the organizational documents of the Borrower or any Borrower Subsidiary or any documents with respect to Subordinated Debt
which is Material Indebtedness, in each case in any manner which could reasonably be expected to be materially adverse to the interests of
the Lenders.
(ii) The Borrower will not, and will not permit any Borrower Subsidiary to, make any optional prepayments of the Second Lien
Indebtedness other than (A) any optional prepayment made by exchange for, or out of the proceeds of, any Refinancing Indebtedness;
(B) any optional prepayment made out of the proceeds of sales of Capital Stock of the Borrower or any direct or indirect parent of the
Borrower and/or any contributions received by them; (C) prepayments in an amount which, together with (1) the aggregate amount of all
Restricted Payments made by the Borrower and the Borrower Subsidiaries after the date hereof (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (v)(A), (vi), (vii), (x) and (xi) of Section 6.10), (2) the aggregate amount of all Investments made by the Borrower and
the Borrower Subsidiaries pursuant to Section 6.14(xiv) after the date hereof and (3) the aggregate amount of all other payments of Second
Lien Indebtedness made pursuant to this Section 6.17(ii)(C) after the date hereof, is less than the Basket Amount at such time;
(D) prepayments in an amount which, when
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aggregated with all Restricted Payments made after the date hereof pursuant to Section 6.10(ix) and all other payments of Second Lien
Indebtedness made pursuant to this Section 6.17(ii)(D) after the date hereof, does not exceed $25,000,000; or (E) any conversion of the
Second Lien Indebtedness into Capital Stock. For purposes hereof, any voluntary purchase, defeasance or acquisition of Second Lien
Indebtedness shall constitute a voluntary prepayment thereof.
Section 6.18 Inconsistent Agreements . The Borrower shall not, and shall not permit any Borrower Subsidiary to, enter into any indenture,
agreement, instrument (or amendment thereto) or other arrangement which directly or indirectly prohibits or restrains, or has the effect of
prohibiting or restraining (x) the incurrence or repayment of the Obligations or the ability of the Borrower or any Borrower Subsidiary to create
or suffer to exist Liens on such Person’s Property securing the Obligations or (y) the ability of any Borrower Subsidiary to (1) pay dividends or
make other distributions on its capital or (2) pay any Indebtedness owed to, or make loans or advances to, or sell, lease or transfer any of its
Property to, the Borrower or any Borrower Subsidiary, except that the following are permitted:
(i) contractual encumbrances or restrictions contained in any Loan Document, any Second Lien Document (including any related Rate
Management Transaction and its related documentation) or otherwise in effect on the Effective Date;
(ii) purchase money obligations for property acquired in the ordinary course of business and Capitalized Lease Obligations that impose
restrictions on disposition of the property so acquired;
(iii) applicable law or any applicable rule, regulation or order or similar restriction;
(iv) any agreement or other instrument of a Person acquired by the Borrower or any Borrower Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the Person, so acquired;
(v) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Borrower Subsidiary pursuant to
an agreement that has been entered into relating to the sale or disposition of all or substantially all the Capital Stock or assets of that
Borrower Subsidiary pursuant to a transaction otherwise permitted by this Agreement;
(vi) restrictions imposed by the terms of secured Indebtedness otherwise permitted to be incurred pursuant to Sections 6.11 and 6.15
hereof that, in the case of a Loan Party, relate to the assets securing such Indebtedness;
(vii) restrictions on cash or other deposits or portfolio securities or net worth imposed by customers or Governmental Entities under
contracts entered into in the ordinary course of business;
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(viii) customary provisions in joint venture agreements, asset sale agreements, sale-lease back agreements and other similar agreements;
(ix) customary provisions contained in leases and other agreements entered into in the ordinary course of business;
(x) any agreement for the sale or other disposition of a Borrower Subsidiary that restricts dividends, distributions, loans or advances by
such Borrower Subsidiary pending such sale or other disposition;
(xi) Permitted Liens;
(xii) restrictions and conditions contained in documentation governing any Receivables Transaction permitted by this Agreement, which
restrictions and conditions apply only to the assets that are the subject of such Receivables Transaction or otherwise customary for such
facilities.
(xiii) restrictions and conditions on the creation or existence of Liens imposed by the terms of the documentation governing any
Indebtedness or preferred stock of a Non-Guarantor, which Indebtedness or preferred stock is permitted by Section 6.11;
(xiv) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under
Section 6.14 and applicable solely to such joint venture entered into in the ordinary course of business; and
(xv) any encumbrances or restrictions of the type referred to in the lead-in to this Section 6.18 imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (i) through (xiv) above; provided, that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such
encumbrance and other restrictions than those prior to such amendment, modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing.
Section 6.19 Financial Covenants .
6.19.1 Interest Coverage Ratio . The Borrower will not permit the ratio, determined as of the end of each of the Borrower’s fiscal quarters
for the then most-recently ended four fiscal quarters, commencing with the fiscal quarter ending March 31, 2009, of (i) Consolidated EBITDA
of the Borrower and its Subsidiaries for such period to (ii) the sum of (x) Consolidated Interest Expense of the Borrower and its Subsidiaries for
such period paid or payable in cash less (y) (to the extent less than or equal to Consolidated Interest Expense) interest income of the Borrower
and its Subsidiaries during such period attributable to Cash and Cash Equivalents (and not to Portfolio Securities) to be less than the applicable
ratio set forth below for such fiscal quarter:
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Interest Coverage
Ratio
Fiscal Quarter Ending
March 31, 2009
June 30, 2009
September 30, 2009
December 31,2009
March 31, 2010
June 30, 2010
September 30, 2010
December 31, 2010
March 31, 2011
June 30, 2011
September 30, 2011
December 31, 2011
March 31, 2012
June 30, 2012
September 30, 2012
December 31, 2012 and thereafter
1.50:1.00
1.50:1.00
1.75:1.00
1.75:1.00
2.00:1.00
6.19.2 Senior Secured Debt Ratio . The Borrower will not permit the Senior Secured Debt Ratio, determined as of the end of each of its
fiscal quarters, commencing with the fiscal quarter ending March 31, 2009, to be greater than the applicable ratio set forth below for such fiscal
quarter:
Senior Secured
Debt Ratio
Fiscal Quarter Ending
March 31, 2009
June 30, 2009
September 30, 2009
December 31, 2009
March 31, 2010
June 30, 2010
September 30, 2010
December 31, 2010
March 31, 2011
June 30, 2011
September 30, 2011
December 31, 2011
March 31, 2012
June 30, 2012
September 30, 2012
December 31, 2012 and thereafter
6.50:1.00
6.00:1.00
5.50:1.00
5.00:1.00
4.50:1.00
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Notwithstanding anything to the contrary contained in this Section 6.19, if (i) the Borrower fails to comply with the requirements of
Section 6.19.1 or 6.19.2 as of the end of any fiscal quarter and (ii) at any time during such fiscal quarter or thereafter until the date that is
20 days after the date the Borrower is required to deliver financial statements with respect to such period pursuant to Section 6.1, the Borrower
receives a cash contribution to its equity capital in exchange for common shares of its Capital Stock and gives written notice to the
Administrative Agent that such cash contribution has been received and is a Specified Equity Contribution (any amount so identified, a “
Specified Equity Contribution ”), then the amount of such Specified Equity Contribution will be deemed to be an increase to Consolidated
EBITDA solely for the purposes of determining compliance with Sections 6.19.1 and 6.19.2 at the end of such fiscal quarter (and for purposes
of determining compliance with future periods that include such fiscal quarter) (but such Specified Equity Contribution shall not be included
for purposes of determining the Basket Amount or other purposes hereunder); provided that (1) in each four fiscal quarter period, there shall be
a period of at least two fiscal quarters in respect of which no Specified Equity Contribution is made and (2) the amount of any Specified Equity
Contribution shall be no greater than the amount required to cause the Borrower to be in compliance with Sections 6.19.1 and 6.19.2. If after
giving effect to the foregoing recalculations the Borrower shall be in compliance with the requirements of Sections 6.19.1 and 6.19.2, the
Borrower shall be deemed to have satisfied the requirements of such covenants as of the relevant date of determination with the same effect as
though there had been no failure to comply therewith at such date, and the applicable Default in respect of such covenant that had occurred
shall be deemed cured for this purposes of this Agreement. From the date on which the Borrower gives the Administrative Agent written notice
of a Specified Equity Contribution with respect to a fiscal period until the 20 th day after financial statements are required to be delivered
pursuant to Section 6.1 for such fiscal period, none of the Administrative Agent, the Collateral Agent, any Lender or any Secured Party shall
exercise any rights or remedies with respect to a breach of Section 6.19.1 or 6.19.2 with respect to such fiscal period, but any such breach shall
not be deemed waived for purposes of Section 4.2 until such Specified Equity Contribution is received by the Borrower.
Section 6.20 Minimum Liquidity Ratio . The Borrower and the Borrower Subsidiaries shall maintain at all times on a consolidated basis a
Minimum Liquidity Ratio of at least 1.00 to 1.00.
Section 6.21 Subsidiary Guarantees . On or before the later of (i) 30 days following the occurrence of the following events or (ii) the first
date required for delivery of the financial statements pursuant to Section 6.1 (i) or (ii) after the occurrence of the following events (or such
longer period as the Administrative Agent may agree), the Borrower shall cause an Authorized Officer of a Wholly-Owned Subsidiary that has
become a Material Domestic Subsidiary to execute and deliver to the Administrative Agent for the benefit of the Lenders a guaranty of the
Obligations pursuant to a guaranty substantially similar to the Guaranty (or a joinder agreement under the Guaranty), all pursuant to
documentation (including related certificates, opinions) reasonably acceptable to the Administrative Agent. The Borrower shall promptly notify
the Administrative Agent at which time any Authorized Officer becomes aware that a Wholly-Owned Subsidiary has become a Material
Domestic Subsidiary. Notwithstanding the foregoing, substantially contemporaneously with any Subsidiary becoming a “Guarantor” (as
defined in the Indenture), the Borrower shall cause such Subsidiary to become a Guarantor hereunder pursuant to documentation as described
above.
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Section 6.22 Collateral . Effective upon any Subsidiary becoming a Guarantor after the date hereof, the Borrower shall cause such Guarantor
within fifteen Business Days after becoming a Guarantor (or such later date as the Administrative Agent may agree) to grant to the Collateral
Agent for the benefit of the Secured Parties a first (subject to Permitted Liens) priority security interest in all assets (including real property and
the Capital Stock of its Subsidiaries) of such Guarantor pursuant to documentation (including related certificates and opinions) reasonably
acceptable to the Administrative Agent. The Borrower will, and will cause each of the Guarantors to, at the expense of the Borrower, make,
execute, endorse, acknowledge, file and/or deliver to the Administrative Agent from time to time such schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral as the Administrative Agent may reasonably require. Notwithstanding any of the foregoing,
(i) neither the Borrower nor any Guarantor shall be obligated hereby to grant a security interest in any asset if the granting of such security
interest would result in the violation of any applicable law or regulation, (ii) the Collateral shall not include a security interest in any asset if the
granting of such security interest would be prohibited by enforceable anti-assignment provisions of contracts or applicable law (after giving
effect to relevant provisions of the Uniform Commercial Code), (iii) fee-owned real property having an individual fair market value of less than
$2,500,000 or aggregate fair market value of less than $10,000,000 shall be excluded from the Collateral, (iv) the Collateral shall not include
cash and cash equivalents, accounts receivable or Portfolio Securities, or deposit or security accounts (except to the extent that the foregoing
are proceeds of Collateral; provided, that in no event shall any control agreements be required) containing any of the foregoing, other assets
requiring perfection through control agreements, letter-of-credit rights, leasehold real property, motor vehicles and other assets subject to
certificates of title (other than any corporate aircraft), interests in certain joint ventures and non-Wholly-Owned Subsidiaries which cannot be
pledged without the consent of one or more third parties and obligations the interest on which is wholly exempt from the taxes imposed by
subtitle A of the Code, (v) the pledge of the Capital Stock of Foreign Subsidiaries shall be limited to 65% of the Capital Stock of material
first-tier Foreign Subsidiaries, (vi) the Administrative Agent shall have the discretion to exclude from the Collateral immaterial assets, assets as
to which it and the Borrower determine that the cost of obtaining such security interest would outweigh the benefit to the Lenders and other
assets in which it may determine that the taking of a security interest would not be advisable, and (vii) no foreign law security or pledge
agreements shall be required.
Section 6.23 Holdco Covenant . Holdco shall not, nor shall it permit any of its Subsidiaries (other than the Borrower and any of its
Subsidiaries) to, engage in any activity or suffer to have any condition outstanding that would violate the Passive Holding Company Condition.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute a Default:
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Section 7.1 Representation or Warranty . Any representation or warranty made or deemed made by or on behalf of Holdco, the Borrower or
any of the Subsidiaries to the Lenders or the Administrative Agent under or in connection with any Loan Document, any Credit Extension, or
any certificate or information required to be delivered under any Loan Document shall be materially false on the date as of which made.
Section 7.2 Non-Payment . Nonpayment of principal of any Loan when due, nonpayment of any reimbursement obligation in respect of any
LC Disbursement within five Business Days after the same becomes due and the Borrower has received written notice of such fact, or
nonpayment of interest upon any Loan or of any commitment fee, LC Fee or other obligations under any of the Loan Documents within five
Business Days after the same becomes due.
Section 7.3 Specific Defaults . The breach by any Loan Party of any of the terms or provisions of Section 6.3, Sections 6.10 through and
including 6.19.
Section 7.4 Other Defaults . The breach by any Loan Party (other than a breach which constitutes a Default under Section 7.2 or 7.3 of this
Article VII) of any of the terms or provisions of this Agreement or any other Loan Document which is not remedied within thirty days after
written notice thereof from the Administrative Agent to the Borrower.
Section 7.5 Cross-Default . Failure of Holdco or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by Holdco
or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any, and provided that such default has
not been cured or waived) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall
occur or condition exist, the effect of which default, event or condition is to cause, or to permit the holder(s) of such Material Indebtedness or
the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity; or
any Material Indebtedness of Holdco or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased
(other than by a regularly scheduled payment) prior to the stated maturity thereof.
Section 7.6 Insolvency; Voluntary Proceedings . Holdco or any of its Subsidiaries shall (i) have an order for relief entered with respect to it
under the Federal or state bankruptcy laws as now or hereafter in effect, (ii) make a general assignment for the benefit of creditors, (iii) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal or state bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors
or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or
partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6, (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7 or (vii) not pay, or admit in writing its inability to pay, its debts generally as they become
due.
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Section 7.7 Involuntary Proceedings . Without the application, approval or consent of Holdco or any of its Subsidiaries, a receiver, trustee,
examiner, liquidator or similar official shall be appointed for Holdco or any of its Subsidiaries or any Substantial Portion of its Property, or a
proceeding described in Section 7.6(iv) shall be instituted against Holdco or any of its Subsidiaries and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period of 45 consecutive days.
Section 7.8 Judgments . Holdco or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more
judgments or orders for the payment of money in excess of $15,000,000 (or the equivalent thereof in currencies other than Dollars) in the
aggregate.
Section 7.9 Unfunded Liabilities; Reportable Event . The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate
$125,000,000 or any Reportable Event shall occur in connection with any Single Employer Plan that could reasonably be expected to have a
Material Adverse Effect.
Section 7.10 Change in Control . Any Change in Control shall occur.
Section 7.11 Withdrawal Liability . Holdco or any other member of the Controlled Group shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other
amounts required to be paid to Multiemployer Plans by Holdco or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification) could reasonably be expected to have a Material Adverse Effect.
Section 7.12 Guaranty . The Guaranty shall fail to remain in full force or effect (other than by reason of a release of a Guarantor in
accordance with the terms hereof and thereof) or any Guarantor shall assert in writing the invalidity or unenforceability of the Guaranty, or any
Guarantor shall deny in writing that it has any further liability under any guaranty of the Obligations to which it is a party, or shall give notice
to such effect.
Section 7.13 Collateral Documents . Any Collateral Document shall cease to be in full force and effect (other than by reason of a release of
Collateral in accordance with the terms hereof or thereof), or shall cease to give the Collateral Agent for the benefit of the Secured Parties the
Liens, rights, powers and privileges purported to be created thereby, except to the extent such failure results from any act or omission of the
Collateral Agent, the Administrative Agent or any Lender.
