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MONEYGRAM INTERNATIONAL INC (MGI)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/01/2006
Filed Period 12/31/2005

Table of contents

  • Page 1
    MONEYGRAM INTERNATIONAL INC (MGI) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/01/2006 Filed Period 12/31/2005

  • Page 2
    ... is a shell company (as defined in Rule 12b-2 of the Exchange Act). 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, 2005, the last business day of the registrant...

  • Page 3
    ... about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III. Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of...

  • Page 4
    ... business is conducted through our wholly owned subsidiary formerly known as Travelers Express Company, Inc. ("Travelers"), which has been in operation since 1940. In June 1998, we acquired MoneyGram Payment Systems, Inc. ("MPSI"), adding the MoneyGram® branded international money transfer services...

  • Page 5
    ...our FormFree service, customers may contact our call center and a representative will collect the information over the telephone and enter it directly into our central data processing system. The funds are made available for payment in various currencies throughout our agent network. The fee paid by...

  • Page 6
    ... number of locations at which customers may pay their bills. Our acquisition of ACH Commerce in 2005 allows consumers to select one-time ACH, recurring ACH and credit and debit card payments to our contracted billers via the telephone. We released an ACH "pay by web" service in February 2006 which...

  • Page 7
    ... national agent accounts, smaller, independent accounts and check cashing outlets. We also have dedicated sales and marketing teams that market our Pay-By-Suite bill payment services, including ExpressPayment, directly to billers. Our international sales and marketing for money transfer services is...

  • Page 8
    ... plan to begin rolling out the functionality for directing transfers to a bank account in 2006. New Products. We developed a prepaid debit card program that was introduced in 2005, the MoneyGram Prepaid MasterCard® card program. Customers can load cash onto a card that can be used to make purchases...

  • Page 9
    ... notice on our website, as well as posting a privacy notice on the forms completed by individuals in order to use services (for example, on our money transfer "send" form). We also have confidentiality/information security agreements in place with our third-party vendors and service providers to the...

  • Page 10
    ... money order dispensing systems. We also have patent applications pending in the United States that relate to our money transfer and PrimeLink technology and business methods. U.S. trademark registrations are for a term of 10 years and are renewable every 10 years as long as the trademarks are used...

  • Page 11
    ...June 2004 to November 2005 and Vice President of Human Resources at Travelers Express Company, Inc. from 1996 to June 2004. Ms. Stemper joined the Company in 1984 and has served in positions of increasing responsibility. Available Information Our principal executive offices are located at 1550 Utica...

  • Page 12
    ... 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 stored...

  • Page 13
    ...of operations. In the United States, the money transfer business is subject to a variety of state regulations. We are also subject to U.S. federal anti-money laundering laws and the requirements of the Office of Foreign Assets Control, which prohibit us from transmitting money to specified countries...

  • Page 14
    ...we must nonetheless pay the money order or complete the money transfer on behalf of the consumer. Moreover, we have made, and may in the future make, 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...

  • Page 15
    ... from the sale of payment instruments, such as official checks and money orders, until these instruments are settled. We generally invest these funds in long-term fixed-income securities. We pay the financial institutions to which we provide official check outsourcing services a commission based...

  • Page 16
    ... sanctions and damage to our reputation. There are a number of risks associated with our international sales and operations that could harm our business. We provided money transfer services between and among approximately 170 countries and territories at December 31, 2005, and our strategy is to...

  • Page 17
    ...use, approximate area in square feet and lease terms, is set forth above. We also have a number of other smaller office locations in New York, Florida, Tennessee and in the United Kingdom, as well as small sales and marketing offices in France, Spain, Germany, Hong Kong, Greece, United Arab Emirates...

  • Page 18
    Table of Contents PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our stock is traded on the New York Stock Exchange under the symbol MGI. Our Board of Directors declared quarterly cash dividends totaling $0.07 and ...

  • Page 19
    ..."Management's Discussion and Analysis of Financial Condition and Results of Operations - Basis of Presentation." 2005 Years Ended December 31, 2004 2003 2002 (Dollars and shares in thousands, except per share data) 2001 Operating Results Revenue Global Funds Transfer segment Payment Systems segment...

  • Page 20
    ... in this Annual Report on Form 10-K. Our Separation from Viad Corp On July 24, 2003, Viad announced a plan to separate its payment services segment, operated by Travelers Express Company, Inc. ("Travelers"), from its other businesses into a new company, and to effect a tax-free distribution of its...

