UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant    þ
Filed by a Party other than the Registrant   o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

MONEYGRAM INTERNATIONAL, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1)		Title of each class of securities to which transaction applies:
	2)		Aggregate number of securities to which transaction applies:
	3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	4)		Proposed maximum aggregate value of transaction:
	5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

1)		Amount Previously Paid:
2)		Form, Schedule or Registration Statement No.:
3)		Filing Party:
4)		Date Filed:

 

 

 

MoneyGram Tower

1550 Utica Avenue South

Minneapolis, Minnesota 55416

 

April 26, 2010

 

Dear MoneyGram Stockholder:

 

You are invited to attend our 2010 Annual Meeting of Stockholders, which will be held at 8:30 a.m. Central Time on Wednesday, May 26, 2010 in the Industry 1 Room of the W Hotel, located at 2440 Victory Park Lane, Dallas, Texas.

 

Details of the business to be conducted at the meeting are described in the attached Notice of Annual Meeting of Stockholders and proxy statement.

 

Your vote is important. Whether or not you plan to attend the meeting, please sign, date and return the enclosed proxy card in the envelope provided, or you may vote by telephone or on the Internet as described on your proxy card. If you plan to attend the meeting, you may vote in person.

 

Also enclosed is a copy of our Annual Report on Form 10-K for the year ended December 31, 2009. I encourage you to read the Annual Report on Form 10-K for information about the company’s performance in 2009.

 

We look forward to seeing you at the meeting.

 

Sincerely,

 

Pamela H. Patsley

Chairman and Chief Executive Officer

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

April 26, 2010

 

The Annual Meeting of Stockholders of MoneyGram International, Inc. will be held at 8:30 a.m. Central Time on Wednesday, May 26, 2010 in the Industry 1 Room of the W Hotel, located at 2440 Victory Park Lane, Dallas, Texas for the following purposes:

 

 

3. To amend the MoneyGram International, Inc. 2005 Omnibus Incentive Plan; and

 

 

Only stockholders of record of common stock and Series B Participating Convertible Preferred Stock at the close of business on April 16, 2010 (the “record date”) are entitled to receive this notice and to vote at the meeting.

 

Our Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”), including financial statements, is included with your proxy materials.

 

To assure your representation at the meeting, please access the automated telephone voting feature or the Internet voting option described on the proxy card, or vote, sign and mail the enclosed proxy card as soon as possible. We have enclosed a return envelope, which requires no postage if mailed in the United States.

 

By Order of the Board of Directors

 

 

Timothy C. Everett

Executive Vice President, General Counsel and
Corporate Secretary

 

1550 Utica Avenue South

Minneapolis, Minnesota 55416

 

TABLE OF CONTENTS

 

 

MONEYGRAM INTERNATIONAL, INC.
PROXY STATEMENT

 

A proxy is solicited on behalf of the Board of Directors of MoneyGram International, Inc. (“MoneyGram,” the “Company,” “we,” “us” or “our”) for use at this Annual Meeting of Stockholders to be held on Wednesday, May 26, 2010 and at any adjournment of the meeting. We are first mailing the proxy statement and proxy card to holders of MoneyGram capital stock on or about April 26, 2010.

 

The proxy statement and 2009 Form 10-K are available at www.moneygram.com.

 

MoneyGram has three classes of capital stock outstanding: common stock, Series B Participating Convertible Preferred Stock (the “B Stock”) and Series B-1 Participating Convertible Preferred Stock (the “B-1 Stock,” and, together with the B Stock, the “Series B Stock”).

 

On the record date, 83,208,022 shares of common stock, 495,000 shares of B Stock and 272,500 shares of B-1 Stock were outstanding. As of the record date, the 495,000 shares of B Stock are convertible into 255,173,522 shares of common stock, and the 272,500 shares of B-1 Stock are convertible into 109,000 shares of Series D Participating Convertible Preferred Stock (the “D Stock”), which are convertible by a holder other than The Goldman Sachs Group, Inc. and its affiliates (the “Goldman Sachs Group”), into 140,474,313 shares of common stock. Each share of B-1 Stock will automatically convert into one share of B Stock upon transfer to any holder other than the Goldman Sachs Group.