Section 7.14 Events Not Constituting Default . Notwithstanding the provisions of Sections 7.1 and 7.4, (i) any breach of any representation
and warranty made hereunder or under or in connection with any Loan Document, (ii) any falsity of any certificate or information required to
be delivered under any Loan Document or (iii) any breach under Section 7.4 (other than such a breach arising out of a breach of Section 6.20
after the Effective Date) of this Agreement or any other Loan Document that, in the case of each of clauses (i) through (iii) above, arises,
directly or indirectly, out of the restatement of the consolidated financial statements of Holdco and its Subsidiaries heretofore delivered or of
Holdco and its Subsidiaries
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or the Borrower and its Subsidiaries requited to be delivered to the Lenders under this Agreement (such financial statements so restated, the “
Restated Financial Statements ”) as a result of (x) the historical valuation, accounting and/or processes, in each case for fiscal periods ended
prior to the Effective Date, related to the investment portfolio of Holdco and its Subsidiaries or (y) the February 11, 2008 SEC non-public
inquiry to Holdco shall in no event constitute a Default or Unmatured Default under this Agreement; provided , however , that (A) the
Borrower furnishes to the Lenders the Restated Financial Statements promptly after the public filing thereof (and in the case of Restated
Financial Statements of the Borrower, promptly after public filing of the corresponding restated financial statements of Holdco) and (B) in the
event of a breach described in clause (iii) of this Section 7.14 consisting of any failure to deliver financial statements required by Section 6.1(i)
or (ii) to be delivered for periods ending after the earliest period for which financial statements are being restated (the “ Subsequent Financial
Statements ”). (1) the Borrower furnishes to the Lenders the Subsequent Financial Statements as to which such a breach exists not later than the
earlier of (x) the public filing of the corresponding financial statements of Holdco and (y) the date that is 45 days, in the case of any delivery of
financial statements for the first three fiscal quarters of any fiscal year, or 60 days, in the case of financial statements for any fiscal year, after
the public filing of any Restated Financial Statements (and in the case of Restated Financial Statements of the Borrower, promptly after public
filing of the corresponding restated financial statements of Holdco), (2) during such period for which the Subsequent Financial Statements or
related audit report, if applicable, required by Section 6.1(i) or (ii) were not available (which period shall in no event extend beyond the dates
set forth in clause (1) above), the Borrower furnishes to the Lenders, in lieu thereof, internal unaudited annual financial statements and internal
unaudited quarterly financial statements within the time periods set forth in Section 6. l(i) and (ii) respectively which are prepared on a
consistent basis as internal unaudited financial statements prepared by Holdco and its Subsidiaries or the Borrower and its Subsidiaries, as the
case may be, which shall be certified by a Financial Officer as (subject to the effect of adjustments for any pending restatement, normal
year-end adjustments and the absence of footnotes) fairly presenting, in all material respects, the consolidated financial condition and
operations at such date and the consolidated results of operations for the period then ended, in each case of Holdco and its Subsidiaries or the
Borrower and its Subsidiaries, as applicable (it being understood that neither (x) the fact that such certification is subject to such adjustments
for any pending restatement nor (y) any failure, as a result of such adjustments for any pending restatement, of such internal unaudited financial
statements to fairly present, in all material respects, such consolidated financial condition and operations and consolidated results of operations
shall constitute a Default or Unmatured Default under this Agreement or any other Loan Document), and (3) within one year of the date an
audit report would be due under Section 6.1(i) with respect to Subsequent Financial Statements for any fiscal year, the Borrower delivers to the
Lenders an audit report as required by Section 6.1(i) with respect to the applicable Subsequent Financial Statements (which audit report may
include a qualification relating to any pending restatement described above and which qualified report shall not constitute a Default or
Unmatured Default under this Agreement or any other Loan Document). Notwithstanding any of the foregoing, in no event will any
Subsequent Financial Statements be delivered to the Lenders hereunder later than corresponding financial statements are delivered to the
noteholders under the Note Purchase Agreement.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
Section 8.1 Acceleration . If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders
to make Loans hereunder and the obligation and power of the LC Issuer to issue Letters of Credit shall automatically terminate and the
Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent, the LC Issuer or
any Lender. If any other Default occurs, the Required Lenders (or the Administrative Agent with the consent of the Required Lenders) may
terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Letters of
Credit, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives.
Section 8.2 Amendments . Subject to the provisions of this Section 8.2 and Sections 8.3 and 8.4 below, the Required Lenders (or the
Administrative Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto
for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or waiving any Default or Unmatured Default hereunder; provided , however, that no such supplemental agreement shall,
without the consent of all of the Lenders adversely affected thereby (or in the case of subsections 8.2(ii), (iv), (v) and (vi), all of the Lenders):
(i) Extend the final maturity of any Loan, or extend the expiry date of any Letter of Credit to a date after the Facility Termination Date or
forgive all or any portion of the principal amount thereof or any LC Disbursements, or reduce the rate or extend the time of payment of
interest or fees hereunder or LC Disbursements (it being understood that the waiver of default interest pursuant to Section 2.14 shall only
require the consent of Required Lenders), or amend Section 2.24(ii).
(ii) Reduce the percentage specified in the definition of Required Lenders.
(iii) Increase any Commitment of any Lender hereunder (it being understood that any change to or waivers or modifications of conditions
precedent, covenants, Defaults or Unmatured Defaults or of a mandatory prepayment shall not constitute an increase or extension of the
Commitments of any Lender).
(iv) Permit the Borrower to assign its rights under this Agreement (it being understood that any modification to Section 6.12 or 6.13 shall
only require approval of the Required Lenders).
(v) Amend this Section 8.2 or Section 11.2 (it being understood that with the consent of the Required Lenders, additional extensions of
credit pursuant to this Agreement (including pursuant to Section 2.8(iii)) may be included in the determination of the Required Lenders on
substantially the same basis as the Commitments and
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extensions of credit thereunder on the Effective Date and this Section 8.2 may be amended by the Required Lenders to reflect such
extensions of credit.
(vi) Release all or substantially all of the Collateral or release all or substantially all of the Guarantors from their obligations under the
Guaranty, except, in either case, as contemplated by Section 10.17.
Without limiting the foregoing and notwithstanding anything herein or in Section 2.8(iii) to the contrary: (A) any amendment having the effect
of permitting the aggregate amount of Term B Loans allowed or incurred pursuant to Section 2.8(iii) after the date hereof to exceed
$50,000,000 or permitting the Term B Balance at any time to exceed $250,000,000 shall require the consent of the Required Specified Lenders
and the Required B Lenders; and (B) the consent of the Required B Lenders shall be required with respect to any amendment that (1) extends
the scheduled date of payment of the principal amount of any Term B Loan, (2) alters the amount or application of any prepayment pursuant to
Section 2.10 in a manner adverse to the interests of Lenders with Term B Loans or (3) has the effect of providing Collateral to the Revolving
Lenders or Lenders with Term A Loans on a basis inconsistent with Section 2.24(ii).
No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the
Administrative Agent, and no amendment of any provision relating to the LC Issuer shall be effective without the written consent of the LC
Issuer. No amendment of any provision of this Agreement relating to the Swing Line Lender or any Swing Line Loan made by such Swing
Line Lender shall be effective without the written consent of the Swing Line Lender. The Administrative Agent may waive payment of the fee
required under Section 12.1(ii)(B)(3) without obtaining the consent of any other party to this Agreement. Notwithstanding the foregoing, upon
the execution and delivery of all documentation required by Section 2.8(iii) to be delivered in connection with an increase to the Aggregate
Revolving Credit Commitment, the Administrative Agent, the Borrower and the new or existing Lenders whose Commitments have been
affected may and shall enter into an amendment hereof (which shall be binding on all parties hereto) solely for the purpose of reflecting any
new Lenders and their new Revolving Credit Commitments and any increase in the Revolving Credit Commitment of any existing Lender.
Section 8.3 Replacement Loans . In addition, notwithstanding the foregoing, this Agreement and the other Loan Documents may be
amended (or amended and restated) with the written consent of the Administrative Agent, the Borrower and the Lenders providing the relevant
Replacement Term Loans to permit the refinancing of all of the outstanding Term A Loans (the “ Refinanced Term A Loans ”) or all of the
outstanding Term B Loans (the “ Refinanced Term B Loans ”) or the replacement of the Aggregate Revolving Credit Commitment (the “
Refinanced Commitment ”) with one or more replacement term loan tranches hereunder which shall be Loans hereunder (“ Replacement Term
A Loans ” or the “ Replacement Term B Loans ”, as applicable) or one or more new revolving commitments (the “ Replacement Commitments
”); provided , that (i) the aggregate principal amount of such Replacement Term A Loans and Replacement Term B Loans shall not exceed the
aggregate principal amount of such Refinanced Term A Loans and Refinanced Term B Loans, respectively, (ii) the Applicable Margin for such
Replacement Term A Loans and Replacement Term B Loans shall not be higher than the Applicable Margin for such Refinanced Term A
Loans and Refinanced Term B Loans,
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respectively, (iii) the Weighted Average Life to Maturity of such Replacement Term A Loans and Replacement Term B Loans shall not be
shorter than the Weighted Average Life to Maturity of such Refinanced Term A Loans and Refinanced Term B Loans, respectively, at the time
of such refinancing, (iv) the aggregate amount of the Replacement Commitment shall not exceed the Refinanced Commitment, (v) the
Applicable Margin for such Replacement Commitment shall not exceed the Applicable Margin for the Refinanced Commitment, (vi) the
borrower of such Replacement Term A Loans, Replacement Term B Loans or Replacement Commitment shall be the Borrower and (vii) all
other terms applicable to such Replacement Term A Loans, Replacement Term B Loans or Replacement Commitments shall be substantially
identical to, or not materially more favorable to the Lenders providing such Replacement Term A Loans, Replacement Term B Loans or
Replacement Commitments than, those applicable to such Refinanced Term A Loans, Refinanced Term B Loans or Refinanced Commitments,
except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term A
Loans or Term B Loans, as applicable, in effect immediately prior to such refinancing.
Section 8.4 Errors . Further, notwithstanding anything to the contrary contained in Section 8.2, if following the Effective Date, the
Administrative Agent and the Borrower shall have agreed in their sole and absolute discretion that there is an ambiguity, inconsistency,
manifest error or any error or omission of a technical or immaterial nature, in each case, in any provision of the Loan Documents, then the
Administrative Agent and the Borrower shall be permitted to amend such provision and such amendment shall become effective without any
further action or consent of any other party to any Loan Documents if the same is not objected to in writing by the Required Lenders within ten
Business Days following receipt of notice thereof (it being understood that the Administrative Agent has no obligation to agree to any such
amendment).
Section 8.5 Preservation of Rights . No delay or omission of the Lenders, the LC Issuer or the Administrative Agent to exercise any right
under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and a Credit
Extension notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Credit
Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the
Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2 or as otherwise provided in
Section 8.3 or 8.4, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Administrative Agent, the LC Issuer and the Lenders until the Obligations have
been paid in full.
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ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Survival of Representations . All representations and warranties of the Borrower and Holdco contained in this Agreement shall
survive the making of the Credit Extensions herein contemplated.
Section 9.2 Governmental Regulation . Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any
Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or
regulation.
Section 9.3 Headings . Section headings in the Loan Documents are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
Section 9.4 Entire Agreement . The Loan Documents embody the entire agreement and understanding among the Borrower, the
Administrative Agent, the LC Issuer and the Lenders and supersede all prior agreements and understandings among the Borrower, the
Administrative Agent, the LC Issuer and the Lenders relating to the subject matter thereof other than those contained in the fee letter described
in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement.
Section 9.5 Several Obligations; Benefits of this Agreement . The respective obligations of the Lenders hereunder are several and not joint
and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such).
The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder.
This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their
respective successors and assigns, provided , however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.6, 9.8 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its
own behalf and in its own name to the same extent as if it were a party to this Agreement.
Section 9.6 Expenses; Indemnification .
(i) The Borrower shall reimburse the Administrative Agent and the Arranger for all reasonable and documented out-of-pocket expenses
(limited to the reasonable fees, disbursements and other charges of one counsel to the Administrative Agent and the Arranger taken as a
whole and, if reasonably necessary, of one local counsel in any relevant jurisdiction) paid or incurred by such parties in connection with the
preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment
(proposed or actual), modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Administrative
Agent, the Collateral Agent, the LC Issuer and the Lenders for all reasonable and documented out-of-pocket expenses (limited with respect
to legal
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expenses to the reasonable fees, disbursements and other charges of one counsel to all such Persons, and, if reasonably necessary, of one
local counsel in any relevant jurisdiction) paid or incurred by the Administrative Agent, the Arranger, the Collateral Agent, the LC Issuer or
any Lender in connection with the collection and enforcement of the Loan Documents.
(ii) The Borrower hereby further agrees to indemnify the Administrative Agent, the Arranger, each Lender, their respective affiliates, and
each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (limited to
the reasonable out-of-pocket fees, disbursements and other charges of one counsel to the indemnified Persons taken as a whole and, if
reasonably necessary, one local counsel in any relevant jurisdiction) which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of
the proceeds of any Credit Extension hereunder except to the extent that they are determined in a final non-appealable judgment by a court
of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of, or breach of the Loan Documents
by, the indemnified party (or their Related Parties) or any dispute solely among the indemnified persons (or their Related Parties) and not
involving Holdco, the Borrower, the Sponsors or their Affiliates. The obligations of the Borrower under this Section 9.6 shall survive the
termination of this Agreement.
Section 9.7 Severability of Provisions . Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction
or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are
declared to be severable.
Section 9.8 Nonliability of Lenders . The relationship between the Borrower on the one hand and the Lenders, the LC Issuer and the
Administrative Agent on the other hand shall be solely that of borrower and lender. Neither the Administrative Agent, the Arranger, the LC
Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Administrative Agent, the Arranger nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s
business or operations. The Borrower agrees that neither the Administrative Agent, the Arranger, the LC Issuer nor any Lender shall have
liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of,
or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence, bad faith or willful misconduct of, or breach of the Loan Documents by, the party from which
recovery is sought or any dispute solely between or among the Administrative Agent, the Arranger, the LC Issuer and/or any Lender and not
involving Holdco, the Borrower, the Sponsors or their respective Affiliates. Neither the Administrative Agent, the Arranger, the LC Issuer nor
any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect,
consequential or punitive damages suffered by the Borrower in connection with,
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arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.
Section 9.9 Confidentiality . The Administrative Agent and each Lender agrees to hold any Information (as defined below) which it may
receive from the Borrower in connection with this Agreement in confidence, except for disclosure (i) to its Affiliates and to the Administrative
Agent and any other Lender and their respective Affiliates for use solely in connection with the performance of their respective obligations
hereunder contemplated hereby, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as required by law, regulation, or legal process, (v) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to the Loan Documents or the enforcement of rights thereunder, (vi) to its direct or indirect
contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties,
(vii) permitted by Section 12.2, and (viii) to rating agencies if requested or required by such agencies in connection with a rating relating to the
Advances hereunder. Without limiting Section 9.4, the Borrower agrees that the terms of this Section 9.9 shall set forth the entire agreement
between the Borrower and each Lender (including the Administrative Agent) with respect to any Information previously or hereafter received
by such Lender in connection with this Agreement, and this Section 9.9 shall supersede any and all prior confidentiality agreements entered
into by such Lender with respect to such Information. For the purposes of this Section, “Information” means all information received from
Holdco, the Borrower, its Subsidiaries or their agents or representatives relating to Holdco, the Borrower, its Subsidiaries or their agents or
other representatives or its business, other than any such information that is available to the Administrative Agent, the LC Issuer or any Lender
on a non-confidential basis prior to disclosure by Holdco or the Borrower. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THIS SECTION 9.9 FURNISHED TO IT
PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDCO
AND ITS AFFILIATES, THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND
CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL
NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN
ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES
LAWS.
ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER
OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL
BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT
HOLDCO AND ITS AFFILIATES, THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR
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RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE
ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT
WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE
WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.
Section 9.10 Nonreliance . Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in
Regulation U) for the repayment of the Credit Extensions provided for herein.
Section 9.11 Disclosure . The Borrower and each Lender hereby acknowledge and agree that JPMCB and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.
Section 9.12 USA PATRIOT Act . Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “ Act ”) hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to
obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other
information that will allow such Lender to identify the Borrower in accordance with the Act.
Section 9.13 Amendment and Restatement; Prior Defaults .
(i) On the Effective Date the Existing Credit Agreement shall be amended, restated and superseded in its entirety hereby. The parties
hereto acknowledge and agree that (i) this Agreement, any Notes delivered pursuant to Section 2.16 and the other Loan Documents executed
and delivered in connection herewith do not constitute a novation, payment and reborrowing, or termination of the “Obligations” (as defined
in the Existing Credit Agreement) under the Existing Credit Agreement as in effect prior to the Effective Date and (ii) such “Obligations”
are in all respects continuing with only the terms thereof being modified (and, as applicable, the primary obligor being changed) as provided
in this Agreement. Except in so far as the terms thereof are expressly modified hereby, nothing herein or in any Loan Document shall release
any Loan Party from any payment obligation in respect of the Obligations under any Loan Document (as defined in the Existing Credit
Agreement). All indemnification obligations of the Borrower pursuant to the Existing Credit Agreement are continued hereunder.
(ii) The parties agree that as of the Effective Date the “Waiver Period” under the Existing Credit Agreement shall terminate and all
Defaults and Unmatured Defaults arising under the Existing Credit Agreement shall be permanently waived; provided that such prior or
permanent waiver shall not constitute a waiver of any Default or Unmatured Default arising under this Agreement upon or after the
effectiveness of this Agreement.
(iii) The Lenders hereby waive the prior notice required by Section 2.10 of the Existing Credit Agreement with respect to the repayment
on the date hereof of $100,000,000 of Revolving Loans outstanding under the Existing Credit Agreement.