  • Page 21
    ... we operated as a stand-alone company during the periods presented. In March 2004, we completed the sale of Game Financial Corporation for approximately $43.0 million in cash. Game Financial Corporation provides cash access services to casinos and gaming establishments throughout the United States...

  • Page 22
    ... service fees charged to consumers and through our investments. Fee and other revenue consist of transaction fees, foreign exchange and other revenue. Transaction fees are fees earned on the sale of money transfers, retail money order and bill payment products and official check transactions. Money...

  • Page 23
    ... of money orders. Fee commissions also include the amortization of capitalized incentive payments to agents. Investment commissions are amounts paid to financial institution customers based on the average outstanding cash balances generated by the sale of official checks, as well as costs associated...

  • Page 24
    ... in 2005 increased by $144.7 million, or 18 percent, and net revenue increased $77.7 million, or 18 percent, primarily driven by transaction growth of 38 percent in the money transfer business, $12.6 million of cash recoveries on previously impaired securities and $6.2 million of income from limited...

  • Page 25
    ... increase in money transfer and bill payment transaction volumes. Growth in net fee revenue was lower than fee and other revenue growth in 2004, primarily due to the pricing structure of certain large money order customers, as well as product mix. Table 3 - Net Investment Revenue Analysis 2005 2004...

  • Page 26
    ... well as costs associated with swaps and the sale of receivables program. (2) Commissions are paid to financial institution customers based upon average outstanding balances generated by the sale of official checks only. The average balance in the table reflects only the payment service obligations...

  • Page 27
    ... number of employees increased in 2005 and 2004 to drive money transfer growth and handle public company responsibilities. Transaction and operations support - Transaction and operations support expenses include marketing costs, professional fees and other outside services costs, telecommunications...

  • Page 28
    ... credit facility and rising interest rates. In connection with the amendment of our $350.0 million bank credit facility in the second quarter of 2005, we expensed $0.9 million of unamortized financing costs related to the original facility. See "Management's Discussion and Analysis - Other Funding...

  • Page 29
    ... Payment Systems - this segment provides financial institutions with payment processing services, primarily official check outsourcing services and money orders for sale to their customers, and processes controlled disbursements. Investment and related income is generated by investing funds received...

  • Page 30
    ....9 percent in 2003 due to the pricing structure of certain large money order customers, as well as the shift in product mix towards money transfer. Operating income in 2005 increased 19 percent over 2004 due to the growth in money transfer and bill payment services and the higher investment revenue...

  • Page 31
    ... expense includes payments made to financial institution customers based on official check average investable balances and short-term interest rate indices, as well as costs associated with swaps and the sale of receivables program. Commissions expense increased eight percent in 2005 compared to...

  • Page 32
    ... such events. LIQUIDITY AND CAPITAL RESOURCES One of our primary financial goals is to maintain adequate liquidity to manage the fluctuations in the balances of payment service assets and obligations resulting from sales of official checks, money orders and other payment instruments, the timing of...

  • Page 33
    ... in the market value of our investments and higher levels of capital expenditures and repurchases of our common stock, as well as changes in our working capital resulting from the timing of normal operational activities. Table 9 - Cash Flows Provided By or Used In Operating Activities 2005 2004 2003...

  • Page 34
    ... payment service obligations presented for payment. Table 11 - Cash Flows Provided By or Used In Investing Activities 2005 2004 (Dollars in thousands) 2003 Net investment activity Purchases of property and equipment Cash paid for acquisitions Proceeds from sale of Game Financial Corporation Other...

  • Page 35
    ... Funding Sources and Requirements In connection with the spin-off, MoneyGram entered into a bank credit facility providing availability of up to $350.0 million in the form of a $250.0 million four-year revolving credit facility and a $100.0 million term loan. On June 30, 2004, the Company borrowed...

  • Page 36
    ... by applicable regulations. During 2005, MoneyGram contributed $13.0 million to the funded pension plans and expects to contribute $9.8 million in 2006. MoneyGram also has certain unfunded pension and postretirement plans that require benefit payments over extended periods of time. During 2005, we...

  • Page 37
    ... paying a quarterly dividend of $0.04 per share in 2006, subject to Board approval, which will be funded through cash generated from operating activities. Viad sold treasury stock in 1992 to its employee equity trust to fund certain existing employee compensation and benefit plans. In connection...

  • Page 38
    ... the Company's funding activity, investing activity and use of derivatives. The Company's Board of Directors has established a Finance and Investment Committee, consisting of five independent Board members, which oversees the investment, capital, credit and foreign currency policies and strategies...