 

Our stockholders holding Series B Stock would own approximately 82.6 percent of our common stock on a diluted basis upon conversion of their Series B Stock. Effectively, holders of the B Stock hold approximately 82.6 percent of the voting power of our stock, voting as a single class with the common stockholders. The B-1 Stock is non-voting stock except for the rights to vote on limited matters specified in the Certificate of Designations, Preferences and Rights of the B-1 Stock of the Company, none of which are being presented for a vote at this meeting.

 

A holder of common stock is entitled to one vote for each share of common stock held on the record date for each of the proposals set forth herein. The holders of our B Stock are entitled to vote on all matters voted on by holders of our common stock, voting as a single class with the common stockholders. The holders of our B Stock have a number of votes equal to the number of shares of common stock issuable if all outstanding shares of B Stock were converted plus 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 on the record date. There is no cumulative voting.

 

You are entitled to vote at the meeting if you are a holder of record of common stock or B Stock on the record date. You may vote in person at the meeting, by automated telephone voting, on the Internet or by proxy.

 

Proxies may be revoked or changed if you:

 

 

The cost of solicitation, if any, will be borne by MoneyGram. Proxies may be solicited on our behalf by directors, officers or employees, in person or by telephone, electronic transmission and facsimile transmission. No additional compensation will be paid to such persons for such solicitation. MoneyGram will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to beneficial owners of shares.

 

The presence at this annual meeting of stockholders, in person or by proxy, of a majority of voting power of our common stock and B Stock issued and outstanding and eligible to vote will constitute a quorum for the transaction of business at the meeting. In general, shares of common stock and B Stock either represented by a properly signed and returned proxy card, or properly voted by telephone or on the Internet, will be counted as present and entitled to vote at the meeting for purposes of determining a quorum. Proxies received but marked as abstentions (or “withhold authority” with respect to one or more directors and broker non-votes) will be included in the voting power considered to be present at the meeting for purposes of determining a quorum. Broker non-votes are shares held of record by a broker that are not voted on a matter because the broker has not received voting instructions from the beneficial owner of the shares and either lacks or declines to exercise the authority to vote the shares in its discretion.

 

Proxies will be voted as specified by the stockholder. Signed proxies that lack any specification will be voted “FOR” the Board’s director nominees, “FOR” the ratification of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for 2010 and “FOR” the amendments to the MoneyGram International, Inc. 2005 Omnibus Incentive Plan (the “2005 incentive plan”), except with respect to the MoneyGram International, Inc. 401(k) Plan (the “401(k) plan”) as described below. The proxy holders will use their discretion on other matters. If a nominee cannot or will not serve as a director, the proxy may be voted for another person as the proxy holders decide.

 

Election of Directors (Proposal 1).  Each director nominee receiving a majority of the voting power of the then outstanding common stock and B Stock, voting together as a single class, voted with respect to the director, will be elected as a director. This means that the voting power of the stock voted “FOR” a director nominee must exceed the voting power of the stock voted “AGAINST” that director nominee in order for that nominee to be elected as a director. Shares not represented at the meeting and proxies marked “ABSTAIN” have no effect on the election of directors.

 

Ratification of Appointment of Independent Registered Public Accounting Firm for 2010 (Proposal 2).  The affirmative vote of a majority of the voting power of the then outstanding common stock and B Stock, voting together as a single class, voted with respect to this proposal is required for the approval of this proposal. Shares not represented at the meeting and proxies marked “ABSTAIN” with regard to this proposal have no effect on this proposal.

Approval of Amendments to MoneyGram International, Inc. 2005 Omnibus Incentive Plan (Proposal 3).  The affirmative vote of a majority of the voting power of the then outstanding common stock and B Stock, voting together as a single class, voted with respect to this proposal is required for the approval of this proposal, provided the total number of shares that vote on the proposal represents a majority of the shares of common stock and B Stock outstanding on the record date. A proxy marked “ABSTAIN” with regard to this proposal will have the effect of a vote against this proposal. Affiliates of Thomas H. Lee Partners, L.P. (“THL”) have provided an executed proxy giving two executive officers of MoneyGram proxies to vote their shares “FOR” the amendments to the 2005 incentive plan at this annual meeting of stockholders.