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ARTICLE X
THE ADMINISTRATIVE AGENT
Section 10.1 Appointment; Nature of Relationship . JPMCB is hereby appointed by each of the Lenders and the LC Issuer as its contractual
representative (herein referred to as the “ Administrative Agent ”) hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set
forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express
conditions contained in this Article X. Notwithstanding the use of the defined term “Administrative Agent,” it is expressly understood and
agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are
expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders’ contractual representative, the
Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative” of the Lenders within the
meaning of the New York Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited
to those expressly set forth in this Agreement and the other Loan Documents together with such rights and powers as are reasonably incident
thereto. Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender hereby waives.
Section 10.2 Powers . The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically
delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The
Administrative Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any
action specifically provided by the Loan Documents to be taken by the Administrative Agent.
Section 10.3 General Immunity . Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to
the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document
or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court
of competent jurisdiction to have arisen from the gross negligence, bad faith or willful misconduct of such Person.
Section 10.4 No Responsibility for Loans. Recitals, etc . Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of
any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Administrative
Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness,
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sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor
of any of the Obligations or of any of the Borrower’s or any such guarantor’s respective Subsidiaries. Except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.
Section 10.5 Action on Instructions of Lenders . The Administrative Agent shall in all cases be fully protected in acting, or in refraining
from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such
instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that
the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this
Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Administrative Agent
shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified
to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to
take any such action.
Section 10.6 Employment of Administrative Agents and Counsel . The Administrative Agent may execute any of its duties as
Administrative Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall be entitled to advice of counsel concerning the
contractual arrangement between the Administrative Agent and the Lenders and all matters pertaining to the Administrative Agent’s duties
hereunder and under any other Loan Document.
Section 10.7 Reliance on Documents; Counsel . The Administrative Agent shall be entitled to rely upon any Note, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, electronic mail message, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper Person or Persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Administrative Agent, which counsel may be employees of the Administrative Agent. For purposes of determining compliance with the
conditions specified in Sections 4.1 and 4.2, each Lender that has signed this Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or
satisfactory to such Lender or the Administrative Agent unless the Administrative Agent shall have received notice from such Lender prior to
the applicable date specifying its objection thereto.
Section 10.8 Administrative Agent’s Reimbursement and Indemnification . The Lenders agree to reimburse and indemnify the
Administrative Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to
their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Administrative
Agent is entitled to reimbursement by the Borrower
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under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses
incurred by the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated
thereby (including, without limitation, for any such amounts incurred by or asserted against the Administrative Agent in connection with any
dispute between the Administrative Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of
the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad faith
or willful misconduct of the Administrative Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the
provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.
Section 10.9 Notice of Default . The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Unmatured Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring
to this Agreement describing such Default or Unmatured Default and stating that such notice is a “notice of default”. In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders.
Section 10.10 Rights as a Lender . In the event the Administrative Agent is a Lender, the Administrative Agent shall have the same rights
and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the
same as though it were not the Administrative Agent, and the term “Lender” or “Lenders” shall, at any time when the Administrative Agent is a
Lender, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its
Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or
such Subsidiary is not restricted hereby from engaging with any other Person. The Administrative Agent, in its individual capacity, is not
obligated to remain a Lender.
Section 10.11 Lender Credit Decision . Each Lender acknowledges that it has, independently and without reliance upon the Administrative
Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arranger or
any other Lender and based on such documents and information as it shall deem
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appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan
Documents.
Section 10.12 Successor Administrative Agent . The Administrative Agent may resign at any time by giving written notice thereof to the
Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor
Administrative Agent has been appointed, sixty days after the retiring Administrative Agent gives notice of its intention to resign. Upon any
such resignation, the Required Lenders (with the consent of the Borrower unless at the applicable time a Default under Section 7.2, 7.6 (in
respect of bankruptcy only) or 7.7 (in respect of bankruptcy only) shall have occurred and be continuing) shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Administrative Agent, other than a Disqualified Institution. If no successor Administrative
Agent shall have been so appointed by the Required Lenders within forty-five days after the resigning Administrative Agent’s giving notice of
its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a successor
Administrative Agent, other than a Disqualified Institution (with the consent of the Borrower unless at the applicable time a Default under
Section 7.2, 7.6 (in respect of bankruptcy only) or 7.7 (in respect of bankruptcy only) shall have occurred and be continuing). Notwithstanding
the previous sentence, the Administrative Agent may at any time (with the consent of the Borrower, not to be unreasonably withheld but
without the consent of any Lender) appoint any of its Affiliates which is a commercial bank as a successor Administrative Agent hereunder. If
the Administrative Agent has resigned and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of
the Administrative Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all
other purposes shall deal directly with the Lenders. No successor Administrative Agent shall be deemed to be appointed hereunder until such
successor Administrative Agent has accepted the appointment. Any such successor Administrative Agent shall be a commercial bank having
capital and retained earnings of at least $250,000,000 and shall not be a Disqualified Institution. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the resigning Administrative Agent. Upon the effectiveness of the
resignation of the Administrative Agent, the resigning Administrative Agent shall be discharged from its duties and obligations hereunder and
under the Loan Documents. After the effectiveness of the resignation of an Administrative Agent, the provisions of this Article X shall
continue in effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as
the Administrative Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Administrative Agent by
merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term “Prime Rate”
as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Administrative Agent.
Section 10.13 Administrative Agent and Arranger Fees . The Borrower agrees to pay to the Administrative Agent and the Arranger, for their
respective accounts, the fees agreed to by the Borrower, the Administrative Agent and the Arranger pursuant to that certain fee letter agreement
dated February 14, 2008, or as otherwise agreed from time to time.
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Section 10.14 Delegation to Affiliates . The Borrower and the Lenders agree that the Administrative Agent may delegate any of its duties
under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs
duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to
which the Administrative Agent is entitled under Articles IX and X.
Section 10.15 Co-Documentation Agents, Co-Syndication Agents, etc . No Lender identified in this Agreement as a “Co-Documentation
Agent” or a “Co-Syndication Agent” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary
relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to
the Administrative Agent in Section 10.11 mutatis mutandis .
Section 10.16 Appointment of Collateral Agent . Each of the Lenders and the LC Issuer hereby irrevocably appoints the Collateral Agent as
its agent and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral
Agent by the terms hereof or of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. Such
authorization shall include the authority to enter into the Collateral Documents (including amendments thereof to facilitate the securing of Rate
Management Obligations) on such terms as it deems appropriate. All provisions of this Article X relating to the Administrative Agent (and all
indemnities of the Administrative Agent by the Borrower and all provisions relating to reimbursement of expenses of the Administrative Agent
by the Borrower) shall be equally applicable to the Collateral Agent mutatis mutandis .
Section 10.17 Certain Releases of Collateral and Guarantors . Without limiting the foregoing, (i) if any of the Collateral under the Collateral
Documents is sold in a transaction permitted hereunder (other than to a Loan Party), such Collateral (but not the proceeds thereof) shall be sold
free and clear of the Liens created by the Collateral Documents and the Administrative Agent and the Collateral Agent shall be authorized to
take any actions deemed appropriate in order to effect the foregoing and (ii) if any Guarantor is sold in a transaction permitted hereby, the
Administrative Agent is authorized to release such Guarantor from the Guaranty upon consummation of such sale.
Section 10.18 Intercreditor Agreement . Each Lender hereby authorizes and directs the Collateral Agent to enter into the Intercreditor
Agreement as attorney-in-fact on behalf of such Lender and agrees that in consideration of the benefits of the security being provided to such
Lender in accordance with the Security Documents and the Intercreditor Agreement and by acceptance of those benefits, each Lender
(including any Lender which becomes such by assignment pursuant to Section 12.1 after the date hereof) shall be bound by the terms and
provisions of the Intercreditor Agreement and shall comply (and shall cause any Affiliate thereof which is the holder of any First Priority
Obligations (as defined therein) to comply) with such terms and provisions.
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ARTICLE XI
SETOFF; RATABLE PAYMENTS
Section 11.1 Setoff . If a Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower against any of and all the Obligations of the Borrower now or hereafter existing under this Agreement held by such Lender or
Affiliate, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such Obligations may be
unmatured. The rights of each Lender under this Section 11.1 are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
Section 11.2 Ratable Payments . If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swing Line Loans resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swing Line Loans
and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans and participations in LC Disbursements and Swing Line Loans of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal
of and accrued interest on their respective Loans and participations in LC Disbursements and Swing Line Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply
to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any
Assignee or Participant.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
Section 12.1 Successors and Assigns .
(i) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors
and assigns permitted hereby (including any Affiliate of the LC Issuer that issues any Letter of Credit), except that (A) the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be null and void) and (B) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this Section 12.1. Nothing in this Agreement, expressed or implied,
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shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of the LC Issuer that issues any Letter of Credit), Participants (solely to the extent provided in paragraph (iii) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the LC Issuer and the
Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(ii) (A) Subject to the conditions set forth in paragraph (ii)(B) below, any Lender may assign to one or more assignees other than any
Disqualified Institution (each, an “ Assignee ”) all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably
withheld) of:
(1) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a
Lender, an Approved Fund or, if a Default under Section 7.2, 7.6 (in respect of bankruptcy only) or 7.7 (in respect of bankruptcy only)
has occurred and is continuing, any other Assignee;
(2) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of (x) any
Revolving Credit Commitment to an Assignee that is a Lender with a Revolving Credit Commitment immediately prior to giving
effect to such assignment or the Borrower or any of its Affiliates and (y) all or any portion of a Term Loan to a Lender, an Affiliate of
a Lender or an Approved Fund or the Borrower or any of its Affiliates; and
(3) the LC Issuer, provided that no consent of the LC Issuer shall be required for an assignment of all or any portion of a Term
Loan.
(B) Assignments shall be subject to the following additional conditions:
(1) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of
the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 in the case of a Revolving Credit Commitment or, in the case of a Term Loan,
$1,000,000 unless each of the Borrower and the Administrative Agent otherwise consent;
(2) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement, provided that this clause shall not be construed to
114
prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of
Commitments or Loans;
(3) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee of $3,500; and
(4) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the
Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public
information about Holdco and its Affiliates, the Loan Parties and their related parties or their respective securities) will be made
available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws,
including Federal and state securities laws.
For the purposes of this Section 12.1(ii), the term “ Approved Fund ” has the following meaning:
“ Approved Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans
and similar extensions of credit in the ordinary course of its business and that is administered or managed by (1) a Lender, (2) an Affiliate of
a Lender or (3) an entity or an Affiliate of an entity that administers or manages a Lender.
(C) Subject to acceptance and recording thereof pursuant to paragraph (ii)(E) of this Section, from and after the effective date
specified in each Assignment and Assumption the Assignee thereunder (except in the case of an assignment to the Borrower) shall be a
party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.1, 3.2, 3.4, 3.5 and 9.6). Any assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 12.1 shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (iii) of this Section 12.1. Notwithstanding anything to the
contrary in this Agreement or any Assignment and Assumption, all Commitments, Loans, and all other rights assigned to the Borrower
pursuant to this Section 12.1 shall be deemed canceled for all purposes under this Agreement, including without limitation with respect to
Section 8.2 and Section 6.19, and, without the consent of the Administrative Agent, neither the
115
Borrower nor any Affiliate of the Borrower which is a Lender shall be entitled to receive information delivered to the Lenders or attend
meetings of the Lenders.
(D) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans and LC Disbursements and any interest thereon owing to, each Lender pursuant to
the terms hereof from time to time (the “ Register ”), The entries in the Register shall be conclusive absent manifest error, and the
Borrower, the Administrative Agent, the LC Issuers and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, any LC Issuer and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.
(E) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the
Assignee’s completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder, the processing and
recordation fee referred to in paragraph (ii)(B)(3) of this Section 12.1 and any written consent to such assignment required by paragraph
(ii) of this Section 12.1, the Administrative Agent shall accept such Assignment and Assumption and record the information contained
therein in the Register; provided that if either the assigning Lender or the Assignee shall have failed to make any payment required to be
made by it pursuant to Section 2.7, 2.21, 2.22(v), 10.8 or 11.2, the Administrative Agent shall have no obligation to accept such
Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in
full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(iii) (A) Any Lender may, without the consent of the Borrower, the Administrative Agent, the LC Issuer or the Swing Line Lender, sell
participations to one or more banks or other entities other than a Disqualified Institution (each, a “ Participant ”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided
that (1) such Lender’s obligations under this Agreement shall remain unchanged, (2) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (3) the Borrower, the Administrative Agent, the LC Issuer and the other
Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that (x) such Lender shall
retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this
Agreement; provided that any
116
such agreement or instrument may provide that such Lender will not, without the consent of the Participant (other than a Participant
which is the Borrower), agree to any amendment, modification or waiver described in Section 8.2(i) that affects such Participant, and
(y) in the case of a Participant which is the Borrower or an Affiliate of the Borrower, the selling Lender shall not (without the consent of
the Administrative Agent), and shall not be obligated to, provide such Participant with information such Participant would not be entitled
to receive in accordance with Section 12.1(ii)(C) were such participation an assignment. Subject to paragraph (iii)(B) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (ii) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.1 as though it were a Lender, provided such Participant agrees to be subject
to Section 11.2 as though it were a Lender. Notwithstanding anything to the contrary in this Agreement or any agreement or instrument
pursuant to which a Lender sells a participation to the Borrower, all Commitments, Loans and all other rights subject to such participation
to the Borrower shall be deemed canceled for all purposes under this Agreement, including without limitation with respect to Section 8.2
and Section 6.19, but, in the case of a participation of any Revolving Credit Commitment, such cancellation shall be subject to the
making of cash collateralization arrangements reasonably satisfactory to the applicable LC Issuer and the Swing Line Lender with respect
to Letters of Credit and Swing Line Loans outstanding at the time of such participation which are subject to such participation.
(B) A Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2, 3.4 or 3.5 than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant. A Participant shall not be entitled to the
benefits of Section 3.5 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 3.5(iv) or (v), as applicable, as though it were a Lender.
(C) Each Lender having sold a participation in its rights or Obligations under this Agreement, acting for this purpose as an agent of the
Borrower, shall maintain a register for the recordation of the names and addresses of such Participants and the rights, interests or
obligations of such Participants in any Obligation, in any Commitment and in any right to receive any payments hereunder.
(iv) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
117
Section 12.2 Dissemination of Information . The Borrower authorizes each Lender to disclose to any Participant, actual or proposed
assignee of an interest in the Obligations or Loan Documents (each a “ Transferee ”) and any prospective Transferee any and all information in
such Lender’s possession concerning the creditworthiness of Holdco and its Subsidiaries, including without limitation any information
contained in any financial statements delivered pursuant to Section 6.1 hereof; provided that each Transferee and prospective Transferee agrees
to be bound by Section 9.9 of this Agreement.
Section 12.3 Tax Treatment . If any interest in any Loan Document is transferred to any Transferee, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv) or (v), as applicable.
ARTICLE XIII
NOTICES
Section 13.1 Notices; Effectiveness; Electronic Communication .
(i) Notices Generally . Except in the case of notices and other communications expressly permitted to be given by telephone (and except
as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows:
(A) if to the Borrower, to it at c/o MoneyGram International, Inc., 1550 Utica Avenue South, MS 2010, Minneapolis, MN
55416-5312, Attention of: Teresa H. Johnson (Facsimile Number (952) 591-3859);
with a copy to (which shall not constitute notice):
Mr. Scott Jaeckel
Thomas H. Lee Partners, L.P.
100 Federal Street, 35th Floor
Boston, Massachusetts 02110
(Fax No. (617) 227-3514)
Email: [email protected]
and
Angela L. Fontana, Esq.
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201-6950
(Fax No. (214) 746-7777)
Email: [email protected]
(B) if to the Administrative Agent, to it at JPMorgan Chase Bank, N.A., 10 S. Dearborn Street, Floor 7, Chicago, IL 60603-2003, Mail
Code: IL1118
0010, Attention of: Claudia A. Kech (Facsimile Number (312) 385-7096), with a copy to JPMorgan Chase Bank, N.A., 111 East
Wisconsin Avenue, Floor 16, Milwaukee, WI 53202-4815, Mail Code: WI1-2042, Attention of: Brian L. Grossman (Facsimile Number
(414) 977-6777);
(C) if to the LC Issuer, to it at JPMorgan Chase Bank, N.A., 10 S. Dearborn Street, Floor 7, Chicago, IL 60603-2003, Mail Code:
IL1-0010, Attention of: Claudia A. Kech (Facsimile Number (312) 385-7096);
(D) if to a Lender, to it at its address or telecopier number set forth in its Administrative Questionnaire provided to the Administrative
Agent.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when
received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for
the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered
through electronic communications to the extent provided in paragraph (ii) below, shall be effective as provided in said paragraph (ii).
(ii) Electronic Communications . Notices and other communications to the Lenders may be delivered or furnished by electronic
communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent or as
otherwise determined by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II
if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication
and, in the case of notice of Default or Unmatured Default, shall permit notification only by Intralinks or a similar website. The
Administrative Agent or the Borrower may, in its respective discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it or as it otherwise determines, provided that such determination or
approval may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed
received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not given during the
normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the
next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received
upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice
or communication is available and identifying the website address therefor.