  • Page 39
    ... actions to help attain corporate margin objectives. Management develops rebalancing actions based upon a number of factors that include both net investment revenue at risk and duration gap, as well as current market conditions. Internal indicators are used to determine when the risk profile of our...

  • Page 40
    ..., corporate guarantees and other forms of security where appropriate. The Company monitors remittance patterns versus reported sales by agent on a daily basis. The Company also utilizes software embedded in each point of sale terminal to control both the number and dollar amount of money orders sold...

  • Page 41
    ... limited by the fact that foreign currency denominated assets and liabilities are generally very short-term in nature. The Company primarily utilizes forward contracts to hedge its exposure to fluctuations in exchange rates. These forward contracts generally have maturities of less than thirty days...

  • Page 42
    ... that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. Certain defined pension benefits, primarily those in excess of benefit levels permitted under qualified pension plans, are unfunded. MoneyGram's discount rate used in...

  • Page 43
    ...interest rates are 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. MoneyGram's pension assets...

  • Page 44
    ... time of grant. The fair value of restricted stock awards is determined using the quoted market price of the Company's common stock on the date of grant. Compensation cost, net of estimated forfeitures, is recognized using a straight-line method over the vesting or service period. Recent Accounting...

  • Page 45
    ... material adverse effect on our business and stock price. • Agent Credit and Fraud Risks. We may face credit and fraud exposure if we are unable to collect funds from our agents who receive the proceeds from the sale of our payment instruments. • Investment Portfolio Credit Risk. If an issuer of...

  • Page 46
    ..., in 2005 the Company's Chief Executive Officer certified to the New York Stock Exchange ("NYSE") that he was not aware of any violation by the Company of the NYSE's corporate governance listing standards. No change in the Company's internal control over financial reporting (as defined in Rule 13a...

  • Page 47
    ...Board of Directors and Governance - Compensation of Directors" and "Executive Compensation and Other Information" in our definitive Proxy Statement for our 2006 Annual Meeting of Stockholders is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...

  • Page 48
    ...for our 2006 Annual Meeting of Stockholders is incorporated herein by reference. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) (2) (3) The financial statements listed in the "Index to Financial Statements and Schedules" are filed as part of this Annual Report on Form 10-K. All...

  • Page 49
    ... duly authorized. MoneyGram International, Inc. (Registrant) Date: March 1, 2006 By: /s/ Philip W. Milne Philip W. Milne President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 50
    * Albert M. Teplin * Timothy R. Wallace /s/ Teresa H. Johnson Teresa H. Johnson * As attorney-in-fact Director Director Executive Vice President, General Counsel and Secretary 46

  • Page 51
    ... Report on Form 8-K filed on November 22, 2005). †10.10 MoneyGram International, Inc. Deferred Compensation Plan, as stated July 1, 2004 (Incorporated by reference from Exhibit 10.7 to Registrant's Quarterly Report on Form 10-Q filed on August 13, 2004). (Terminated plan replaced with plan listed...

  • Page 52
    ... and restated and replaced with plan listed in Exhibit 10.15 above). †10.19 Travelers Express Company, Inc. Supplemental Pension Plan (Incorporated by reference from Exhibit 10.11 to Amendment No. 3 to Registrant's Form 10 filed on June 3, 2004). †10.20 MoneyGram International, Inc. Supplemental...

  • Page 53
    ...listed in Exhibit 10.45 below). †10.45 Employment Agreement, dated August 19, 2005, between MoneyGram International, Inc. and Philip W. Milne (Incorporated by reference from Exhibit 99.03 to Registrant's Current Report on Form 8-K filed on August 23, 2005). †10.46 2005 Deferred Compensation Plan...

  • Page 54
    ...Performance Unit Incentive Plan, as adopted May 10, 2005 (Incorporated by reference from Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q filed on May 12, 2005). †10.49 Description of MoneyGram International, Inc. Compensation for Non-Management Members of Board of Directors and of Board...

  • Page 55
    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, 2005 and 2004 Consolidated ...

  • Page 56
    ... 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...

  • Page 57
    ... 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 effectiveness of the Company's internal control over financial reporting as of December 31, 2005, based on the criteria...

  • Page 58
    ...on management's assessment and an opinion on the effectiveness of 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...

  • Page 59
    Table of Contents MONEYGRAM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS December 31, 2005 2004 (Dollars in thousands, except share data) Assets Cash and cash equivalents Cash and cash equivalents (substantially restricted) (Note 2) Receivables (substantially restricted) (Note 2) Investments (...

