MoneyGram 2008 Annual Report Download - page 129

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Consolidated Balance Sheets and was reduced as stock was issued from the trust to fund employee benefits. As of December 31, 2007, all
shares in the Trust had been issued.
Deferred Compensation Plans — Under the Deferred Compensation Plan for Directors of MoneyGram International, Inc., non-employee
directors may defer all or part of their retainers, fees and stock awards in the form of stock units or cash. In 2007, the plan was amended
to require that a portion of the retainer received by non-employee directors be deferred in stock units. Director deferred accounts are
payable upon resignation from the Board. 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 our 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, 2008 and 2007, the Company had a liability related to the deferred compensation plans of $2.6 million and
$8.8 million, respectively, recorded in the "Accounts payable and other liabilities" component in the Consolidated Balance Sheets. The
rabbi trusts had a market value of $9.2 million and $13.6 million at December 31, 2008 and 2007, respectively, recorded in "Other assets"
in the Consolidated Balance Sheets.
Note 12 — Mezzanine Equity
Preferred Stock — In connection with the Capital Transaction, the Company issued 495,000 shares of B Stock and 265,000 shares of B-1
Stock to THL and Goldman Sachs, respectively, for a purchase price of $495.0 million and $265.0 million, respectively. In addition, the
Company paid $7.5 million of capitalized transaction costs relating to the issuance of the Series B Stock and the Notes through the
issuance of 7,500 shares of B-1 Stock to Goldman Sachs. The B Stock and B-1 Stock are referred to collectively as the "Series B Stock."
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 (the "D Stock"), which is a non-voting common equivalent stock.
The Series B Stock pay 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 five
years. While no dividends have been declared as of December 31, 2008, the Company has accrued dividends through a charge to
"Additional paid-in capital" as accumulated and unpaid dividends are included in the redemption price of the Series B Stock. The
Series B Stock also participate 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, 2008, 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
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