119
(iii) Change of Address, Etc . Any party hereto may change its address or telecopier number for notices and other communications
hereunder by notice to the other parties hereto.
ARTICLE XIV
COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION
Section 14.1 Counterparts; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as
provided in Article IV, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this
Agreement.
Section 14.2 Electronic Execution of Assignments . The words “execution,” “signed,” “signature,” and words of like import in any
assignment and assumption agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping
system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, or any other state laws based on the Uniform Electronic Transactions Act.
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
Section 15.1 CHOICE OF LAW . THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
Section 15.2 CONSENT TO JURISDICTION . THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS
120
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC ISSUER OR ANY LENDER
TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT OR ANY LENDER
OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
Section 15.3 WAIVER OF JURY TRIAL . THE BORROWER, THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT, EACH
LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
[signature pages follow]
121
IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Agreement as of the date first above
written.
MONEYGRAM INTERNATIONAL, INC.
MONEYGRAM PAYMENT SYSTEMS
WORLDWIDE, INC.
By:
/s/
Its:
Executive Vice President and Chief Financial
Officer
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
JPMORGAN CHSE BANK, N.A.,
Individually, as Administrative Agent,
Collateral Agent, LC Issuer and Swing Line
Lender
By:
/s/
Its: Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
CHASE LINCOLN FIRST COMMERCIAL
CORPORATION, as a Lender
By:
/s/
Its: Managing Director
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Bank of America N.A., as a Lender
By:
/s/
Title: Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Keybank National Association, as a Lender
By:
/s/
Title: Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
U.S. BANK NATIONAL ASSOCIATION
as a Lender
By:
/s/
Karen Paris
Title:
Senior Vice President
U.S. BANK NATIONAL ASSOCIATION
as a Lender
By:
/s/
Steve Gibson
Title:
Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
BNP Paribas, as a Lender
By:
/s/
Title: Managing Director
By:
/s/
Title: Managing Director
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Citicorp, USA, Inc., as a Lender
By:
/s/
Title:
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
CALYON NEW YORK BRANCH, as a Lender
By:
By:
/s/
Name:
Title:
Blake Wright
Managing Director
/s/
Name:
Title:
Joseph Philbin
Director
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
The Royal Bank of Scotland plc, as a Lender
By:
/s/
Title: Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
Lender
By:
/s/
Title: Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Wachovia Bank, National Association, as a Lender
By:
/s/
Helen F. Wessling
Title:
Managing Director
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
BRANCH BANKING AND TRUST COMPANY,
as a Lender
By:
/s/
Title: Senior Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Societe Generale, as a Lender
By:
/s/
Nigel Elvey
Title:
Vice President
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
SunTrust Bank, Inc., as a Lender
By:
/s/
Title: Director
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
MEGA INTERNATIONAL COMMERCIAL BANK
SILICON VALLEY BRANCH
as a Lender
By:
/s/
Title: SVP & General Manager
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
GoldenTree Capital Opportunities LP,
By: GoldenTree Asset Management, LP
as a Lender
By:
/s/
Its: Director — Bank Debt
Signature Page to MoneyGram Second Amended and Restated Credit Agreement
Schedule 1
Scheduled Restricted Investments/Specified Securities
See Attached.
Schedule 1 1
Category
C-1
FHLB 4 3/09 C 4/04
FHLB 4 3/26/09 C 4/04
FHLB 4.02 12/10 C 9/03
FHLB 6.125 12/29/14
FHLB 6.32 06/17
FHLMC 4.1 12/10
FHLMC 4.5 13
FHLMC 4.95 5/13 C 5/04
FNMA 0 07/05/14
FNMA 5 2/13 C 5/04
FNMA 5.15 1/13 C 1/05
FNMA 6 03/20/17
FNMA 6.25 08/15/16
FHR 2006 ZB
FHR 2018 Z
FHR 2080 Z
FHR 2211 ZA
FHR 2336 TB
FHR 2391 XG
FHR 2466 DG
FHR 2482 EJ
FHR 2484 VB
FHR 2532 A
FHR 2539 TC
FHR 2564 QC
FHR 2574 PC
FHR 2603 JP
FHR 2641 KC
FHR 2656 AC
FHR 2675 PB
FHR 2691 LD
FHR 2740 PC
FHR 2793 GC
FHR 2793 GC
FHR 2807 JA
FHR 2878 QD
FHR 3014 DW
FN 725341
FNR 02-77 QE
FNR 1997-12 KB
FNR 1999-33 ZA
FNR 2001-23 PG
FNR 2001-31 VB
FNR 2001-63 TB
FNR 2002-55 VL
FNR 2003-41 PM
FNR 2003-97 WC
FNR 2005-53 MB
FNR 2005-58 CW
FNR 2007-10 VA
GNR 1998-24 Z
GNR 2000-26 PD
GNR 2002-67 VB
FHR 49 G
CUSIP
3133X4VF5
3133X4Q87
31339X4E1
3133XLGV9
3133XLGE7
3128X1FX0
3134A4SA3
3128X1CT2
TT3169600
3136F3AJ5
3136F2B56
3136F8GW9
3136F7U88
3133TBQM5
3133TCJ74
3133TG3U1
3133TNEQ3
3133986U8
31339LYF1
31392MM74
31392PQU2
31392PRK3
31393FNV4
31393FXA9
31393LNU3
31393L2N2
31393PST2
31393WV63
31394HR86
31394J4P9
31394LDU3
31394P3P6
31394YG99
31394YG99
31395AM44
31395GKM3
31395XAD7
31402CZE5
31392F4E4
31359NE64
31359WKG5
31359S4D9
313920CB4
31392AUH9
31392EFY1
31393BD51
31393TNL6
31394DH60
31394EDC9
31396PNB3
3837H1B42
3837H4B79
38373VQX1
31340YRU5
Par Value
(12/31/2007) (a)
[*]
Par Value
(1/31/2008) (a)
[*]
Investor Value
(12/31) (a)
[*]
Investor Value
(1/31) (a)
[*]
FFCB 5 3/14 C 6/04
FHLMC 4.25 3/10 C 9/04
FHLMC 5 3/13 C 9/04
FHLMC 5.25 2/14 C 2/05
FNMA 4.01 8/09 C 8/04
FNMA 4.27 1/09 C 4/04
FNMA 4.3 3/10 C 6/04
FNMA 4.6 9/10 C 12/04
FNMA 5 2/12 C 5/04
FNMA 5 8/11 C 5/04
FNMA 5.25 1/13 C 7/03
FNMA 5.25% 1/13 C 4/04
FNMA 5.5 11/14 2/05
Total C-1
Investor Value/Par Value
31331TWT4
3128X2ZL2
3128X2C52
3128X2QV0
3136F5CC3
3136F4W83
3136F5HH7
3136F6EW5
3136F45M2
3136F46A7
3136F2J90
3136F2P77
3136F6MW6
[*]
[*]
[*]
[*]
[*]
[*]
(a)
Par Values ($) and Investor Values ($) for illustrative purposes only
1
The appearance of [ * ] denotes confidential information that has been omitted from this Exhibit
and filed separately with the SEC pursuant to a confidential treatment request under Rule 24b-2
of the Securities Exchange Act of 1934, as amended.
Schedule 1 1
Category
C-2
ACCDO V C
ACCDO V D
ACCDO 10A C
ACCOA 2007-1A A2
ANDY 2007-1A A2
ANDY 2007-1A B
AYRES 2005-1A C
CCRK 2006-1A A3
CCRK 2007-2A A2
CRONA 2007-1A B
FORTS 2006-2A A2
FORTS 2006-2A B
GLCR 2006-4A C
GSCSF 2007-1RA A1LC
HLCDO 2006-1A A2
INDE4 4A C
INDE7 7A B
LEXN 2006-2A D
MID 01-1A A1L
NEPTN 2004-1A A3L
NEPTN 2007-5A A2L
ORCHD 03-1A B
ORCHD 03-1A C1
PSCBO 1A A1L
PSCBO 1A A1
PYXIS 2007-1A B
SAYB 2001-1A A
SHERW 2006-3A A1J
SOLST 1A A
STAK 2006-2A 4
TABS 2007-7A A1J
VERT 2007-1A A1J
VERT 2007-1A A2
NORTH 2001-3A
COOKS 2007-9A A
GSCSF 2006-1A B
IXION 2006-9A 12
LCERT 2006-1A B
LEXN 2007-3A E
MILL REEF 05-1
SALISBURY 05-14
SALISBURY 06-1
SALISBURY 06-16
SKYBOX 05-1A C
AYRESOME CDO I PREF
DUKEF 2005-HG1A SUB
MILL REEF PREF
OPUS 2006-1A SUB
SHERW 2006-3A SUB
STILLWATER PREF
TABS 2005-2A SUB
GSTAR 05-5A IN
NEPTN 2004-1A SUB
MID 2001-1A
CUSIP
00388EAC5
00388EAD3
00389KAD8
00389UAC8
034050AD6
034050AE4
05473WAJ5
164553AD1
164554AC1
219655AH0
34957YAC1
34957YAD9
37638NAD3
3622MTAC4
40536UAB8
453433AF1
45377MAG6
52902WAF6
59541FAB4
640699AD6
64069WAD5
68571SAC8
68571SAD6
74438VAA6
74438VAB4
74732XAD9
805659AA7
82442VAB1
83436UAA1
85234AAE6
872159AB4
92534YAC1
92534YAE7
25153HAA2
2163P2AA0
3622X0AC5
46601WAJ4
50547QAC1
52902YAN5
600008AC0
795267AG8
79526EAK4
79526FAA3
83083GAE0
05473U209
264412AA5
27020EAA6
68402DAA0
82442TAA8
860721208
87337LAF1
362905AA9
64069QAA4
59541BAC1
Par Value
(12/31/2007) (a)
[*]
Par Value
(1/31/2008) (a)
[*]
Investor Value
(12/31) (a)
[*]
Investor Value
(1/31) (a)
[*]
LOGAN 05-1 C
COOKS 2007-18A A
THOM 2006-1A C
CENTS 2006-1A A3
CENTS 2006-1A B
CLSVF 2007-3A A3
EIGHT 2007-1A A3
MARSC 2007-1A A3
PTPLS 2007-1A A2
SQRD 2007-1A A2A
TRIC 2005-4A A3L
TRIC 2006-6A A2L
TWOLF 2007-1A A2
ZING 6A B1
Total C-2
42702MBA1
21638PAA8
874008AE5
156323AJ6
156323AL1
18272FAD1
28248EAG7
571656AC1
730594AC2
85223XAC3
89608VAD2
89609AAD7
88714PAF3
98885LAE7
[*]
[*]
Investor Value/Par Value
[*]
[*]
[*]
[*]
(a)
Par Values ($) and Investor Values ($) for illustrative purposes only
1
[ * ] Please refer to the footnote on page 1 of Schedule 1.
Schedule 1 1
Category
CUSIP
C-3
TABERNA 05-2A D
TABERNA PFD
TAF 1A B1
CMLTI 2006-WF1 M2
CMLTI 2006-WF2 M1
SHARP 05-HE4N N
RAMC 2007-2 M3
MLMI 2005-HE2 M2
FFML 04-FF10 M5
SVHE 2005-OPT3 M6
ACE 2004-HE3 B
SACO 2005-9 M4
GPMF 2005-HE4 M8
QUEST 2006-X1 M1
CONHE 1997-1 M2
SASC 2004-18H B2
SASC 2000-5 B5
SASC 2001-9 B4
OCMBS 99-R1 AP
RAST 2006-A7CB B1
SIMSBURY CLO
STANFIELD CLO
LONGHORN 2000-1
ANCHORAGE FIN SUB-TR IV
NORTH CASTLE CUST TR VIII
SUTTON CAPITAL TRUST III
TIERS 2001-6
US BANK PIPER JAFFREY TRUST
Total C-3
87330UAJ0
87330L200
89675YAC6
17307G4N5
17309BAF4
820018BV0
75970QAM2
59020US55
32027NMN8
83611MGZ5
004421JB0
785778MR9
39538WDQ8
748351AT0
21075WEG6
86359BF48
8635722E2
86358REH6
675748BR7
76113NAU7
829192BC6
85430NAA8
543044200
033302209
65831M208
86943W207
88652RAA4
USBPJT
Par Value
(12/31/2007) (a)
Par Value
(1/31/2008) (a)
Investor Value
(12/31) (a)
Investor Value
(1/31) (a)
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
Investor Value/Par Value
(a)
Par Values ($) and Investor Values ($) for illustrative purposes only
1
[ * ] Please refer to the footnote on page 1 of Schedule 1.
Schedule 2.22 1
Outstanding Letters of Credit
OutStanding
Bank Name
Bank
Reference
No.
[*]
10/8/2004
$
596,000
JPMorgan
[*]
4/30/2009
[*]
4/18/2006
$
690,000
JPMorgan
[*]
4/30/2008
[*]
10/8/2004
$
100,000
JPMorgan
[*]
4/30/2009
[*]
10/8/2004
$
840,000
JPMorgan
[*]
4/30/2009
[*]
8/25/2007
$
20,000
JPMorgan
[*]
4/30/2009
[*]
10/8/2004
$
610,000
JPMorgan
[*]
4/30/2009
[*]
9/11/2007
$
1,700,000
JPMorgan
[*]
9/30/2008
Beneficiary
1
Issue Date
Amount
Expiration
Date
The appearance of [ * ] denotes confidential information that has been omitted from this Exhibit and filed
separately with the SEC pursuant to a confidential treatment request under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
Schedule 5.8
Subsidiaries
Material
Domestic
Subsidiary
Jurisdiction
Owner
Yes
Delaware
MoneyGram
International, Inc.
100%
Yes
Delaware
MoneyGram Payment
Systems Worldwide,
Inc.
100%
Yes
Delaware
MoneyGram Payment
Systems, Inc.
100%
No
Delaware
MoneyGram
Investments, LLC
100%
No
Delaware
MoneyGram
Investments, LLC
100%
No
Delaware
MoneyGram
Investments, LLC
100%
No
Delaware
MoneyGram Payment
Systems, Inc.
100%
Yes
Minnesota
MoneyGram Payment
Systems, Inc.
100%
No
France
MoneyGram Payment
Systems, Inc.
100%
MoneyGram International Holdings
Limited
No
United
Kingdom
MoneyGram Payment
Systems, Inc.
100%
MoneyGram International Limited
No
United
Kingdom
MoneyGram
International Holdings
Limited
100%
MIL Overseas Limited
No
United
Kingdom
MoneyGram
International Limited
100%
Entity
MoneyGram Payment Systems
Worldwide, Inc.
MoneyGram Payment Systems, Inc.
MoneyGram Investments, LLC
Hematite Trust
Monazite Trust
Long Lake Partners, LLC
Ferrum Trust
FSMC, Inc.
MoneyGram France S.A.
3
Ownership
Interest
Entity
MoneyGram Overseas (Pty) Limited
Material
Domestic
Subsidiary
Jurisdiction
Owner
No
South Africa
MIL Overseas
Limited
100%
No
India
MIL Overseas
Limited
100%
Yes
Delaware
MoneyGram
Payment
Systems, Inc.
100%
No
Ontario
MoneyGram
Payment
Systems, Inc.
100%
No
Italy
MoneyGram
Payment
Systems, Inc.
100%
Yes
Delaware
MoneyGram
Payment
Systems, Inc.
100%
No
Puerto Rico
MoneyGram
Payment
Systems, Inc.
100%
No
Delaware
MoneyGram
Payment
Systems, Inc.
100%
No
Minnesota
MoneyGram
Payment
Systems, Inc.
100%
No
Nigeria
MIL Overseas
Limited
100%
MoneyGram India Private Ltd.
MoneyGram of New York, LLC
MoneyGram Payment Systems Canada,
Inc.
MoneyGram Payment Systems Italy
S.r.l.
PropertyBridge, Inc.
Travelers Express Company (P.R.), Inc.
Tsavorite Trust
GBP Holdings, Inc.
MIL Overseas Nigeria Limited
4
Ownership
Interest
Schedule 5.13
Ownership of Properties
None.
5
Schedule 6.11 1
Existing Indebtedness
Intercompany loan between [ * ] and [ * ] with an outstanding principal balance of [ * ] (no interest).
Intercompany loan between [ * ] and [ * ] with an outstanding principal balance of [ * ] and accrued interest of [ * ] as of February 29, 2008.
[ * ] LOC which supports Guarantee given by [ * ] in 2000 for the benefit of [ * ], required by [ * ] to do business in [ * ]. The amount is [ * ].
Capital commitment of [ * ] to [ * ] for the benefit of [ * ] in the amount of [ * ].
Liability for deferred purchase price pursuant to the Agreement and Plan of Merger dated September 12, 2007, by and among MPSI,
PropertyBridge, Inc., Project Oscar Acquisition, Inc. and Shareholders’ Representative. The maximum amount of the earn-out is $10 million
dollars.
Unfunded commitments to provide funds in four Limited Partnership Investments, not to exceed $1,500,000.