  • Page 60
    Table of Contents MONEYGRAM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, 2004 (Dollars in thousands, except share and per share data) 2005 2003 Revenue: Fee and other revenue (Note 2) Investment revenue (Note 4) Net securities (losses) gains (Note 4) Total ...

  • Page 61
    Table of Contents MONEYGRAM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2005 2004 2003 (Dollars in thousands) Net income Other comprehensive income: Net unrealized (losses) gains on available-for-sale securities: Reclassification of securities from ...

  • Page 62
    ...classified as available-for-sale Purchases of property and equipment Cash paid for acquisitions Proceeds from the sale of Game Financial Corporation, net of cash sold Other investing activities Net cash provided by (used in) investing activities Cash flows from financing activities: Payments on debt...

  • Page 63
    ... per share data) Common Stock in Treasury Common Stock Additional Capital Total December 31, 2002 Net income Dividends ($0.36 per share) Employee benefit plans Treasury shares acquired Unrealized foreign currency translation adjustment Unrealized gain on available-for-sale securities Unrealized...

  • Page 64
    ... and processing of money orders, processing of official checks and share drafts, controlled disbursement processing and routine bill payment service. These products and services are offered to consumers and businesses through a network of agents and financial institution customers located around...

  • Page 65
    ... - We generate funds from the sale of money orders, official checks (including cashier's checks, teller checks, and agent checks) and other payment instruments (classified as "Payment service obligations" in the Consolidated Balance Sheets). The proceeds are invested in cash and cash equivalents and...

  • Page 66
    ... with an investment rating of A or higher in an amount generally equal to the payment service obligation for those regulated payment instruments, namely teller checks, agent checks, money orders, and money transfers. Consequently, a significant amount of cash and cash equivalents, receivables and...

  • Page 67
    ... official check payment instruments, remittances and clearing adjustments; amounts owed to agents for funds paid to consumers on behalf of the Company; amounts owed under our sale of receivables program for collections on sold receivables; amounts owed to investment brokers for purchased securities...

  • Page 68
    ... the lowest level at which management reviews cash flows for a business. Goodwill, which is generated solely through acquisitions, is allocated to the reporting unit in which the acquired business operates. The carrying value of the reporting unit is compared to its estimated fair value; any excess...

  • Page 69
    ... 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...

  • Page 70
    ... with Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees. This method defines compensation cost for stock options as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount the employee must pay to...

  • Page 71
    ... FSP amends SFAS No. 123R to require that stock options issued to employees as compensation be accounted for as equity instruments until a contingent event allowing for cash settlement is probable of occurring. The Company has adopted FSP No. 123R-4 effective January 1, 2006 with no impact to the...

  • Page 72
    ...was responsible for the variable costs associated with its direct usage of the asset. In January 2006, the Company acquired the remaining 50% interest in the corporate aircraft at a cost of $10.0 million. Game Financial Corporation: During the first quarter of 2004, the Company completed the sale of...

  • Page 73
    ... 31, 2005: Amortized Cost Gross Gross Unrealized Unrealized Gains Losses (Dollars in thousands) Market Value Obligations of states and political subdivisions Commercial mortgage-backed securities Residential mortgage-backed securities Other asset-backed securities U.S. government agencies Corporate...

  • Page 74
    ... in connection with the sale of the underlying securities. Gross realized gains and losses on sales of securities classified as available-for-sale, using the specific identification method, and other-than-temporary impairments were as follows for the year ended December 31: 2005 2004 (Dollars...

  • Page 75
    ... contract generally represents future commitments to purchase or sell financial instruments at specified terms on a specified date or to exchange currency or interest payment streams based on the contract or notional amount. The Company uses derivative instruments primarily to manage exposures to...

  • Page 76
    .... The Company has also entered into swap agreements to mitigate the effects on cash flows of interest rate fluctuations on variable rate debt and commissions paid to financial institution customers of our Payment Systems segment. The agreements involve varying degrees of credit and market risk in...

  • Page 77
    ... cash flow available for investments. The receivables are sold to two commercial paper conduit trusts and represent a small percentage of the total assets in each trust. The Company's rights and obligations are limited to the receivables transferred, and the transactions are accounted for as sales...

  • Page 78
    ... in "Accounts payable and other liabilities" in the Consolidated Balance Sheets. During 2004, the Company determined that an impairment existed on $4.5 million of software costs related primarily to a joint development project with Concord EFS utilizing ATMs to facilitate money transfers and other...