 

If you hold your shares in street name and do not provide voting instructions to your broker, the shares may be counted as present at the meeting for the purpose of determining a quorum and may be voted on Proposal 2 at the discretion of your broker. Such shares will not be voted at the discretion of your broker on Proposals 1 or 3 and will have no effect on the outcome of those proposals.

 

If you are a participant in the 401(k) plan, your proxy will serve as a voting instruction to the Independent Fiduciary (as defined in the 401(k) plan). The Independent Fiduciary shall instruct the Trustee. The Independent Fiduciary shall follow each participant’s instructions unless it determines that doing so would be contrary to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). If no voting instructions are received from a participant in the 401(k) plan, the Trustee will vote those shares in accordance with the majority of shares voted in the 401(k) plan for which instructions were received, unless the Independent Fiduciary determines that doing so would be contrary to ERISA and instructs the Trustee to so vote such shares differently.

 

Because many stockholders hold shares of our common stock in multiple accounts or share an address with other stockholders, stockholders may receive duplicate mailings of notices or proxy materials. Stockholders may avoid receiving duplicate mailings as follows:

 

 

On March 25, 2008, MoneyGram completed a recapitalization transaction (the “recapitalization”) pursuant to the terms of an amended and restated purchase agreement (the “Purchase Agreement”), dated as of March 17, 2008, with THL and affiliates of Goldman, Sachs & Co. (“Goldman Sachs,” and, together with THL, the “Investors”). Pursuant to the Purchase Agreement, we, among other things, sold 495,000 shares of B Stock to THL and 265,000 shares of B-1 Stock to Goldman Sachs for an aggregate purchase price of $760.0 million. In addition, the Company paid $7.5 million of transaction costs relating to the issuance of the Series B Stock through the issuance of 7,500 shares of B-1 Stock to Goldman Sachs. The issuance of the Series B Stock gave the Investors an initial equity interest of approximately 79 percent. For additional information regarding the recapitalization, the Purchase Agreement, the terms of the Series B Stock and related matters, see “Part Four — Other Important Information — Transactions with Related Persons” in this proxy statement.

 

Pursuant to the Purchase Agreement, the Investors have been provided with certain rights with respect to representation on the Board and committees of the Board (“Board Representatives”), which resulted in a change to the composition of the majority of the Board in March 2008. Additionally, under the Purchase Agreement, as long as the Investors have a right to designate directors to our Board, Goldman Sachs has the right to designate one director who would have one vote and THL has the right to designate two to four directors who each have equal votes and who are to 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 has multiple votes and each other director has one vote. To date, Goldman Sachs has not designated a member to the Board. The Board has, however, consented to the general attendance by two representatives of Goldman Sachs to observe at Board meetings.

 

The Company’s Amended and Restated Certificate of Incorporation provides that each director of the Company is elected for a one-year term by the vote of a majority of the voting power of the then outstanding voting stock, voting together as a single class, voted with respect to the director. If a vacancy occurs during the year, the vacant directorship may be filled by the affirmative vote of a majority of the remaining directors for a term expiring at the next annual meeting of stockholders, subject to certain rights provided to the Investors under the Purchase Agreement. Each director holds office until a successor has been duly elected and qualified.

 

The Board of Directors is currently comprised of eight members: three Independent Directors (as defined below), four Board Representatives and Pamela H. Patsley, Chairman and Chief Executive Officer (“CEO”) of the Company. Jess T. Hay and Albert M. Teplin have served as directors since MoneyGram become an independent public company on June 30, 2004, when Viad Corp (“Viad”), as our sole stockholder, distributed all of our outstanding common stock to the stockholders of Viad in a tax-free spin-off transaction (referred to in this proxy statement as the “Spin-Off”). Othón Ruiz Montemayor was appointed by the Board on August 18, 2005 in accordance with our Bylaws to fill a newly created vacancy and was subsequently elected by our stockholders. An “Independent Director” means a director or director nominee who satisfies all standards for independence under the New York Stock Exchange, Inc. (“NYSE”) listing standards, the categorical standards for independence contained in our Corporate Governance Guidelines and any other applicable laws. Messrs. Hay, Ruiz and Teplin currently serve as Independent Directors on the Board and are not seeking reelection at this annual meeting of stockholders. Information