Until the occurrence of the Effective Date, that certain $150,000,000 364-day Credit Agreement dated as of November 15, 2007, as amended,
by and among Holdco, JPMorgan Chase Bank, N.A. as administrative agent and the lenders party thereto.
Guarantee given by MPSI on behalf of PropertyBridge for the benefit of First National Bank of Omaha dated October 1, 2007.
1
The appearance of [ * ] denotes confidential information that has been omitted from this Exhibit and filed
separately with the SEC pursuant to a confidential treatment request under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
Schedule 6.13
Investment Write-Downs
Description
CUSIP
SHARP 05-HE4N N
DUKEF 2005-HG1A SUB
DUKEF 2005-HG1A SUB
ACE 2004-HE3 B
TAF 1A B1
ANDY 2007-1A A2
ANDY 2007-1A B
CCRK 2006-1A A3
CCRK 2007-2A A2
CLSVF 2007-3A A3
CRONA 2007-1A B
GLCR 2006-4A C
GSCSF 2006-1A B
HLCDO 2006-1A A2
INDE4 4A C
IXION 2006-9A 12
LEXN 2006-2A D
LEXN 2007-3A E
NEPTN 2004-1A A3L
NEPTN 2007-5A A2L
ORCHD 03-1A C1
PTPLS 2007-1A A2
PYXIS 2007-1A B
SHERW 2006-3A A1J
THOM 2006-1A C
TWOLF 2007-1A A2
CENTS 2006-1A A3
CENTS 2006-1A B
COOKS 2007-9A A
EIGHT 2007-1A A3
FORTS 2006-2A A2
FORTS 2006-2A B
GSCSF 2007-1RA A1LC
INDE7 7A B
LCERT 2006-1A B
MARSC 2007-1A A3
SACO 2005-9 M4
SHERW 2006-3A SUB
SQRD 2007-1A A2A
STAK 2006-2A 4
SALISBURY 06-1
820018BV0
264412AA5
264412AA5
004421JB0
89675YAC6
034050AD6
034050AE4
164553AD1
164554AC1
18272FAD1
219655AH0
37638NAD3
3622X0AC5
40536UAB8
453433AF1
46601WAJ4
52902WAF6
52902YAN5
640699AD6
64069WAD5
68571SAD6
730594AC2
74732XAD9
82442VAB1
874008AE5
88714PAF3
156323AJ6
156323AL1
2163P2AA0
28248EAG7
34957YAC1
34957YAD9
3622MTAC4
45377MAG6
50547QAC1
571656AC1
785778MR9
82442TAA8
85223XAC3
85234AAE6
79526EAK4
7
Description
CUSIP
SALISBURY 06-16
ORCHD 03-1A B
AYRESOME CDO I PREF
NEPTN 2004-1A SUB
OPUS 2006-1A SUB
LONGHORN 2000-1
79526FAA3
68571SAC8
05473U209
64069QAA4
68402DAA0
543044200
8
Schedule 6.14(viii)
Existing Investments
None.
9
Schedule 6.14(xx)
Certain Acquisitions
Potential Super Agent Acquisitions
Acquiring
Entity
Target
Target’s
Jurisdiction
Assumption
of Debt
Consideration
MoneyGram Payment Systems, Inc.
Cambios Sol
S.A.
Spain
No
Cash
MoneyGram Payment Systems, Inc.
MoneyCard
World Express,
S.A.
Spain
No
Cash
MoneyGram Payment Systems, Inc.
Blue Dolphin
Belgium
No
Cash
MoneyGram Payment Systems, Inc.
Raphael’s Bank
France
No
Cash
10
Schedule 6.15
Existing Liens
MoneyGram Payment Systems Inc. (“MPSI”), as Seller/Debtor, and Citicorp North America, Inc. (“Citi”), as Purchaser/Secured Party, have
entered into a Receivables Purchase and Sale Agreement, dated September 8, 1997, whereby Purchaser/Secured Party will acquire from time to
time the receivables of the Seller/Debtor. MPSI is in receipt of a letter from Citi dated March 7, 2008 confirming the termination of the
Agreement and acknowledging that all outstanding amounts due under the Facility have been paid. By this letter, Citi authorized the filing of
termination statements for the UCC-1 financing statements that have been filed with respect to the facility. A termination statement is being
filed to terminate the UCC-1.
UCC Financing Statement No. 60066506 naming MPSI as Debtor and Hematite Trust c/o Branch Banking and Trust Company as Secured
Party was filed in Delaware on 01/06/06 covering certain collateral, in connection with the sale of certain accounts from MPSI, whereby MPSI
sold to Buyer all of its right, title and interest to all receivables and their proceeds.
UCC Financing Statement No. 60066514 naming MPSI as Debtor and Tsavorite Trust c/o US Bank National Association was filed in Delaware
on 01/06/06 covering certain collateral, in connection with the sale of certain accounts from MPSI, whereby MPSI sold to Buyer all of its right,
title and interest to all receivables and their proceeds. This Financing Statement was amended on 12/21/07 (Amendment No. 74917323)
UCC Financing Statement No. 60066548 naming MPSI as Debtor and Ferrum Trust c/o Allfirst Financial Center National Association as
Secured Party was filed in Delaware on 01/06/06 covering certain collateral, in connection with the sale of certain accounts from MPSI,
whereby MPSI sold to the Buyer all of its right, title and interest to all receivables and all of their proceeds.
UCC Financing Statement No. 60066621 naming MPSI as Debtor and Monazite Trust c/o The Huntington National Bank as Secured Party was
filed in Delaware on 01/06/06 covering certain collateral, in connection with the sale of certain accounts from MPSI, whereby MPSI sold to
Buyer all of its right, title and interest to all receivables and their proceeds.
11
Schedule 6.16
Existing Affiliate Transactions
None.
12
EXHIBIT A
AMENDED AND RESTATED REVOLVING CREDIT NOTE
March ____, 2008
MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “ Borrower ”), promises to pay to the order of _______ (the “
Lender ”) the aggregate unpaid principal amount of all Revolving Loans made or continued by the Lender to the Borrower (or assumed by the
Borrower) pursuant to Article II of the Agreement (as hereinafter defined), in immediately available funds at the office of JPMorgan Chase
Bank, N.A., in Chicago, Illinois (or as otherwise specified pursuant to the Agreement), as Administrative Agent, together with interest on the
unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued
and unpaid interest on the Revolving Loans in full on the Facility Termination Date and shall make such mandatory payments as are required to
be made under the terms of Article II of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual
practice, the date and amount of each Revolving Loan and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement
dated as of March ____, 2008 (which, as it may be amended, restated, amended and restated, supplemented, renewed, extended or modified and
in effect from time to time, is herein called the “ Agreement ”), by and among the Borrower, MoneyGram International, Inc., the lenders party
thereto, including the Lender, and JPMorgan Chase Bank, N.A., as Administrative Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including the amount hereof and the terms and conditions under which this Note
may be prepaid or its maturity date accelerated. This Note is secured and guaranteed pursuant to the Guaranty and the Collateral Documents, as
more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized
terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.
MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.
By:
Print Name:
Title:
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO REVOLVING CREDIT NOTE
OF
,
DATED MARCH
, 2008
Date
Principal
Amount of
Loan
Maturity
of Interest
Period
A-2
Principal
Amount
Paid
Unpaid
Balance
EXHIBIT B-1
TERM A NOTE
March ____, 2008
MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “ Borrower ”), promises to pay to the order of _______ (the “
Lender ”) the aggregate unpaid principal amount of all Term A Loans made or continued by the Lender to MoneyGram International, Inc. and
assumed by the Borrower pursuant to Article II of the Agreement (as hereinafter defined), in immediately available funds at the office of
JPMorgan Chase Bank, N.A., in Chicago, Illinois (or as otherwise specified pursuant to the Agreement), as Administrative Agent, together with
interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of
and accrued and unpaid interest on the Term A Loans in full on the Facility Termination Date and shall make such mandatory payments as are
required to be made under the terms of Article II of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual
practice, the date and amount of each Term A Loan and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement
dated as of March ______, 2008 (which, as it may be amended, restated, amended and restated, supplemented, renewed, extended or modified
and in effect from time to time, is herein called the “ Agreement ”), by and among the Borrower, MoneyGram International, Inc., the lenders
party thereto, including the Lender, and JPMorgan Chase Bank, N.A., as Administrative Agent, to which Agreement reference is hereby made
for a statement of the terms and conditions governing this Note, including the amount hereof and the terms and conditions under which this
Note may be prepaid or its maturity date accelerated. This Note is secured and guaranteed pursuant to the Guaranty and the Collateral
Documents, as more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof.
Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.
MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.
By:
Print Name:
Title:
SCHEDULE OF LOANS AND PAYMENTS OF
PRINCIPAL TO TERM A NOTE
OF
,
DATED MARCH
, 2008
Date
Principal
Amount of
Loan
Maturity
of Interest
Period
B-1 -2
Principal
Amount
Paid
Unpaid
Balance
EXHIBIT B-2
TERM B NOTE
March ____, 2008
MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “ Borrower ”), promises to pay to the order of
(the “
Lender ”) the aggregate unpaid principal amount of all Term B Loans made by the Lender to the Borrower pursuant to Article II of the
Agreement (as hereinafter defined), in immediately available funds at the office of JPMorgan Chase Bank, N.A., in Chicago, Illinois (or as
otherwise specified pursuant to the Agreement), as Administrative Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Term B Loans
in full on the Facility Termination Date and shall make such mandatory payments as are required to be made under the terms of Article II of the
Agreement.
The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual
practice, the date and amount of each Term B Loan and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement
dated as of March ___, 2008 (which, as it may be amended, restated, amended and restated, supplemented, renewed, extended or modified and
in effect from time to time, is herein called the “ Agreement ”), by and among the Borrower, MoneyGram International, Inc., the lenders party
thereto, including the Lender, and JPMorgan Chase Bank, N.A., as Administrative Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including the amount hereof and the terms and conditions under which this Note
may be prepaid or its maturity date accelerated. This Note is secured and guaranteed pursuant to the Guaranty and the Collateral Documents, as
more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized
terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.
MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.
By:
Print Name:
Title:
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO TERM B NOTE
OF
,
DATED MARCH
, 2008
Date
Principal
Amount of
Loan
Maturity
of Interest
Period
B-2 -2
Principal
Amount
Paid
Unpaid
Balance
EXHIBIT C
SWING LINE NOTE
March ___, 2008
MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “ Borrower ”), promises to pay to the order of ____ (the “
Lender ”) the aggregate unpaid principal amount of all Swing Line Loans made by the Lender to the Borrower pursuant to Article II of the
Agreement (as hereinafter defined), in immediately available funds at the office of JPMorgan Chase Bank, N.A., in Chicago, Illinois (or as
otherwise specified pursuant to the Agreement), as Administrative Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Borrower shall pay the principal of and accrued and unpaid interest on the Swing Line
Loans as set forth in the Agreement, with any then outstanding principal of or interest on the Swing Line Loans made by the Lender being
payable in full on the Facility Termination Date and shall make such mandatory payments as are required to be made under the terms of
Article II of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual
practice, the date and amount of each Swing Line Loan and the date and amount of each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement
dated as of March ___, 2008 (which, as it may be amended, restated, amended and restated, supplemented, renewed, extended or modified and
in effect from time to time, is herein called the “ Agreement ”) by and among the Borrower, MoneyGram International, Inc., the lenders party
thereto, including the Lender, and JPMorgan Chase Bank, N.A., as Administrative Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including the amount hereof and the terms and conditions under which this Note
may be prepaid or its maturity date accelerated. This Note is secured and guaranteed pursuant to the Guaranty and the Collateral Documents, as
more specifically described in the Agreement, and reference is made thereto for a statement of the terms and provisions thereof. Capitalized
terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.
MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.
By:
Print
Name:
Title:
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO SWING LINE NOTE
OF
,
DATED MARCH
, 2008
Date
Principal
Amount of
Loan
Maturity
of Interest
Period
C-2
Principal
Amount
Paid
Unpaid
Balance
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (the “Assignment and Assumption ”) is dated as of the Effective Date set forth below and is
entered into by and between [Insert name of Assignor] (the “ Assignor ”) and [Insert name of Assignee] (the “ Assignee ”). Capitalized terms
used but not defined herein shall have the meanings given to them in the Second Amended and Restated Credit Agreement identified below (as
amended, restated, amended and restated, supplemented, renewed, extended or otherwise modified from time to time, the “ Credit Agreement
”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in
full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably
purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as
of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity
as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount
and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swing line loans included in such facilities) and (ii) to the extent permitted to
be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any
Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered
pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by the Assignor.
1. Assignor:
2. Assignee:
[and is an Affiliate/Approved Fund of [ identify Lender ] 1 ]
3. Borrower:
MoneyGrarn Payment Systems Worldwide, Inc.
4. Administrative
Agent:
JPMorgan Chase Bank, N.A., as the Administrative Agent under the Credit Agreement
1
Select as applicable.
1
5. Credit Agreement:
The $600,000,000 Second Amended and Restated Credit Agreement dated as of March ___, 2008 among
MoneyGram Payment Systems Worldwide, Inc., MoneyGram International, Inc., the Lenders party thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent
D-2
6. Assigned Interest:
Aggregate Amount of
Commitment/Loans
for all Lenders
Facility Assigned 2
$
$
$
Amount of
Commitment/Loans
Assigned
$
$
$
Percentage of
Commitment/Loans
Assigned 3
%
%
%
Effective Date:
, 20
[TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL
BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or
more credit contacts to whom all syndicate-level information (which may contain material non-public information about Holdco and its
Affiliates, the Loan Parties and their related parties or their respective securities) will be made available and who may receive such information
in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.
By its acceptance of this Assignment, the Assignee hereby agrees to be bound by the terms and provisions of the Intercreditor Agreement and
to comply (and cause any Affiliate thereof which is the holder of any First Priority Obligation (as defined in the Intercreditor Agreement) to
comply) with such terms and provisions.
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
2
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned
under this Assignment (i.e. “Revolving Credit Commitment,” “Term A Loan”, “Term B Loan”).
3
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders.
D-3
By:
Title:
D-4
[Consented to and] 4 Accepted:
JPMorgan Chase Bank, N.A., as
Administrative Agent
By
Title:
[Consented to:] 5
[NAME OF RELEVANT PARTY]
By
Title:
4
To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
5
To be added only if the consent of the Borrower and/or the LC Issuer is required by the terms of the Credit
Agreement.
D-5
ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes
no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any
other Loan Documents, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any
collateral thereunder, (iii) the financial condition of Holdco, the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any of the Loan Documents or (iv) the performance or observance by Holdco, the Borrower, any of its Subsidiaries or Affiliates or
any other Person of any of their respective obligations under any of the Loan Documents.
1.2 Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute
and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to
acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.1 thereof,
as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Administrative Agent or any other Lender, and (v) attached to the Assignment and Assumption is
any documentation required to be delivered by it pursuant to Section 3.5 of the Credit Agreement, duly completed and executed by the
Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and
based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not
taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
1
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall
constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be
effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be
governed by, and construed in accordance with, the internal laws of the State of New York, but giving effect to Federal laws applicable to
national banks.
2
EXHIBIT E
COMPLIANCE CERTIFICATE
To:
The Lenders party to the
Second Amended and Restated Credit Agreement described below
This Compliance Certificate is furnished pursuant to Section 6.1(v) of that certain Second Amended and Restated Credit Agreement dated
as of March
, 2008 (as amended, restated, amended and restated, modified, renewed or extended from time to time, the “Agreement”)
among MoneyGram Payment Systems Worldwide, Inc., a Delaware corporation (the “Borrower”), the Lenders party thereto and JPMorgan
Chase Bank, N.A., as Administrative Agent for the Lenders. Unless otherwise defined herein, capitalized terms used in this Compliance
Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am a duly elected Financial Officer of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the
transactions and conditions of Holdco, the Borrower and its Subsidiaries during the accounting period covered by the attached financial
statements;
3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which
constitutes a Default or Unmatured Default as of the date of this Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations evidencing the Borrower’s compliance with the covenants set forth
in Sections 6.19.1 , 6.19.2 and 6.20 of the Agreement, all of which data and computations are to the best of my knowledge true, complete and
correct.
5. Attached hereto as Schedule II are the [quarterly] [monthly] financial statements required to be delivered pursuant to Section 6.1(ii) or
(iii) of the Agreement, which financial statements fairly present, in all material respects, the consolidated financial condition of the Borrower
and its consolidated Subsidiaries (or the Borrower individually, as applicable) (subject to normal year-end adjustments and the absence of
footnotes) and which have been prepared in reasonable detail.
Described below are the exceptions, if any, to paragraph 3, listing in detail the nature of the condition or event, the period during which it
has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:
1
The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this
day of
,
.