  • Page 79
    ... percent depending upon our credit rating. The Company incurred $1.2 million of financing costs in connection with this transaction. These costs were capitalized and were being amortized over the life of the debt. On June 29, 2005, the Company amended its bank credit facility. The amended agreement...

  • Page 80
    ...loans under these facilities are unsecured obligations of MoneyGram, and are guaranteed on an unsecured basis by MoneyGram's material domestic subsidiaries. The proceeds from any future advances may be used for general corporate expenses and to support letters of credit. Any letters of credit issued...

  • Page 81
    ... $ $ 24,370 3,233 (702) 26,901 (14,416) 12,485 In 2005, the Company recognized a state income tax benefit resulting from changes in estimates to previously estimated amounts as the result of new and better information. Income tax expense totaling $0.5 million, $13.8 million and $25.0 million in...

  • Page 82
    ... 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 will be issued with...

  • Page 83
    ... March 16, 2006. Treasury Stock: Through June 30, 2004, treasury stock represented Viad common stock repurchased and held by the Company. On November 18, 2004, the Board of Directors authorized a plan to repurchase, at the Company's discretion, up to 2,000,000 shares of MoneyGram International, Inc...

  • Page 84
    ... share. During the last six months of 2004, the Company repurchased 770,299 shares at an average cost of $21.01 per share. At December 31, 2005, there are 2,701,163 shares of stock held in treasury. The Company has remaining authorization to repurchase up to 3,954,050 shares. Following is a summary...

  • Page 85
    ..., MoneyGram was a participating employer in the Viad Companies Retirement Income Plan (the "Plan") of which the plan administrator was Viad. At the time of the Distribution, the Company assumed sponsorship of the Plan, which is a noncontributory defined benefit pension plan covering all employees...

  • Page 86
    ...31, 2003. Another SERP, the MoneyGram International, Inc. SERP, is a nonqualified defined benefit pension plan, which provides postretirement income to eligible employees selected by the Board of Directors. It is our policy to fund the supplemental executive retirement plan as benefits are paid. Net...

  • Page 87
    Table of Contents MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The benefit obligation and plan assets, changes to the benefit obligation and plan assets and a reconciliation of the funded status of the defined benefit pension plan and ...

  • Page 88
    ... 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...

  • Page 89
    ...) The Company's funding policy is to make contributions to the plan as benefits are required to be paid. Net periodic postretirement benefit cost includes the following components for the year ended December 31: 2005 2004 (Dollars in thousands) 2003 Service cost Interest cost Amortization of...

  • Page 90
    ... the form of stock units or cash. Director deferred accounts are payable upon resignation from the Board. In 2005, the Board of Directors approved a deferred compensation plan for certain employees which allows for the deferral of base compensation in the form of cash. In addition, the Company makes...

  • Page 91
    ...remaining authorization to issue awards of up to 7,443,500 shares of common stock. Option awards are granted with an exercise price equal to the market price of the Company's common stock on the date of grant. Stock options granted in 2005 become exercisable in a three-year period in an equal number...

  • Page 92
    ... at the time of grant. Compensation cost, net of expected forfeitures, is recognized using a straight-line method over the vesting or service period. 2005 2004 2003 Expected dividend yield Expected volatility Risk-free interest rate Expected life Following is a summary of stock option activity...

  • Page 93
    ... Contents MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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...

  • Page 94
    ... 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...

  • Page 95
    ... network of global retail agents and domestic money orders. In addition, Global Funds Transfer provides a full line of bill payment services. The Payment Systems segment primarily provides official check services for financial institutions in the United States, and processes controlled disbursements...

  • Page 96
    ... income taxes as reported in the financial statements for the year ended December 31: 2005 2004 (Dollars in thousands) 2003 Revenue Global Funds Transfer: Money transfer, including bill payment Retail money orders Other Payment Systems: Official check and payment processing Other Total revenue...

  • Page 97
    ...) Geographic areas - Foreign operations are located principally in Europe. Foreign 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...

  • Page 98
    Table of Contents MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2004 Fiscal Quarters First Second Third Fourth (Dollars in thousands, except per share data) Revenues Commission expense Net revenues Operating expenses, excluding commission ...

