MoneyGram 2010 Annual Report Download - page 16

Table of Contents
Our Series B Stock significantly dilutes 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
(assuming conversion). 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 84 percent (assuming conversion) as of
December 31, 2010.
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 D 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 a holder of the B Stock, has appointed four members to our Board
of Directors. Goldman Sachs, as a holder of the B-1 Stock, has the right to appoint a director to our Board of Directors. Goldman Sachs
has not exercised this right, but has appointed two observers who attend meetings of our Board of Directors. The size of our Board has
been set at nine directors, four 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.
Sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions, could
adversely affect our business, financial condition and results of operations.
We face certain risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained
deterioration in the liquidity, or failure, of our clearing, cash management and custodial financial institutions. In particular:
• We may be unable to access funds in our investment portfolio on a timely basis 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.
• Clearing and cash management banks upon which we rely to conduct our official check, money order and money transfer businesses
could fail or experience sustained deterioration in liquidity. This could lead to our inability to clear our payment service instruments
and move funds on a global and timely basis as required to settle our obligations and collect partner receivables.
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