By:
Name:
Title:
E-2
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of [
,
] with
Provisions of Sections 6.19.1, 6.19.2 and 6.20 of
the Agreement
[attached]
E-3
SCHEDULE II TO COMPLIANCE CERTIFICATE
[Quarterly] [Monthly] Financial Statements
[attached]
E-4
EXHIBIT F
FORM OF INTERCREDITOR AGREEMENT
(See Attached)
1
EXECUTION VERSION
INTERCREDITOR AGREEMENT
Intercreditor Agreement (this “Agreement”) dated as of March 25, 2008 among JPMorgan Chase Bank, N.A., as Collateral Agent (in such
capacity, with its successors and assigns, the “First Priority Representative”) for the First Priority Secured Parties (as defined below),
Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent (in such capacities, with its successors and assigns, the “Second
Priority Representative”) for the Second Priority Secured Parties (as defined below), MoneyGram Payment Systems Worldwide, inc., a
Delaware corporation, as borrower (the “Borrower”), the Guarantors (as defined below) and each of the other Loan Parties (as defined below)
party hereto.
WHEREAS, the Borrower, MoneyGram International, Inc. (“Holdco”), the First Priority Representative and certain financial institutions
are parties to a $600,000,000 Second Amended and Restated Credit Agreement dated as of March 25, 2008 (as in effect on the date hereof, the
“Existing First Priority Agreement”), pursuant to which such financial institutions have agreed to make loans and extend other financial
accommodations to the Borrower; and
WHEREAS, the Borrower, the Guarantors and the Second Priority Representative are parties to an Indenture dated as of dated as of
March 25, 2008 (as in effect on the date hereof, the “Existing Second Priority Agreement”), pursuant to which certain financial institutions
are the holders of secured notes; and
WHEREAS, the Borrower and the other Loan Parties have agreed to (a) grant to the First Priority Representative security interests in the
Common Collateral as security for payment and performance of the First Priority Obligations, and (b) grant to the Second Priority
Representative junior security interests in the Common Collateral as security for payment and performance of the Second Priority Obligations;
and
NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein contained and other good and valuable
consideration, the existence and sufficiency of which is expressly recognized by all of the parties hereto, the parties agree as follows:
SECTION 1 . Definitions.
(a) The following terms, as used herein, have the following meanings:
“Affiliate” means, with respect to any Person, any Person that directly or indirectly controls, is controlled by, or is under common control
with, such Person. For purpose of this definition, “control” means the possession of either (a) the power to vote, or the Beneficial Ownership
of, 10% or more of the voting stock of such Person or (b) the power to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise; provided, that, in no event shall GSMP and their subsidiaries and other Persons engaged primarily in
the investment of mezzanine securities that directly or indirectly are controlled by, or under common control with, the same investment adviser
as GSMP (“GS Mezzanine Entities”) by virtue of their
affiliation with affiliates other than GS Mezzanine Entities be deemed to control Holdco or any of its Subsidiaries).
“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. §101 et seq.), as amended from time to time.
“Beneficial Ownership” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act.
“Business Day” means any calendar day other than a Legal Holiday.
“Common Collateral” means all assets that are both First Priority Collateral and Second Priority Collateral.
“Enforcement Action” means, with respect to the First Priority Obligations or the Second Priority Obligations, the exercise of any rights
and remedies with respect to any Common Collateral securing such obligations or the commencement or prosecution of enforcement of any of
the rights and remedies under, as applicable, the First Priority Documents or the Second Priority Documents, or applicable law, including
without limitation the exercise of any rights of set off or recoupment and any rights of a judgment creditor with respect to any Common
Collateral, and the exercise of any rights or remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction
or under the Bankruptcy Code.
“Existing First Priority Agreement” has the meaning set forth in the first WHEREAS clause of this Agreement.
“Existing Second Priority Agreement” has the meaning set forth in the second WHEREAS clause of this Agreement.
“First Priority Agreement” means (i) the Existing First Priority Agreement, as amended, supplemented, restated, amended and restated or
otherwise modified from time to time, and (ii) any other credit agreement, loan agreement, note agreement, promissory note, indenture or other
agreement or instrument evidencing or governing the terms of any indebtedness or other financial accommodation that has been incurred to
extend, replace, refinance, refund or restate in whole or in part the indebtedness and other obligations outstanding under the Existing First
Priority Agreement or any other agreement or instrument referred to in this clause (ii), including any DIP Financing agreement, unless such
agreement or instrument expressly provides that it is not intended to be and is not a First Priority Agreement hereunder. Any reference to the
First Priority Agreement hereunder shall be deemed a reference to any First Priority Agreement then extant.
“First Priority Collateral” means all assets, whether now owned or hereafter acquired by the Borrower or any other Loan Party, in which
a Lien is granted or purported to be granted to any First Priority Secured Party as security for any First Priority Obligation.
2
“First Priority Documents” means the First Priority Agreement or any other document executed in connection therewith granting any
interest in or rights to the First Priority Representative or the First Priority Lenders in and to the First Priority Collateral.
“First Priority Lenders” means the “Lenders” as defined in the First Priority Agreement, or any Persons that are designated under the
First Priority Agreement as the “First Priority Lenders” for purposes of this Agreement.
“First Priority Lien” means any Lien created by the First Priority Security Documents.
“First Priority Obligations” means (i) all principal of and interest (including without limitation any Post-Petition Interest) and premium
(if any) on all loans made pursuant to the First Priority Agreement, (ii) all reimbursement obligations (if any) and interest thereon (including
without limitation any Post-Petition Interest) with respect to any letter of credit or similar instruments issued pursuant to the First Priority
Agreement, (iii) all Hedging Obligations of any Loan Party and (iv) all reasonable and customary fees, expenses and other amounts payable
from time to time pursuant to the First Priority Documents as determined by the First Priority Representative in its discretion taking into
account market and economic conditions the time such fees, expenses and other amounts are incurred, in each case whether or not allowed or
allowable in an Insolvency Proceeding; provided that the First Priority Obligations shall not be an amount in excess of the Maximum First
Priority Obligations Amount. To the extent any payment with respect to any First Priority Obligation (whether by or on behalf of any Loan
Party, as proceeds of security, enforcement of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any
respect, set aside or required to be paid to a debtor in possession, any Second Priority Secured Party, receiver or similar Person, then the
obligation or part thereof originally intended to be satisfied shall, for the purposes of this Agreement and the rights and obligations of the First
Priority Secured Parties and the Second Priority Secured Parties, be deemed to be reinstated and outstanding as if such payment had not
occurred.
“First Priority Obligations Payment Date” means the first date on which (i) the First Priority Obligations (other than those that
constitute Unasserted Contingent Obligations) have been indefeasibly paid in cash in full (or cash collateralized or defeased in accordance with
the terms of the First Priority Documents), (ii) all commitments to extend credit under the First Priority Documents have been terminated and
(iii) there are no outstanding letters of credit or similar instruments issued under the First Priority Documents (other than such as have been
cash collateralized or defeased in accordance with the terms of the First Priority Documents). Upon the written request by the Second Priority
Representative and/or the Borrower, the First Priority Representative shall promptly deliver a written notice to the Second Priority
Representative stating that (to the extent such events have occurred) the events described in clauses (i), (ii) and (iii) have occurred to the
satisfaction of the First Priority Secured Parties.
“First Priority Representative” has the meaning set forth in the introductory paragraph hereof.
3
“First Priority Required Lenders” means the “Required Lenders” as defined in the First Priority Agreement.
“First Priority Secured Parties” means the holders of the First Priority Obligations.
“First Priority Security Documents” means the “Collateral Documents” as defined in the First Priority Agreement, and any other
documents that are designated under the First Priority Agreement as “First Priority Security Documents” for purposes of this Agreement.
“GSMP” means GSMP V Onshore US, Ltd., GSMP V Offshore US, Ltd. and GSMP V Institutional US, Ltd.
“Guarantors” has the meaning set forth in the First Priority Agreement.
“Hedging Obligations” means, with respect to any Loan Party, any obligations of such Loan Party owed to any First Priority Lender (or
any Affiliate thereof or any Person who was a First Priority Lender or an Affiliate thereof at the time of the applicable transaction) in respect of
any Rate Management Transaction (as defined in the Existing First Priority Agreement), including without limitation Rate Management
Transactions existing prior to the date hereof.
“Holdco” has the meaning set forth in the first WHEREAS clause of this Agreement.
“Insolvency Proceeding” means any proceeding in respect of bankruptcy, liquidation, reorganization, insolvency, winding up,
receivership, dissolution or assignment for the benefit of creditors, in each of the foregoing events whether under the Bankruptcy Code or any
similar federal, state or foreign bankruptcy, insolvency, reorganization, receivership or similar law.
“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the State of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening
period.
“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, encumbrance or preference, priority or other
security agreement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease (as defined in the First Priority Agreement) or other title retention agreement). For the purposes hereof, none of the following
shall be deemed to be Liens: (i) setoff rights or statutory liens arising in the ordinary course of business, (ii) restrictive contractual obligations
with respect to assets comprising the Payment Instruments Funding Amounts or Payment Service Obligations (as defined in the First Priority
Agreement), provided that such contractual obligations are no more
4
restrictive in nature than those in effect on the Effective Date, (iii) Liens purported to be created under Repurchase Agreements (as defined in
the First Priority Agreement), provided that such Liens do not extend to any assets other than those that are the subject of such Repurchase
Agreements, (iv) ordinary course of business contractual obligations with clearing banks relative to clearing accounts or (v) operating leases.
“Loan Party” means the Borrower, each of the Guarantors and any other Person (other than the First Priority Representative and the
Second Priority Representative) that has executed or may from time to time execute a First Priority Security Document and a Second Priority
Security Document.
“Maximum First Priority Obligations Amount” means the sum of (a) $700 million, plus (b)(i) all Hedging Obligations of any Loan
Party and (ii) all interest, fees, expenses and other amounts payable from time to time pursuant to the First Priority Documents, in each case
whether or not allowed or allowable in an Insolvency Proceeding.
“Person” means any person, individual, sole proprietorship, partnership, joint venture, corporation, limited liability company,
unincorporated organization, association, institution, entity, party, including any government and any political subdivision, agency or
instrumentality thereof.
“Post-Petition Interest” means any interest or entitlement to fees or expenses that accrues after the commencement of any Insolvency
Proceeding, whether or not allowed or allowable in any such Insolvency Proceeding.
“Required Holder” has the meaning set forth in the Existing Second Priority Agreement.
“Second Priority Agreement” means (i) the Existing Second Priority Agreement, as amended, supplemented, restated, amended and
restated or otherwise modified from time to time in accordance with Section 6(c) , and (ii) any other credit agreement, loan agreement, note
agreement, promissory note, indenture, or other agreement or instrument evidencing or governing the terms of any indebtedness or other
financial accommodation that has been incurred to extend, replace, refinance or refund in whole or in part the indebtedness and other
obligations outstanding under the Existing Second Priority Agreement or other agreement or instrument referred to in this clause (ii) in
accordance with Section 6(c) , unless such agreement or instrument expressly provides that it is not intended to be and is not a Second Priority
Agreement hereunder. Any reference to the Second Priority Agreement hereunder shall be deemed a reference to any Second Priority
Agreement then extant.
“Second Priority Collateral” means all assets, whether now owned or hereafter acquired by the Borrower or any other Loan Party, in
which a Lien is granted or purported to be granted to any Second Priority Secured Party as security for any Second Priority Obligation.
5
“Second Priority Documents” means each Second Priority Agreement and each Second Priority Security Document.
“Second Priority Enforcement Date” means the date which is 180 days after the First Priority Representative’s receipt of written notice
from the Second Priority Representative of the occurrence of an Event of Default (under and as defined in the Second Priority Agreement);
provided that the Second Priority Enforcement Date shall be stayed and deemed not to have occurred for so long as (i) the First Priority
Representative has commenced and is diligently pursuing an Enforcement Action against, or diligently attempting to vacate any stay of
enforcement of their Liens on, all or a material portion of the Common Collateral, (ii) the Event of Default referenced in the written notice from
the Second Priority Representative is waived or (iii) an Insolvency Proceeding is commenced by or against the Borrower; provided that the
foregoing clause (iii) shall not prohibit the filing of an involuntary proceeding under the Bankruptcy Code by a Second Priority Secured Party
to the extent otherwise permitted pursuant to Sections 3.1 and 3.7 .
“Second Priority Holders” means the “Holders” as defined in the Second Priority Agreement, or any Persons that are designated under
the Second Priority Agreement as the “Second Priority Holders” for purposes of this Agreement.
“Second Priority Lien” means any Lien created by the Second Priority Security Documents.
“Second Priority Obligations” means (i) all principal of and interest (including without limitation any Post-Petition Interest) and
premium (if any) on all indebtedness under the Second Priority Agreement, and (ii) all fees, expenses and other amounts payable from time to
time pursuant to the Second Priority Documents, in each case whether or not allowed or allowable in an Insolvency Proceeding. To the extent
any payment with respect to any Second Priority Obligation (whether by or on behalf of any Loan Party, as proceeds of security, enforcement
of any right of setoff or otherwise) is declared to be a fraudulent conveyance or a preference in any respect, set aside or required to be paid to a
debtor in possession, any First Priority Secured Party, receiver or similar Person, then the obligation or part thereof originally intended to be
satisfied shall, for the purposes of this Agreement and the rights and obligations of the First Priority Secured Parties and the Second Priority
Secured Parties, be deemed to be reinstated and outstanding as if such payment had not occurred.
“Second Priority Representative” has the meaning set forth in the introductory paragraph hereof.
“Second Priority Secured Party” means the Second Priority Representative and any Second Priority Holders.
“Second Priority Security Documents” means the “Security Documents” as defined in the Second Priority Agreement and any
documents that are designated under the Second Priority Agreement as “Second Priority Security Documents” for purposes of this Agreement.
6
“Secured Parties” means the First Priority Secured Parties and the Second Priority Secured Parties.
“Unasserted Contingent Obligations” shall mean, at any time, First Priority Obligations for taxes, costs, indemnifications,
reimbursements, damages and other liabilities (excluding (i) the principal of, and interest and premium (if any) on, and fees and expenses
relating to, any First Priority Obligation and (ii) contingent reimbursement obligations in respect of amounts that may be drawn under
outstanding letters of credit) in respect of which no assertion of liability (whether oral or written) and no claim or demand for payment
(whether oral or written) has been made (and, in the case of First Priority Obligations for indemnification, no notice for indemnification has
been issued by the indemnitee) at such time.
“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York.
(b) Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it; and shall be construed, in accordance with GAAP;
(iii) “or” is not exclusive;
(iv) words in the singular include the plural, and in the plural include the singular;
(v) “will” shall be interpreted to express a command;
(vi) the word “including” means “including without limitation”;
(vii) any reference to any Person shall be construed to include such Person’s successors and permitted assigns; and
(viii) for purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and
“until” each mean “to but excluding.”
SECTION 2. Lien Priorities.
2.1 Subordination of Liens . (a) Any and all Liens now existing or hereafter created or arising in favor of any Second Priority Secured Party
securing the Second Priority Obligations, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise are
expressly junior in priority, operation and effect to any and all Liens now existing or hereafter created or arising in favor of the First Priority
7
Secured Parties securing the First Priority Obligations, notwithstanding (i) anything to the contrary contained in any agreement or filing to
which any Second Priority Secured Party may now or hereafter be a party, and regardless of the time, order or method of grant, attachment,
recording or perfection of any financing statements or other security interests, assignments, pledges, deeds, mortgages and other liens, charges
or encumbrances or any defect or deficiency or alleged defect or deficiency in any of the foregoing, (ii) any provision of the Uniform
Commercial Code or any applicable law or any First Priority Document or Second Priority Document or any other circumstance whatsoever
and (iii) the fact that any such Liens in favor of any First Priority Secured Party securing any of the First Priority Obligations are
(x) subordinated to any Lien securing any obligation of any Loan Party other than the Second Priority Obligations or (y) otherwise
subordinated, voided, avoided, invalidated or lapsed.
(b) No First Priority Secured Party or Second Priority Secured Party shall object to or contest, or support any other Person in contesting or
objecting to, in any proceeding (including without limitation, any Insolvency Proceeding), the validity, extent, perfection, priority or
enforceability of any security interest in the Common Collateral granted to the other. Notwithstanding any failure by any First Priority Secured
Party or Second Priority Secured Party to perfect its security interests in the Common Collateral or any avoidance, invalidation or
subordination by any third party or court of competent jurisdiction of the security interests in the Common Collateral granted to the First
Priority Secured Parties or the Second Priority Secured Parties, the priority and rights as between the First Priority Secured Parties and the
Second Priority Secured Parties with respect to the Common Collateral shall be as set forth herein.
2.2 No Payment Subordination . The subordination of all Liens on the Common Collateral securing the Second Priority Obligations to all
Liens on the Common Collateral securing any First Priority Obligations is with respect to only the priority of the Liens held by or on behalf of
the First Priority Secured Parties and shall not constitute a subordination of the Second Priority Obligations to the First Priority Obligations.
Except as provided in Sections 2.1 , 4.1 and 5.5 , nothing contained in this Agreement is intended to subordinate any debt claim by a Second
Priority Secured Party to a debt claim by a First Priority Secured Party. All debt claims of the First Priority Secured Parties and Second Priority
Secured Parties are intended to be pari passu.