  • Page 99
    Exhibit 10.15 MONEYGRAM INTERNATIONAL, INC. DEFERRED COMPENSATION PLAN Adopted February 16, 2006

  • Page 100
    ... 1.2.1. Account 1.2.2. Affiliate 1.2.3. Annual Deferral Amount 1.2.4. Beneficiary 1.2.5. Chief Executive Officer 1.2.6. Code 1.2.7. Common Stock 1.2.8. Compensation 1.2.9. Disability 1.2.10. Effective Date 1.2.11. Employers 1.2.12. ERISA 1.2.13. Event of Maturity 1.2.14. Human Resources Committee...

  • Page 101
    ... 2.2.3. Election As to Time and Form of Payment SECTION 3. CREDITS TO ACCOUNTS 3.1. Elective Deferral Credits 3.2. Matching Credits 3.2.1. Matching Credits on Compensation Deferrals 3.2.2. Matching Credits on Incentive Pay Deferrals 3.3. Supplemental Profit Sharing Credits SECTION 4. ADJUSTMENT OF...

  • Page 102
    ... Claim on Review 10.4. Rules and Regulations 10.4.1. Adoption of Rules 10.4.2. Special Rules 10.4.3. Limitations and Exhaustion SECTION 11. PLAN ADMINISTRATION 11.1. Authority 11.1.1. MGI 11.1.2. Chief Executive Officer 11.1.3. Board of Directors 11.2. Conflict of Interest 11.3. Service of Process...

  • Page 103
    ... collectively referred to as the "Employers" and separately as the "Employer") established a nonqualified, unfunded deferred compensation plan known as the "MONEYGRAM INTERNATIONAL, INC. SUPPLEMENTAL 401(k) PLAN," which permits eligible employees to defer Compensation and receive matching credits...

  • Page 104
    ... executive officer of MGI. 1.2.6. Code - the Internal Revenue Code of 1986, as amended (including, when the context requires, all regulations, interpretations and rulings issued thereunder). 1.2.7. Common Stock - common stock of MGI. 1.2.8. Compensation - Compensation as defined under the MoneyGram...

  • Page 105
    ... Resources Committee - the Human Resources Committee of the Board of Directors of MGI (or any successor committee). 1.2.15. Incentive Pay - any performance-based cash compensation, other than Compensation, earned by a Participant under any Employer's annual or long-term incentive plans for services...

  • Page 106
    ... of Incentive Pay and matching credits with respect to such deferrals, if applicable. All parts together constitute the Plan and shall be referred to as the "MONEYGRAM INTERNATIONAL, INC. DEFERRED COMPENSATION PLAN." 1.2.19. Plan Statement - this document entitled "MONEYGRAM INTERNATIONAL, INC...

  • Page 107
    ... for participation under this Section 2 shall be a member of a select group of management or highly compensated employees (as that expression is used in ERISA). Such employee shall as a condition of participation in this Plan complete such forms as MGI may require for the effective administration of...

  • Page 108
    ... Withholding. In the event an employee elects to defer an amount of his or her Compensation that would not allow for the full payment of all FICA, federal, state and/or local income tax liabilities, the actual amount deferred shall be the maximum amount allowable after all applicable taxes. Election...

  • Page 109
    ... or her Annual Deferral Amount as a Scheduled Distribution. An election as to the time and form of payment, once accepted by the Employer and made effective, may not be changed. SECTION 3 CREDITS TO ACCOUNTS 3.1. Elective Deferral Credits. Elective deferrals of Compensation shall be credited to the...

  • Page 110
    ... make a profit sharing credit to a Participant's Account for a Plan Year to the extent that it is determined that a Participant's Profit Sharing Contribution under the MoneyGram International, Inc. 401(k) Plan was reduced by sections 401(a)(17) or 415 of the Code or any other legal limitations. MGI...

  • Page 111
    ... to be increased (or decreased) from time to time for distributions, credits (including any earnings, gains or losses thereon) and expenses, if any, charged to the Account. 4.3. Investment Adjustments. The Human Resources Committee shall designate from time to time one or more investment options in...

  • Page 112
    ... elected for Compensation deferred for the Plan Year commencing January 1, 2006, the earliest Scheduled Distribution could become payable during a sixty (60)-day period commencing January 1, 2010. 7.1.2. Scheduled Distributions of Incentive Pay Deferrals and Matching Credits. In connection with each...

  • Page 113
    ... the death of the employee, if earlier) if required to comply with section 409A of the Code. 7.3.2. Form of Payment. If a Participant's Account becomes distributable by reason of one of the Events of Maturity listed in Section 6, distribution of the Participant's entire Account balance shall be made...