about the nominees for election as Independent Directors is set forth in “Part Three — Proposals to be Voted on at the 2010 Annual Meeting — Proposal 1: Election of Directors” in this proxy statement. On March 25, 2008, pursuant to the rights provided to THL in the Purchase Agreement, the Board elected two Board Representatives, Messrs. Scott L. Jaeckel and Seth W. Lawry, who were subsequently elected by our stockholders on May 12, 2009. On November 19, 2008, pursuant to the rights provided to the Investors in the Purchase Agreement, the Board set the number of directors at nine and elected two additional Board Representatives, Messrs. Thomas M. Hagerty (designee of THL) and Ganesh B. Rao (designee of THL), who were subsequently elected by our stockholders on May 12, 2009. On January 21, 2009, the Board elected Pamela H. Patsley and Anthony P. Ryan, the Company’s former President and CEO, to fill two vacancies on the Board, who were subsequently elected by our stockholders on May 12, 2009. On September 1, 2009, Mr. Ryan resigned from his position on the Board and a resulting vacancy on the Board currently exists. A director will be elected to fill this vacancy at this annual meeting of stockholders. To date, Goldman Sachs has not designated a member to the Board.

 

Because more than 50 percent of the voting power of our stock is held by the Investors, the Company has elected to be treated as a “controlled company” for purposes of the NYSE listing standards. As a result, the NYSE listing standards do not require our Board to be comprised of at least a majority of Independent Directors or our Human Resources and Nominating Committee to be comprised entirely of Independent Directors.

 

The NYSE listing standards do, however, require our Audit Committee to be comprised entirely of Independent Directors. The NYSE listing standards also require our Board to make a formal determination each year as to which of our directors are independent.

 

The Board has determined that the following director nominees are independent within the meaning of the NYSE listing standards, applicable Securities and Exchange Commission (“SEC”) regulations and the categorical standards for independence contained in our Corporate Governance Guidelines: Ms. Ann Mather and Messrs. J. Coley Clark, Victor W. Dahir and W. Bruce Turner. The Board has adopted categorical standards to assist in the making of determinations of independence. The following commercial or charitable relationships will not be considered to be material relationships that would impair a director’s (or director nominee’s) independence: (a) if the director (or director nominee) is an executive officer or employee, or their immediate family member is an executive officer, of another company that does business with MoneyGram or its affiliates and the annual sales to, or purchases from, MoneyGram or its affiliates are less than the greater of $1.0 million or one percent of the other company’s annual consolidated gross revenues; (b) if the director (or director nominee) is an executive officer of another company which is indebted to MoneyGram, or to which MoneyGram is indebted, and the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the company that he or she serves as an executive officer; or (c) if the director (or director nominee) serves as an officer, director or trustee of a charitable organization and MoneyGram’s annual charitable contributions to the organization are less than the greater of $200,000 or one percent of that organization’s total annual charitable receipts, which shall not include MoneyGram’s automatic matching of director charitable contributions.

 

The Board held five regular and six special meetings during 2009. Each director attended at least 75 percent of the aggregate number of meetings of the Board and meetings of the committees on which the director served.

 

Under our Corporate Governance Guidelines, directors are expected to attend the annual meeting of stockholders, Board meetings and meetings of committees on which they serve. All directors attended the 2009 annual meeting of stockholders.

 

The Board schedules regular executive sessions of the non-management directors. The Board chooses one of its members to preside over each executive session of non-management directors. In 2009, the Board held three executive sessions of the non-management directors, which included all directors except Ms. Patsley and Mr. Ryan.

 

Under our Corporate Governance Guidelines and the NYSE listing standards, the Board schedules an executive session of the Independent Directors at least annually. In 2009, the Board held one executive session of the Independent Directors.

 

In accordance with each Certificate of Designations, Preferences and Rights of the Series B Stock, the Independent Directors determine quarterly whether dividends on the Series B Stock should be paid in cash or accrued by the Company. In addition, the Independent Directors are required to approve the redemption of the Series B Stock by the Company and any adjustment for unspecified action by the Company which would materially adversely affect the conversion rights of the holders of shares of the Series B Stock.