2.3 Nature of First Priority Obligations . The Second Priority Representative on behalf of itself and the other Second Priority Secured Parties
acknowledges that a portion of the First Priority Obligations are revolving in nature and that the amount thereof that may be outstanding at any
time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the First Priority Obligations may be
modified, extended or amended from time to time, and that the aggregate amount of the First Priority Obligations may be increased, replaced or
refinanced, in each event, without notice to or consent by the Second Priority Secured Parties and without affecting the provisions hereof. The
lien priorities provided in Section 2.1 shall not be altered or otherwise affected by any such amendment, modification, supplement, extension,
repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of
8
either the First Priority Obligations or the Second Priority Obligations, or any portion thereof.
2.4 Agreements Regarding Actions to Perfect Liens . (a) The Second Priority Representative on behalf of itself and the other Second Priority
Secured Parties agrees that UCC-1 financing statements, patent, trademark or copyright filings or other filings or recordings filed or recorded
by or on behalf of the Second Priority Representative shall be in form reasonably satisfactory to the First Priority Representative.
(b) The Second Priority Representative agrees on behalf of itself and the other Second Priority Secured Parties that all mortgages, deeds of
trust, deeds and similar instruments (collectively, “ mortgages ”) now or thereafter filed, or acquired by operation of law or by assignment
against real property in favor of or for the benefit of the Second Priority Representative shall be in form reasonably satisfactory to the First
Priority Representative and shall contain the following notation: “The lien created by this mortgage on the property described herein is junior
and subordinate to the lien on such property created by any mortgage, deed of trust or similar instrument now or hereafter granted to JPMorgan
Chase Bank, N. A., and its successors and assigns, in such property, in accordance with the provisions of the Intercreditor Agreement dated as
of March 25, 2008 among JPMorgan Chase Bank, N.A., as Collateral Agent; Deutsche Bank Trust Company Americas, as Trustee and
Collateral Agent; and MoneyGram Payment Systems Worldwide, Inc., as amended from time to time.”
(c) The First Priority Representative hereby acknowledges that, to the extent that it holds, or a third party holds on its behalf, physical
possession of or “control” (as defined in the Uniform Commercial Code) over Common Collateral pursuant to the First Priority Documents,
such possession or control is also for the benefit of the Second Priority Representative and the other Second Priority Secured Parties solely to
the extent required to perfect their security interest in such Common Collateral. Nothing in the preceding sentence shall be construed to impose
any duty on the First Priority Representative (or any third party acting on its behalf) with respect to such Common Collateral or provide the
Second Priority Representative or any other Second Priority Secured Party with any rights with respect to such Common Collateral beyond
those specified in this Agreement and the Second Priority Security Documents, provided that subsequent to the occurrence of the First Priority
Obligations Payment Date, the First Priority Representative shall (x) deliver to the Second Priority Representative, at the Borrower’s sole
reasonable cost and expense, the Common Collateral in its possession or control together with any necessary endorsements to the extent
required by the Second Priority Documents or (y) direct and deliver such Common Collateral as a court of competent jurisdiction otherwise
directs, and provided further that the provisions of this Agreement are intended solely to govern the respective Lien priorities as between the
First Priority Secured Parties and the Second Priority Secured Parties and shall not impose on the First Priority Secured Parties any obligations
in respect of the disposition of any Common Collateral (or any proceeds thereof) that would conflict with prior perfected Liens or any claims
thereon in favor of any other Person that is not a Secured Party.
9
2.5 Similar Liens and Agreements . The parties hereto agree that it is their intention that the First Priority Collateral and the Second Priority
Collateral shall be identical. In furtherance of the foregoing, the parties hereto agree, subject to the other provisions of this Agreement:
(a) upon request by the First Priority Representative or the Second Priority Representative, to cooperate in good faith (and to direct their
counsel to cooperate in good faith) from time to time in order to determine the specific items included in the First Priority Collateral and the
Second Priority Collateral and the steps taken to perfect their respective Liens and the identity of the respective parties obligated under the First
Priority Documents and the Second Priority Documents; and
(b) that the documents and agreements creating or evidencing the First Priority Collateral and the Second Priority Collateral and guarantees
for the First Priority Obligations and the Second Priority Obligations shall be in all material respects the same forms of documents other than
(i) with respect to the first priority and the second priority nature of the security interests created thereunder and (ii) as provided in Section 2.6 .
(c) So long as the First Priority Obligations Payment Date has not occurred, if any Second Priority Secured Party shall acquire or hold any
new Lien on any assets of any Loan Party securing any Second Priority Obligation which assets are not also subject to the first-priority Lien of
the First Priority Representative under the First Priority Documents, then the Second Priority Representative, will, without the need for any
further consent of any other Second Priority Secured Party, notwithstanding anything to the contrary in any other Second Priority Document,
hold such Lien for the benefit of the First Lien Representative. To the extent that the foregoing provisions are not complied with for any reason,
without limiting any other rights and remedies available to the First Priority Secured Parties, the Second Priority Representative and the other
Second Priority Secured Parties agree that any amounts received by or distributed to any of them pursuant to or as a result of Liens granted in
contravention of this Section 2.5(c) shall be subject to Section 4.1.
2.6 Bailee for Perfection . (a) The First Priority Representative agrees to hold that part of the Common Collateral that is in its possession or
control (or in the possession or control of its agents or bailees) to the extent that possession or control thereof is taken to perfect a Lien thereon
under the Uniform Commercial Code or other applicable law as collateral agent for the First Priority Secured Parties and as bailee for the
Second Priority Representative (such bailment being intended, among other things, to satisfy the requirements of Sections 8-106(d)(3),
8-301(a)(2) and 9-313(c) of the Uniform Commercial Code) and any assignee solely for the purpose of perfecting the security interest granted
under the First Priority Documents and the Second Priority Documents, respectively, subject to the terms and conditions of this Section 2.6 .
Solely with respect to any deposit accounts under the control (within the meaning of Section 9-104 of the UCC) of the First Priority
Representative, the First Priority Representative agrees to also hold control over such deposit accounts as agent for the Second Priority
Representative.
(b) The First Priority Representative shall have no obligation whatsoever to the First Priority Secured Parties, the Second Priority
Representative or any Second Priority Secured Party to ensure that the Common Collateral is genuine or owned by any
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of the Grantors or to preserve rights or benefits of any Person except as expressly set forth in this Section 2.6 . The duties or responsibilities of
the First Priority Representative under this Section 2.6 shall be limited solely to holding the Common Collateral as agent and bailee in
accordance with this Section 2.6 and delivering the Common Collateral upon a discharge of First Priority Obligations as provided in paragraph
(d) below.
(c) The First Priority Representative acting pursuant to this Section 2.6 shall not have by reason of the First Priority Security Documents, the
Second Priority Security Documents, this Agreement or any other document a fiduciary relationship in respect of the First Priority Secured
Parties, the Second Priority Representative or any Second Priority Secured Party.
(d) Upon the discharge of First Priority Obligations under the First Priority Documents to which the First Priority Representative is a party,
the First Priority Representative shall promptly deliver, at Borrower’s sole reasonable cost and expense, the remaining Common Collateral (if
any) in its possession or control together with any necessary endorsements, first, to the Second Priority Representative to the extent Second
Priority Obligations remain outstanding, and second, to the Borrower to the extent no First Priority Obligations or Second Priority Obligations
remain outstanding (in each case, so as to allow such Person to obtain control of such Common Collateral). Upon such discharge of First
Priority Obligations, the First Priority Representative further agrees to take all other action reasonably requested by the Second Priority
Representative in connection with the Second Priority Representative obtaining a first priority interest in the Common Collateral or as a court
of competent jurisdiction may otherwise direct.
SECTION 3. Enforcement Rights.
3.1 Exclusive Enforcement . (a) Until the First Priority Obligations Payment Date has occurred, whether or not an Insolvency Proceeding
has been commenced by or against any Loan Party, the First Priority Secured Parties shall have the exclusive right to take and continue any
Enforcement Action with respect to the Common Collateral, without any consultation with or consent of any Second Priority Secured Party.
Upon the occurrence and during the continuance of a default or an event of default under the First Priority Documents, the First Priority
Representative and the other First Priority Secured Parties may take and continue any Enforcement Action with respect to the First Priority
Obligations and the Common Collateral in such order and manner as they may determine in their sole discretion subject only to any express
limitation on taking such Enforcement Action contained in the First Priority Documents. Except as specifically provided in this Section 3.1 or
3.7 below, notwithstanding any rights or remedies available to a Second Priority Secured Party under any of the Second Priority Security
Documents, applicable law or otherwise, no Second Priority Secured Party shall, directly or indirectly, take any Enforcement Action; provided
that , upon the occurrence and continuance of the Second Priority Enforcement Date the Second Priority Secured Parties may take any
Enforcement Action subject to the other terms of this Agreement;
(b) The First Priority Representative shall respond to all reasonable written requests from the Second Priority Representative to provide
written statements as to the
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status of any Enforcement Action taken by the First Priority Representative. The Second Priority Representative shall respond to all reasonable
written requests from the First Priority Representative to provide written statements as to the status of any Enforcement Action taken by the
Second Priority Representative. Notwithstanding the occurrence and continuance of the Second Priority Enforcement Date, in no event shall
any Second Priority Secured Parties commence or continue any Enforcement Action if an Insolvency Proceeding has been commenced by or
against any Loan Party and is continuing; provided that the foregoing shall not prohibit the filing of an involuntary proceeding under the
Bankruptcy Code by a Second Priority Secured Party to the extent otherwise permitted pursuant to Sections 3.1 and 3.7 ;
(c) The Second Priority Representative hereby acknowledges and agrees that the rights and remedies of the First Priority Representative and
First Priority Secured Parties under the First Priority Documents are independent rights and remedies and that no covenant, agreement or
restriction contained in the Second Priority Security Documents or any other Second Priority Document (other than this Agreement) shall be
deemed to restrict the manner in which the First Priority Representative and any of the First Priority Secured Parties exercise (or elect not to
exercise) such rights and remedies, it being understood that notwithstanding the foregoing, the Second Priority Representative and the Second
Priority Secured Parties shall, except as expressly provided in this Agreement, have the right to enforce their rights and remedies under the
Second Priority Documents, and the First Priority Representative hereby acknowledges and agrees that the rights and remedies of the Second
Priority Representative and the Second Priority Secured Parties under the Second Priority Documents are independent rights and remedies and
that no covenant, agreement or restriction contained in the First Priority Security Documents or the other First Priority Documents (other than
this Agreement) shall be deemed to restrict the manner in which the Second Priority Representative and any of the Second Priority Secured
Parties exercise (or elect not to exercise) such rights and remedies, it is understood that notwithstanding the foregoing, the First Priority
Representative and the First Priority Secured Parties shall have the right to enforce their rights and remedies under the First Priority
Documents.
(d) Nothing in this Agreement shall be construed to in any way limit or impair the right of any First Priority Secured Party or any Second
Priority Secured Party to join (but not control) any Enforcement Action initiated by any other person against the Common Collateral, so long as
it does not delay or interfere in any material respect with the exercise by such other person of its rights as provided in this Agreement. The
foregoing shall not be construed as limiting or otherwise impairing the right of the First Priority Representative to control any Enforcement
Action.
3.2 Standstill and Waivers . The Second Priority Representative, on behalf of itself and the other Second Priority Secured Parties, agrees
that, until the First Priority Obligations Payment Date has occurred, subject to the proviso set forth in Section 5.1 :
(i) they will not take or cause to be taken any action, the purpose or effect of which is to make any Lien in respect of any Second Priority
Obligation pari passu with or senior to, or to give any Second Priority Secured Party any
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preference or priority relative to, the Liens with respect to the First Priority Obligations or the First Priority Secured Parties with respect to
any of the Common Collateral;
(ii) subject to Section 4.2 , they will not oppose, object to, interfere with, hinder or delay, in any manner, whether by judicial proceedings
(including without limitation the filing of an Insolvency Proceeding) or otherwise, any foreclosure, sale, lease, exchange, transfer or other
disposition of the Common Collateral by the First Priority Representative or any other First Priority Secured Party or any other Enforcement
Action taken by or on behalf of the First Priority Representative or any other First Priority Secured Party;
(iii) they have no right to (x) direct either the First Priority Representative or any other First Priority Secured Party to exercise any right,
remedy or power with respect to the Common Collateral or pursuant to the First Priority Documents or (y) consent or object to the exercise
by the First Priority Representative or any other First Priority Secured Party of any right, remedy or power with respect to the Common
Collateral or pursuant to the First Priority Documents or to the timing or manner in which any such right is exercised or not exercised (or, to
the extent they may have any such right described in this clause (iii), whether as a junior lien creditor or otherwise, they hereby irrevocably
waive such right);
(iv) they will not institute any suit or other proceeding or assert in any suit, Insolvency Proceeding or other proceeding any claim against
either First Priority Representative or any other First Priority Secured Party seeking damages from or other relief by way of specific
performance, instructions or otherwise, with respect to, and neither the First Priority Representative nor any other First Priority Secured
Party shall be liable for, any action taken or omitted to be taken by the First Priority Representative or any other First Priority Secured Party
with respect to the Common Collateral or pursuant to the First Priority Documents;
(v) they will not make any judicial or nonjudicial claim or demand or commence any judicial or nonjudicial proceedings against any
Loan Party or any of its subsidiaries or affiliates under or with respect to any Second Priority Security Document seeking payment or
damages from or other relief by way of specific performance, instructions or otherwise under or with respect to any Second Priority Security
Document except for Enforcement Actions permitted hereby (other than filing a proof of claim) or exercise any right, remedy or power
under or with respect to, or otherwise take any action to enforce, other than filing a proof of claim, any Second Priority Security Document;
(vi) they will not commence judicial or nonjudicial foreclosure proceedings with respect to, seek to have a trustee, receiver, liquidator or
similar official appointed for or over, attempt any action to take possession of any Common Collateral, exercise any right, remedy or power
with respect to, or
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otherwise take any action to enforce their interest in or realize upon, the Common Collateral or pursuant to the Second Priority Security
Documents; and
(vii) they will not seek, and hereby waive any right, to have the Common Collateral or any part thereof marshaled upon any foreclosure
or other disposition of the Common Collateral.
3.3 Judgment Creditors . In the event that any Second Priority Secured Party becomes a judgment lien creditor in respect of Common
Collateral as a result of its enforcement of its rights as an unsecured creditor, such judgment lien shall be subject to the terms of this Agreement
for all purposes (including in relation to the First Priority Liens and the First Priority Obligations) to the same extent as all other Liens securing
the Second Priority Obligations (created pursuant to the Second Priority Security Documents) subject to this Agreement.
3.4 Cooperation . The Second Priority Representative, on behalf of itself and the other Second Priority Secured Parties, agrees that each of
them shall take such actions as the First Priority Representative shall reasonably request in writing in connection with the exercise by the First
Priority Secured Parties of their rights set forth herein.
3.5 No Additional Rights For the Borrower Hereunder . Except as provided in Section 3.6 , if any First Priority Secured Party or Second
Priority Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, the Borrower shall not be entitled to use
such violation as a defense to any action by any First Priority Secured Party or Second Priority Secured Party, nor to assert such violation as a
counterclaim or basis for set off or recoupment against any First Priority Secured Party or Second Priority Secured Party.
3.6 Actions Upon Breach . (a) If any Second Priority Secured Party, contrary to this Agreement, commences or participates in any action or
proceeding against the Borrower or the Common Collateral, the Borrower, only with the prior written consent of the First Priority Secured
Representative, may interpose as a defense or dilatory plea the making of this Agreement, and any First Priority Secured Party may intervene
and interpose such defense or plea in its or their name or in the name of the Borrower.
(b) Should any Second Priority Secured Party, contrary to this Agreement, in any way take, attempt to or threaten to take any action with
respect to the Common Collateral (including, without limitation, any attempt to realize upon or enforce any remedy with respect to this
Agreement), or fail to take any action required by this Agreement, any First Priority Secured Party (in its or their own name or in the name of
the Borrower) or the Borrower, only with the prior written consent of the First Priority Representative, may obtain relief against such Second
Priority Secured Party by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by the
Second Priority Representative on behalf of each Second Priority Secured Party that (i) the First Priority Secured Parties’ damages from its
actions may at that time be difficult to ascertain and may be irreparable, and (ii) each Second Priority Secured Party waives any defense that the
Borrower and/or the First Priority
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Secured Parties cannot demonstrate damage and/or be made whole by the awarding of damages.
3.7 Permitted Actions and other Agreements . The Second Priority Representative (acting at the written direction of the majority of Second
Priority Holders) and/or the Second Priority Secured Parties:
(a) may, but shall not be obligated to, take any action as they deem necessary (subject to Section 2.1) , including to file any proof of claim or
other filing or to make any argument or motion, in order to create, perfect or preserve their Lien on all or any portion of the Common
Collateral;
(b) shall be entitled to file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or
other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Second Priority Secured Parties,
including without limitation any claims secured by the Common Collateral, if any, in each case not in contravention of the express provisions
of this Agreement;
(c) may purchase any Common Collateral at any private or judicial foreclosure sale of such Common Collateral initiated by any Secured
Party or at any Section 363 hearing (i) by an all cash bid or (ii) by a credit bid pursuant to Section 363(k) of the Bankruptcy Code if, in addition
to such credit bid, such bid includes cash consideration payable to the First Priority Parties equal to the First Priority Obligations;
(d) shall be entitled to file a claim, proof of claim or statement of interest with respect to the Second Priority Obligations in any Insolvency
Proceeding; and
(e) except as provided in Sections 3.1 , 3.2 , 5.1 , 5.2 , 5.5 , 5.6 and 5.9 , may exercise rights and remedies as unsecured creditors against the
Borrower and any other Loan Party, including without limitation filing any pleadings, objection, motions or agreement which assert right or
interests of unsecured creditors, excluding, prior to the Second Priority Enforcement Date, the right to file an involuntary proceeding under the
Bankruptcy Code, and including the right to file an involuntary proceeding under the Bankruptcy Code after the occurrence of the Second
Priority Enforcement Date (unless the Second Priority Enforcement Date is deemed not to have occurred pursuant to the definition thereof).