  • Page 114
    ... in the Account which is payable to the Beneficiary (and shall not be paid to the Participant's estate). 7.7. Distributions in Cash. Distributions from this Plan shall be made in cash. SECTION 8 FUNDING OF PLAN 8.1. Unfunded Obligation. The obligation of the Employers to make payments under this...

  • Page 115
    ... of this Plan out of their general assets. 8.2. Corporate Obligation. Neither MGI, the Board of Directors of MGI, the Chief Executive Officer, the Human Resources Committee, the Employers nor any of their directors, officers, agents or employees in any way secure or guarantee the payment of any...

  • Page 116
    ...by MGI or any other person pursuant to any provision of the Plan Statement may be signed in the name of MGI by any officer or other person who has been authorized to make such certification or to give such notices or consents. 10.3. Claims Procedure. The claim and review procedures set forth in this...

  • Page 117
    ... a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and a description of the claim and review procedures, including the time limits applicable to such procedure, and a statement of the claimant...

  • Page 118
    ...a claim and on a request for a review of a denied claim may be provided to the claimant in electronic form instead of in writing at the discretion of MGI. In connection with the review of a denied claim, the claimant or the claimant's representative shall be provided, upon request and free of charge...

  • Page 119
    ... regard to whether all the information necessary to make a benefit determination accompanies the filing. The claims and review procedures shall be administered with appropriate safeguards so that benefit claim determinations are made in accordance with governing plan documents and, where appropriate...

  • Page 120
    ...where necessary to comply with applicable corporate or securities law, or applicable rules of the New York Stock Exchange, the Human Resources Committee shall have the exclusive authority to make determinations with respect to benefits under this Plan (e.g., with respect to executive officers). -18-

  • Page 121
    ... by the Chief Executive Officer, the Secretary of MGI is designated as the appropriate and exclusive agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan. SECTION 12 CONSTRUCTION 12.1. ERISA Status. This Plan is adopted...

  • Page 122
    ... in any Employer's employ or in any way limit or restrict any Employer's right or power to discharge any employee or other person at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant in this Plan. Neither the terms of the Plan Statement...

  • Page 123
    ...Event of Maturity, as such powers may be conferred upon it by any applicable provision hereof. 12.14. Amendment History. This Plan was formerly known as the "MONEYGRAM INTERNATIONAL, INC. SUPPLEMENTAL 401(k) PLAN" adopted August 19, 2005, but effective January 1, 2006. That Plan was a successor plan...

  • Page 124
    United States version MONEYGRAM INTERNATIONAL, INC. 2005 OMNIBUS INCENTIVE PLAN PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT As Adopted February 15, 2006 (PBRS - US) Exhibit 10.40 This Performance-Based Restricted Stock Agreement is between MoneyGram International, Inc., a Delaware corporation (...

  • Page 125
    ... and confidential information and thereby help insure the long-term success of the business, Grantee, without prior written consent of the Corporation, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, agent, consultant, owner...

  • Page 126
    ... other officers and employees. 4. Certificates for the Shares. The Corporation shall issue a certificate in respect of the Shares or shall direct the Corporation's transfer agent to record ownership in respect of the Shares in the Corporation's stock ledger in the name of the Grantee, the number of...

  • Page 127
    United States version The transferability of the Shares of stock represented hereby are subject to the terms and conditions (including forfeiture) contained in the MoneyGram International, Inc. 2005 Omnibus Incentive Plan and an Agreement entered into between the registered owner and MoneyGram ...

  • Page 128
    ...contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or (iii) Consummation...

  • Page 129
    ... set forth are subject in all respects to the terms and conditions of the Plan, which are controlling. The Plan provides that the Board or the Committee may from time to time make changes therein, interpret it and establish regulations for the administration thereof. The Grantee, by acceptance of...

  • Page 130
    United States version MONEYGRAM INTERNATIONAL, INC. 2005 OMNIBUS INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AGREEMENT As Adopted February 15, 2006 (NQSO - US) Exhibit 10.41 This Non-Qualified Stock Option Agreement is between MoneyGram International, Inc., a Delaware corporation (Corporation) and ...

  • Page 131
    ... by the Grantee in such form as the Corporation may require, properly completed and among other things stating the number of Shares of Common Stock with respect to which the Option is being exercised, and specifying the method of payment for such Common Stock. The notice must be mailed or delivered...

  • Page 132
    ...to pay the purchase price either substantially all with Common Stock or partly with Common Stock and the balance in cash, he will be notified by the Corporation of the fair market value of the Common Stock on the exercise date and the amount of Common Stock or cash payable. Within five business days...