 

The Company does not have a lead independent director. The Board does, however, choose one non-management director to preside over each executive session of non-management directors. The Company has at various points in its history had a combined Chairman and CEO, and has also maintained separate Chairman and CEO positions. After the resignation of Philip W. Milne, the Company’s former Chairman and CEO, in June 2008, the Board directed Anthony P. Ryan, the Company’s Executive Vice President and Chief Operating Officer of the Company at the time, to oversee the day-to-day operations of the Company during the search for a successor. In January 2009, the Board deemed it advisable and in the best interests of the Company to separate the roles of Chairman and CEO and appointed Pamela H. Patsley as Executive Chairman of the Company on a part-time basis and Mr. Ryan as President and CEO of the Company. As Mr. Ryan had never served in a CEO role, the Board deemed it advisable to appoint Ms. Patsley on a part-time basis to provide guidance to Mr. Ryan. After Mr. Ryan’s resignation in September 2009, the Board appointed Ms. Patsley as Chairman and CEO of the Company. At this time, we believe that a combined Chairman and CEO is the most desirable approach for the Company because it creates efficiencies and enables the CEO to act as a bridge between management and the Board, thereby promoting a unified approach to the development and execution of the Company’s strategy.

 

The Board of Directors is responsible for providing oversight of risk management functions including the Company’s policies and strategies relating to the management of credit, liquidity, market, financial and operational risks. The Board regularly assesses management’s response to critical risks and recommends changes to management, including changes in leadership, where appropriate.

 

In addition to regularly scheduled Board meetings, the entire Board of Directors meets annually with key members of management to review the Company’s business and agree upon its strategy and the risks involved with such strategy. Management and the Board discuss the amount of risk the Company is willing to accept related to implementing our strategy. On a periodic basis throughout the year, management responsible for managing credit, liquidity, market and key operational risks including

legal, regulatory compliance, fraud, information technology and security meet directly with the full Board to provide an update on key risks and their processes and systems to manage the risk. The Board approves management’s policies related to key risk areas and provides timely input to management regarding risk issues and the appropriateness of management’s response. The Board also approves actions surrounding our debt agreements, dividend and interest payments, and legal settlements, evaluates potential acquisitions, and approves the annual budget. Key finance, accounting and treasury management meet directly with the full Board to provide an update on our financial results.

 

The Board of Directors delegates responsibility for overseeing certain risk to the Audit Committee. The Audit Committee monitors the quality and integrity of our financial statements and our compliance with legal and regulatory requirements. The Audit Committee is also responsible for understanding risk assessment and risk management policies. The internal audit function reports directly to the Audit Committee and is responsible for testing, on a risk basis, management’s compliance with policies and procedures. On an annual basis, the Audit Committee reviews internal audit’s process for assessing risk and the results of such risk assessment. The Audit Committee also reviews and approves the annual audit plan and regularly reports to the Board. For additional information with respect to the Audit Committee, see “Part Two — Board of Directors and Governance — Audit Committee” in this proxy statement.

 

The Company believes that its current leadership structure, which combines the role of Chairman and CEO, as discussed above, promotes effective oversight of the Company’s risk management by providing united leadership through a single person, while allowing all directors to be actively involved in the risk oversight function and fully engaged in discussions with management and Board deliberations and decisions.

 

The Board currently maintains two standing committees: Audit Committee and Human Resources and Nominating Committee. The Board has also created three special committees: Independent Director Special Committee, Special Committee and Special Sub-Committee. As a “controlled company” under the NYSE listing standards, MoneyGram is not required to maintain separate compensation and nominating committees.

 

The Audit Committee was comprised of Messrs. Teplin (Chair), Hay and Ruiz during 2009. Messrs. Teplin, Hay and Ruiz are not seeking reelection at this annual meeting of stockholders. If each of the director nominees is elected at this annual meeting of stockholders, the Board of Directors will appoint at least three Independent Directors to comprise the Audit Committee immediately following the meeting.

 

The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (“Exchange Act”). Membership on the Audit Committee is limited to Independent Directors and the Board has determined that each member of that committee is an Independent Director. The Board has determined that all members of the Audit Committee are financially literate under the NYSE listing standards and that Mr. Teplin qualified as an “audit committee financial expert” under the rules of the SEC for 2009. If each of the director nominees is elected at this annual meeting of stockholders, the Board of Directors will designate an “audit committee financial expert” under the rules of the SEC immediately following the meeting. In 2009, no member of the Audit Committee simultaneously served on the audit committee of more than three public companies.