3.8 Option to Purchase .
(a) The First Priority Representative agrees that it will use commercially reasonable efforts to give the Second Priority Representative
written notice (the “Enforcement Notice”) at least two Business Days prior to commencing any Enforcement Action with respect to a material
portion of the Common Collateral following the acceleration of the First Priority Obligations. Any Second Priority Secured Party constituting
not less than the Required Holders (the “Purchasing Parties”) shall have the option to purchase all, but not less than all, of the First Priority
Obligations from the First Priority Secured Parties following delivery of irrevocable written notice
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(the “Purchase Notice”) by the Second Priority Representative on behalf of the Purchasing Parties to the First Priority Representative no later
than 25 Business Days after (i) commencement of any Enforcement Action with respect to a material portion of the Common Collateral
following the acceleration of the First Priority Obligations or (ii) the commencement of an Insolvency Proceeding by or against the Borrower.
If the Second Priority Representative on behalf of the Purchasing Parties so delivers the Purchase Notice, the First Priority Representative shall
terminate any existing Enforcement Actions and shall not take any further Enforcement Actions, provided , that the Purchase (as defined
below) shall have been consummated on the date specified in the Purchase Notice in accordance with this Section 3.8.
(b) On the date specified by the Second Priority Representative on behalf of the Purchasing Parties in the Purchase Notice (which shall be a
Business Day not less than five Business Days, nor more than 20 Business Days, after receipt by the First Priority Representative of the
Purchase Notice), the First Priority Secured Parties shall, subject to any required approval of any court or other governmental authority then in
effect, sell to the Purchasing Parties, and the Purchasing Parties shall purchase (the “Purchase”) from the First Priority Secured Parties, the
First Priority Obligations; provided , that the First Priority Obligations purchased shall not include any rights of First Priority Secured Parties
with respect to indemnification and other obligations of the Loan Parties under the First Priority Documents that are expressly stated to survive
the termination of the First Priority Documents (the “Surviving Obligations”).
(c) Without limiting the obligations of the Loan Parties under the First Priority Documents to the First Priority Secured Parties with respect
to the Surviving Obligations (which shall not be transferred in connection with the Purchase), on the date of the Purchase, the Purchasing
Parties shall pay to the First Priority Secured Parties as the purchase price (the “Purchase Price”) therefor the full amount of all First Priority
Obligations then outstanding and unpaid (including principal, interest, fees, premiums, breakage costs, attorneys’ fees and expenses), and, in
the case of any Hedging Obligations, the amount that would be payable by the relevant Loan Party thereunder if it were to terminate such
Hedging Obligations on the date of the Purchase or, if not terminated, an amount determined by the relevant First Priority Secured Party to be
necessary to collateralize its credit risk arising out of such Hedging Obligations, (ii) furnish cash collateral (the “ Cash Collateral”) to the First
Priority Secured Parties in such amounts as the relevant First Priority Secured Parties determine is reasonably necessary to secure such First
Priority Secured Parties in connection with any outstanding letters of credit (not to exceed 105% of the aggregate undrawn face amount of such
letters of credit), (iii) agree to reimburse the First Priority Secured Parties for any loss, cost, damage or expense (including attorneys’ fees and
expenses) in connection with any fees, costs or expenses related to any checks or other payments provisionally credited to the First Priority
Obligations and/or as to which the First Priority Secured Parties have not yet received final payment and (iv) agree, after written request from
the First Priority Representative, to reimburse the First Priority Secured Parties in respect of indemnification obligations of the Loan Parties
under the First Priority Documents as to matters or circumstances known to the Purchasing Parties at the time of the Purchase which could
reasonably be expected to result in any loss, cost, damage or expense to any
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of the First Priority Secured Parties, provided that, in no event shall any Purchasing Party have any liability for such amounts in excess of
proceeds of Common Collateral received by the Purchasing Parties.
(d) The Purchase Price and Cash Collateral shall be remitted by wire transfer in immediately available funds to such account of the First
Priority Representative as it shall designate to the Purchasing Parties. The First Priority Representative shall, promptly following its receipt
thereof, distribute the amounts received by it in respect of the Purchase Price to the First Priority Secured Parties in accordance with the First
Priority Agreement. Interest shall be calculated to but excluding the day on which the Purchase occurs if the amounts so paid by the Purchasing
Parties to the account designated by the First Priority Representative are received in such account prior to 12:00 Noon, New York City time,
and interest shall be calculated to and including such day if the amounts so paid by the Purchasing Parties to the account designated by the First
Priority Representative are received in such account later than 12:00 Noon, New York City time.
(e) The Purchase shall be made without representation or warranty of any kind by the First Priority Secured Parties as to the First Priority
Obligations, the Common Collateral or otherwise and without recourse to the First Priority Secured Parties, except that the First Priority
Secured Parties shall represent and warrant: (i) the amount of the First Priority Obligations being purchased, (ii) that the First Priority Secured
Parties own the First Priority Obligations free and clear of any liens or encumbrances and (iii) that the First Priority Secured Parties have the
right to assign the First Priority Obligations and the assignment is duly authorized.
3.9 Obligations Following Discharge of First Priority Obligations . Following the First Priority Obligations Payment Date, the First Priority
Representative, on behalf of itself and the First Priority Secured Parties, agrees that it will not take any action that would hinder any exercise of
remedies undertaken by the Second Priority Representative and the Second Priority Secured Parties, or any of them, under the Second Priority
Documents, including any public or private sale, lease, exchange, transfer, or other disposition of the Common Collateral, whether by
foreclosure or otherwise. Following the First Priority Obligations Payment Date, the First Priority Representative, on behalf of itself and the
First Priority Secured Parties, hereby waives any and all rights it may have as a lien creditor or otherwise to contest, protest, object to, interfere
with the manner in which the Second Priority Representative or any of the Second Priority Secured Parties seeks to enforce the Liens in any
portion of the Common Collateral (it being understood and agreed that the terms of this Agreement shall govern with respect to the Common
Collateral even if any portion of the Liens securing the Second Priority Obligations are avoided, disallowed, set aside or otherwise invalidated
in any judicial proceeding or otherwise). If the First Priority Obligations Payment Date has occurred, whether or not any Insolvency Proceeding
has been commenced by or against the Borrower or any other Loan Party, any Common Collateral or proceeds thereof received by the First
Priority Representative or any First Priority Secured Parties in contravention of this Agreement shall be segregated and held in trust and
forthwith paid over to the Second Priority
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Representative for the benefit of the Second Priority Secured Parties in the same form as received, with any necessary or reasonably requested
endorsements or as a court of competent jurisdiction may otherwise direct.
SECTION 4. Application Of Proceeds Of Common Collateral; Dispositions And Releases Of Common Collateral; Inspection and
Insurance.
4.1 Application of Proceeds; Turnover Provisions . All proceeds of Common Collateral (including without limitation any interest earned
thereon) resulting from the sale, collection or other disposition of Common Collateral in connection with or resulting from any Enforcement
Action, and whether or not pursuant to an Insolvency Proceeding, shall be distributed as follows: first to the First Priority Representative for
application to the First Priority Obligations in accordance with the terms of the First Priority Documents, until the First Priority Obligations
Payment Date has occurred and thereafter , to the Second Priority Representative for application in accordance with the Second Priority
Documents. Until the occurrence of the First Priority Obligations Payment Date, any Common Collateral, including without limitation any such
Common Collateral constituting proceeds, that may be received by any Second Priority Secured Party in violation of this Agreement shall be
segregated and held in trust and promptly paid over to the First Priority Representative, for the benefit of the First Priority Secured Parties, in
the same form as received, with any necessary endorsements, and each Second Priority Secured Party hereby authorizes the First Priority
Representative to make any such endorsements as agent for the Second Priority Representative (which authorization, being coupled with an
interest, is irrevocable).
4.2 Releases of Second Priority Lien . (a) Upon any release, sale or disposition of Common Collateral that results in the release of the First
Priority Lien on any Common Collateral and (i) is permitted pursuant to the terms of the Second Priority Documents, (ii) results from any
Enforcement Action taken by the First Priority Secured Parties or (iii) occurs pursuant to a sale under section 363 of the Bankruptcy Code, the
Second Priority Lien on such Common Collateral (excluding any portion of the proceeds of such Common Collateral remaining after the First
Priority Obligations Payment Date occurs) shall be automatically and unconditionally released with no further consent or action of any Person.
(b) The Second Priority Representative shall promptly execute and deliver such release documents and instruments and shall take such
further actions, at the expense of the Borrower, as the First Priority Representative shall reasonably request in writing to evidence any release
of the Second Priority Lien described in paragraph (a). The Second Priority Representative hereby appoints the First Priority Representative
and any officer or duly authorized person of the First Priority Representative, with full power of substitution, as its true and lawful attorney in
fact with full irrevocable power of attorney in the place and stead of the Second Priority Representative and in the name of the Second Priority
Representative or in the First Priority Representative’s own name, from time to time, in the First Priority Representative’s sole discretion, for
the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents
and instruments as may be necessary or
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desirable to accomplish the purposes of this paragraph, including, without limitation, any financing statements, endorsements, assignments,
releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).
4.3 Inspection Rights and Insurance . (a) Subject to Section 4.2 and any express limitations contained in the First Priority Documents, any
First Priority Secured Party and its representatives and invitees may at any time inspect, repossess, remove and otherwise deal with the
Common Collateral, and the First Priority Representative may advertise and conduct public auctions or private sales of the Common Collateral,
in each case without notice to, the involvement of or interference by any Second Priority Secured Party or liability to any Second Priority
Secured Party.
(b) Until the First Priority Obligations Payment Date has occurred, the First Priority Representative will have the sole and exclusive right
(i) to adjust or settle any insurance policy or claim covering the Common Collateral in the event of any loss thereunder and (ii) to approve any
award granted in any condemnation or similar proceeding affecting the Common Collateral.
SECTION 5. Insolvency Proceedings.
5.1 Filing of Motions . Except as provided in Section 5.4 , solely with respect to seeking adequate protection, until the First Priority
Obligations Payment Date has occurred, the Second Priority Representative agrees on behalf of itself and the other Second Priority Secured
Parties that no Second Priority Secured Party shall, in or in connection with any Insolvency Proceeding, file any pleadings or motions, take any
position at any hearing or proceeding of any nature, or otherwise take any action whatsoever, in each case in respect of any of the Common
Collateral, including, without limitation, with respect to the determination of any Liens or claims held by the First Priority Representative
(including the validity and enforceability thereof) or any other First Priority Secured Party or the value of any claims of such parties under
Section 506(a) of the Bankruptcy Code or otherwise; provided that the Second Priority Representative may file a proof of claim in an
Insolvency Proceeding, subject to the limitations contained in this Agreement and only if consistent with the terms and the limitations on the
Second Priority Representative imposed hereby.
5.2 Financing Matters . If any Loan Party becomes subject to any Insolvency Proceeding, and if the First Priority Representative or the First
Priority Secured Parties desire to consent (or not object) to the use of cash collateral under the Bankruptcy Code or to provide financing to any
Loan Party under the Bankruptcy Code (including, without limitation, financing including a priming Lien under Section 364(d) of the
Bankruptcy Code) or to consent (or not object) to the provision of such financing to any Loan Party by any third party (“DIP Financing”) ,
then the Second Priority Representative agrees, on behalf of itself and the other Second Priority Secured Parties, that each Second Priority
Secured Party (i) will be deemed to have consented to, will raise no objection to, nor support any other Person objecting to, the use of such cash
collateral or to such DIP Financing, (ii) will not request or accept adequate protection or any other relief in
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connection with the use of such cash collateral or such DIP Financing except as set forth in paragraph 5.4 below, (iii) will subordinate (and will
be deemed hereunder to have subordinated) the Second Priority Liens (x) to such DIP Financing on the same terms as the First Priority Liens
are subordinated thereto (and such subordination will not alter in any manner the terms of this Agreement), (y) to any adequate protection
provided to the First Priority Secured Parties and (z) to any “carve-out” agreed to by the First Priority Representative or the First Priority
Secured Parties, and (iv) agrees that notice received two (2) calendar days prior to the entry of an order approving such usage of cash collateral
or approving such financing shall be adequate notice; provided , however that the Second Priority Second Parties may object to a DIP
Financing (i) on the basis that they are not receiving adequate protection permitted under paragraph 5.4 below, (ii) to the extent the outstanding
principal amount of the DIP Financing and the principal amount of the other First Priority Obligations exceed the Maximum First Priority
Obligations Amount or (iii) if they do not retain a Lien on the Common Collateral or the proceeds thereof at the same priority as existed prior
to the commencement of such Insolvency Proceeding subject to any priming Lien in such DIP Financing and the priority of the First Priority
Liens provided hereunder. No Second Priority Secured Party shall propose or support any third party who proposes any DIP Financing without
the express written consent of the First Priority Representative, which consent may be withheld in the sole discretion of the First Priority
Representative.
5.3 Relief From the Automatic Stay . The Second Priority Representative agrees, on behalf of itself and the other Second Priority Secured
Parties, that none of them will seek relief from the automatic stay or from any other stay in any Insolvency Proceeding or take any action in
derogation thereof, in each case in respect of any Common Collateral, without the prior written consent of the First Priority Representative.
5.4 Adequate Protection . The Second Priority Representative, on behalf of itself and the other Second Priority Secured Parties, agrees that
none of them shall object, contest, or support any other Person objecting to or contesting, (i) any request by the First Priority Representative or
the First Priority Secured Parties for adequate protection or (ii) any objection by the First Priority Representative or any other First Priority
Secured Parties to any motion, relief, action or proceeding based on a claim of a lack of adequate protection or (iii) the payment of interest,
fees, expenses or other amounts to the First Priority Representative or any other First Priority Secured Party under Section 506(b) or 506(c) of
the Bankruptcy Code or otherwise. Notwithstanding anything contained in this Section and in Section 5.2 , in any Insolvency Proceeding, (x) if
the First Priority Secured Parties (or any subset thereof) are granted adequate protection in the form of additional collateral or superpriority
claims in connection with any DIP Financing or use of cash collateral, and the First Priority Secured Parties do not object to the adequate
protection being provided to them, then the Second Priority Representative, on behalf of itself and any of the Second Priority Secured Parties,
may seek or accept adequate protection solely in the form of (A) a replacement Lien on such additional collateral, subordinated to the Liens
securing the First Priority Obligations and such DIP Financing on the same basis as the other Liens securing the Second Priority Obligations
are so subordinated to the First Priority Obligations under this Agreement, (B) accrual (but not current payment) of interest on the Second
Priority Secured Obligations, and (C) payment of reasonable
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professional fees and expenses of the Second Priority Representative, and (y) in the event the Second Priority Representative, on behalf of itself
and the Second Priority Secured Parties, seeks or requests adequate protection and such adequate protection is granted in the form of additional
collateral, then the Second Priority Representative, on behalf of itself or any of the Second Priority Secured Parties, agrees that the First
Priority Representative shall also be granted a senior Lien on such additional collateral as security for the First Priority Obligations and any
such DIP Financing and that any Lien on such additional collateral securing the Second Priority Obligations shall be subordinated to the Liens
on such collateral securing the First Priority Obligations and any such DIP Financing (and all obligations relating thereto) and any other Liens
granted to the First Priority Secured Parties as adequate protection, with such subordination to be on the same terms that the other Liens
securing the Second Priority Obligations are subordinated to such First Priority Obligations under this Agreement.
5.5 Avoidance Issues . (a) If any First Priority Secured Party is required in any Insolvency Proceeding or otherwise to disgorge, turn over or
otherwise pay to the estate of any Loan Party, because such amount was avoided or ordered to be paid or disgorged for any reason, including
without limitation because it was found to be a fraudulent or preferential transfer, any amount (a “ Recovery ”), whether received as proceeds
of security, enforcement of any right of set-off or otherwise, then the First Priority Obligations shall be reinstated to the extent of such
Recovery and deemed to be outstanding as if such payment had not occurred and the First Priority Obligations Payment Date shall be deemed
not to have occurred. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and
effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto. The
Second Priority Secured Parties agree that none of them shall be entitled to benefit from any avoidance action affecting or otherwise relating to
any distribution or allocation made in accordance with this Agreement, whether by preference or otherwise, it being understood and agreed that
the benefit of such avoidance action otherwise allocable to them shall instead be allocated and turned over for appli