  • Page 133
    ... of MoneyGram International, Inc.or any of its Affiliates or misconduct which represents a material knowing violation of any code of ethics of the Corporation applicable to the Grantee or of the Always Honest compliance program or similar program of the Corporation. (ii) If, at any time after...

  • Page 134
    ... ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either: (1) the then outstanding shares of Common Stock of the Corporation (the "Outstanding Corporation Common Stock") or (2) the combined voting power of the then outstanding voting securities...

  • Page 135
    United States version of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so ...

  • Page 136
    ... (k) the foregoing terms and conditions apply in full with respect to any prior Option grants to Grantee. 9. Governing Law. This agreement is governed by and is to be construed and enforced in accordance with the laws of Delaware. Options to purchase shares of Common Stock of the Corporation may not...

  • Page 137
    ...MoneyGram International, Inc. 2005 Omnibus Incentive Plan (Plan). The Corporation hereby grants to Grantee, effective as of the Grant Date, the right and option (Option) to purchase all or any part of the aggregate number of shares of Common Stock set forth in the Notice, on the terms and conditions...

  • Page 138
    ... by the Grantee in such form as the Corporation may require, properly completed and among other things stating the number of Shares of Common Stock with respect to which the Option is being exercised, and specifying the method of payment for such Common Stock. The notice must be mailed or delivered...

  • Page 139
    United Kingdom version Stock or partly with Common Stock and the balance in cash, he will be notified by the Corporation of the fair market value of the Common Stock on the exercise date and the amount of Common Stock or cash payable. Within five business days after the exercise date, the Grantee ...

  • Page 140
    ... of MoneyGram International, Inc. or any of its Affiliates or misconduct which represents a material knowing violation of any code of ethics of the Corporation applicable to the Grantee or of the Always Honest compliance program or similar program of the Corporation. (ii) If, at any time after...

  • Page 141
    ...contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or (iii) Consummation...

  • Page 142
    ... as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (2) no Person (other than the Corporation or any entity controlled by the Corporation, any employee benefit plan (or...

  • Page 143
    ... to the collection, use and transfer of personal data as described in this Section 9. The Grantee understands that the Corporation and its subsidiaries hold certain personal information about the Grantee, including, but not limited to, the Grantee's name, home address and telephone number, date of...

  • Page 144
    ... of the MoneyGram International, Inc. 2005 Omnibus Incentive Plan (Plan). The Corporation hereby grants to Director, effective as of the Grant Date, the right and option (Option) to purchase all or any part of the aggregate number of shares of Common Stock set forth in the Notice, on the terms and...

  • Page 145
    ...to pay the purchase price either substantially all with Common Stock or partly with Common Stock and the balance in cash, he will be notified by the Corporation of the fair market value of the Common Stock on the exercise date and the amount of Common Stock or cash payable. Within five business days...

  • Page 146
    ... ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either: (1) the then outstanding shares of Common Stock of the Corporation (the "Outstanding Corporation Common Stock") or (2) the combined voting power of the then outstanding voting securities...

  • Page 147
    ...contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board, or (iii) Consummation...

  • Page 148
    ...(h) the foregoing terms and conditions apply in full with respect to any prior Option grants to Director. 9. Governing Law. This agreement is governed by and is to be construed and enforced in accordance with the laws of Delaware. Options to purchase shares of Common Stock of the Corporation may not...

  • Page 149
    ... MoneyGram Payment Systems, Inc. (Delaware) • CAG Inc. (Nevada Hematite Trust (Delaware) Monazite Trust (Delaware) Long Lake Partners, LLC (Delaware) Ferrum Trust (Delaware) FSMC, Inc. (Minnesota) Mid-America Money Order Company (Kentucky) MoneyGram International Holdings Limited (United Kingdom...

  • Page 150
    ...internal control over financial reporting, dated February 27, 2006 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the revision of the consolidated statements of cash flows described in Note 2), appearing in the Annual Report on Form 10-K of MoneyGram...

  • Page 151
    ... severally, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Form 10-K Annual Report of MoneyGram International, Inc. for the fiscal year ended...

  • Page 152
    ... financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules...

  • Page 153
    ... financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules...

  • Page 154
    ... 2002 In connection with the Annual Report of MoneyGram International, Inc. (the "Company") on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Philip W. Milne, Chief Executive Officer of the Company, certify...

  • Page 155
    ... 2002 In connection with the Annual Report of MoneyGram International, Inc. (the "Company") on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David J. Parrin, Chief Financial Officer of the Company, certify...