 

The Audit Committee held nine regular and one special meeting in 2009. The Board has adopted a separate written charter for the Audit Committee, which is available in the Investor Relations section of our website at www.moneygram.com. A copy of the Audit Committee charter is also available in print to any stockholder who submits a request to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary.

The Audit Committee reports regularly to the full Board and annually evaluates its own performance. The Audit Committee meets periodically during the year, usually in conjunction with regular meetings of the Board. It also meets to review quarterly earnings and related press releases and to review our management’s discussion and analysis for inclusion in our quarterly reports on Form 10-Q and our annual report on Form 10-K filed with the SEC. The Audit Committee appoints our independent registered public accounting firm and assists the Board in monitoring the quality and integrity of our financial statements, our compliance with legal and regulatory requirements and the independence and performance of our internal auditor and our independent registered public accounting firm. From time to time, the Audit Committee meets in executive session with our independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee. For additional information regarding the responsibilities of the Audit Committee, see “Part Two — Board of Directors and Governance — Risk Oversight” in this proxy statement.

 

The Human Resources and Nominating Committee was comprised of Messrs. Lawry (Chair), Hay and Jaeckel in 2009. Mr. Hay is not seeking reelection at this annual meeting of stockholders. If each of the director nominees is elected at this annual meeting of stockholders, the Board of Directors will appoint an Independent Director to the Human Resources and Nominating Committee to ensure the committee is comprised of at least three Board members, of which at least one will be an Independent Director.

 

The Human Resources and Nominating Committee held four regular and four special meetings in 2009. The Board has adopted a separate written charter for the Human Resources and Nominating Committee which is available in the Investor Relations section of our website at www.moneygram.com. A copy of the Human Resources and Nominating Committee charter is also available in print to any stockholder who submits a request to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary.

 

The Human Resources and Nominating Committee reports regularly to the full Board and annually evaluates its own performance. It meets periodically during the year, usually in conjunction with regular meetings of the Board. The Human Resources and Nominating Committee oversees development and implementation of a compensation strategy designed to enhance profitability and fundamental value for the Company. It also reviews and approves the salary and other compensation of the Chairman and CEO and the other executive officers, as well as the compensation and benefits of our non-employee directors. The Human Resources and Nominating Committee determines incentive compensation targets and awards under various compensation plans and makes grants of stock options and other awards under our stock incentive plans. The Human Resources and Nominating Committee currently utilizes the services of Hewitt Associates, LLC (“Hewitt”) as its compensation consultant. In 2009, Hewitt assisted the Human Resources and Nominating Committee with an evaluation of the Company’s peer group and executive compensation matters. For additional information regarding our compensation consultant, see “Part Four — Other Important Information — Compensation Discussion and Analysis — Authority Over and Responsibility for Executive Compensation — Role of Compensation Consultant” in this proxy statement.

 

The Human Resources and Nominating Committee is also responsible for recommending to the Board a slate of directors for election by the stockholders at each annual meeting and for proposing candidates to fill any vacancies on the Board. The Human Resources and Nominating Committee is also responsible for assessing the Board’s performance and reviewing our Corporate Governance Guidelines.

 

The Independent Director Special Committee was created by the Board in March 2010 and is comprised of Messrs. Hay, Ruiz and Teplin. This committee was created to assist the Board in identifying individuals qualified to become Independent Directors.

 

The Special Committee was created by the Board in May 2009 and is comprised of Ms. Patsley (Chair) and Messrs. Hagerty, Lawry and Teplin. The Special Committee held seven special meetings in 2009. This committee was created to receive reports and take action with respect to specific regulatory inquiries and litigation matters involving the Company. The Special Committee meets on an as needed basis only and provides reports of its activities to the full Board as warranted.

 

The Special Sub-Committee was created by the Board in June 2009 and is comprised of Ms. Patsley and Mr. Hagerty. The Special Sub-Committee held seven special meetings in 2009. This committee was created to objectively examine and evaluate the demands, claims and allegations made in connection with specific derivative litigation matters involving the Company. The Special Sub-Committee meets on an as needed basis only and provides reports of its activities to the full Board as warranted.

 

No member of the Company’s Human Resources and Nominating Committee is a current or former officer or employee of the Company. During the year ended December 31, 2009, none of our executive officers served as a director or member of the compensation committee (or other committee performing similar functions) of another entity when an executive officer of such entity served as a director of the Company or on our Human Resources and Nominating Committee.

 

Stockholders or other interested parties may communicate with our non-management directors as a group, committees of the Board or individual directors by sending a writing to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary. Upon receipt, the Corporate Secretary will forward all such correspondence, as appropriate. Complaints and concerns regarding MoneyGram may also be reported anonymously and confidentially via MoneyGram’s Always Honest Hotline at 888-218-0282. The text of our Policy on Communications with the Board is contained in our Corporate Governance Guidelines, which are posted in the Investor Relations section of our website at www.moneygram.com. Copies of the Guidelines are also available in print to any stockholder who submits a request to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary.

 

Our Corporate Governance Guidelines describe the process for selection of director nominees, including desired qualifications. Although there are no minimum qualifications for nominees, a candidate for Board service must possess the ability to apply good business judgment, have demonstrated the highest level of integrity, be able to properly exercise the duties of loyalty and care in the representation of the interests of our stockholders and must be able to represent all of our stockholders fairly and equally. Candidates should also exhibit proven leadership capabilities, and experience in business, finance, law, education, technology or government. In addition, candidates should have an understanding regarding major issues facing public companies similar in scope to MoneyGram. Experience in payment or financial services is an added benefit. Candidates must have, and be prepared to devote, adequate time to the Board and its committees. Although no formal policy exists, the Human Resources and Nominating Committee will seek to promote through the nomination process an appropriate diversity on the Board of experience (including international experience), expertise, perspective, age, gender and ethnicity. The Board will also consider the independence of a nominee under the NYSE listing standards, applicable SEC regulations and the Board’s categorical standards for independence contained in our Corporate Governance Guidelines.

In general, candidates for membership as Independent Directors are evaluated, regardless of the source of the nomination, by the Human Resources and Nominating Committee for recommendation to the Board in accordance with their charters and the procedures described in the Corporate Governance Guidelines. However, so long as the Investors or their affiliates own, in the aggregate, Series B Stock, D Stock or common stock representing an initial cost of not less than $75 million, they are entitled to nominate and cause the Company to appoint replacements for their respective Board Representatives.

 

In March 2010, the Human Resources and Nominating Committee retained Hiedrick & Struggles International, Inc., an independent third-party search firm (“Heidrick & Struggles”), to assist the Board in identifying and reviewing prospective Independent Director nominees. Heidrick & Struggles was specifically instructed to evaluate candidates in light of the Board’s requirements regarding experience, skills and ethical standards. As a result, Ms. Mather and Messrs. Coley, Dahir and Turner were referred to the Company and recommended by the Board as nominees for election as Independent Directors at this annual meeting of stockholders. The Independent Director Special Committee was consulted in this process and joined in the recommendation of the nominees.

 

A stockholder making a nominating recommendation for the election of a director must ensure that the nomination complies with our Bylaw provisions on making stockholder proposals at an annual meeting. For information regarding stockholder proposals for our 2011 annual meeting of stockholders, see the section entitled “Part Four — Other Important Information — Stockholder Proposals for the 2011 Annual Meeting” in this proxy statement.

 

Corporate Governance Guidelines.  Our Board has adopted Corporate Governance Guidelines that describe corporate values and ethical business conduct, duties of directors, Board operations and committee matters, director qualifications and selection process, director compensation, director independence standards, CEO evaluation, management succession, process for stockholders or other interested parties to communicate with directors and annual Board evaluations. The Guidelines are available in the Investor Relations section of our website at www.moneygram.com. Copies of the Guidelines are also available in print to any stockholder who submits a request to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary.

 

Code of Ethics.  All of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, are subject to our Code of Ethics, our Always Honest policy and the provisions regarding corporate values and ethical business conduct contained in our Corporate Governance Guidelines. These documents are available in the Investor Relations section of our website at www.moneygram.com. Copies of these documents are also available in print to any stockholder who submits a request to MoneyGram International, Inc., 1550 Utica Avenue South, GHQ 8020, Minneapolis, Minnesota 55416, Attention: Corporate Secretary. The Company intends to disclose any amendment to, or waiver from, our Code of Ethics by disclosing such information on our website.

 

Committee Authority to Retain Independent Advisors.  Each committee of the Board has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by the Company.

 

Whistleblower Procedures.  The Audit Committee has established procedures for handling accounting and auditing complaints whereby employees of the Company may submit a good faith complaint regarding accounting, internal accounting controls or auditing matters without fear of dismissal or retaliation. MoneyGram is committed to achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and auditing practices. In order to facilitate the reporting of employee complaints, the Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting and auditing matters, and confidential, anonymous submission by employees of concerns regarding such questionable matters.

Disclosure Committee.  We have established a Disclosure Committee comprised of members of management and chaired by our Senior Vice President and Controller to assist in fulfilling our obligations to maintain disclosure controls and procedures and to coordinate and oversee the process of preparing our periodic securities filings with the SEC.

 

Asset/Liability Committee.  We have established an Asset/Liability Committee comprised of members of management and chaired by our Senior Vice President and Treasurer to oversee and make recommendations to the Board regarding financial policies and procedures of the Company.

 

No Executive Loans.  We do not extend loans to our executive officers or directors and do not have any such loans outstanding.

 

Majority Vote Standard.  In an uncontested election, our Bylaws require directors to be elected for a one-year term by the vote of the majority of the voting power of the then outstanding voting stock, voting together as a single class, voted with respect to the director. A majority of the votes cast means that the voting power of the stock voted “FOR” a director must exceed the voting power of the stock voted “AGAINST” that director. In a contested election, a situation in which the number of nominees exceeds the number of directors to be elected as of a date that is 14 days in advance of the date of filing of the definitive proxy statement, the standard for election of directors would be a plurality of the voting power of the stock represented in person or by proxy at any such meeting and entitled to vote on the election of directors. A plurality means that the nominees receiving the highest percentage of voting power of the stock would be elected.

 

If a nominee who is serving as a director is not elected at this annual meeting of stockholders, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Bylaws, any director who fails to be elected must offer to tender his or her resignation to the Board. The Human Resources and Nominating Committee will then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Human Resources and Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the Board’s decision. If a nominee who was not already serving as a director is not elected at this annual meeting of stockholders, under Delaware law that nominee would not become a director and would not serve on the Board as a “holdover director.”

 

The following individuals are nominated as directors for terms expiring at the 2011 annual meeting of stockholders: Mmes. Patsley and Mather and Messrs. Clark, Dahir, Hagerty, Jaeckel, Lawry, Rao and Turner. Ms. Patsley and Messrs. Hagerty, Jaeckel, Lawry and Rao are currently serving as directors of the Company.

 

Each of the nominees has consented to being named in this proxy statement, and to serve as a director if elected. Each nominee elected as a director will continue in office until his or her successor has been elected and qualified or until his or her death, resignation or retirement. If any nominee is unable to serve, proxies will be voted in favor of the remaining nominees and may be voted for another person nominated by the Board. In making its recommendation to the Board for a slate of directors for election by the Company’s stockholders, the Human Resources and Nominating Committee and Independent Director Special Committee considered the criteria described in “Part Two — Board of Directors and Governance — Director Nominee Criteria and Process” in this proxy statement. The biographies of each of the director nominees below contain information regarding age, the year they first became directors, business

experience, other public company directorships held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experience, qualifications, attributes or skills that caused the Human Resources and Nominating Committee and Independent Director Special Committee to determine that they should serve as directors of the Company.

 

J. Coley Clark, 64, Director Nominee

 

Mr. Clark has been Chairman of the Board and Chief Executive Officer of BancTec, Inc., a global provider of document and payment processing solutions, since September 2004. In 2004, Mr. Clark retired from Electronic Data Systems Corporation (“EDS”), a supply chain software and services company which was acquired by Hewlett-Packard in 2008, as Senior Vice President and head of the Financial and Transportation Industry Group. He joined EDS in 1971 in the Systems Engineering Development Program and progressed through a variety of technical, sales and management roles related to the financial and insurance industries. He assumed responsibility for the Financial Industry Group in 1986 and was named a corporate officer in 1989. Mr. Clark was appointed a Senior Vice President in 1996 and served as a member of the Global Operations Council. In addition, Mr. Clark served three years in the U.S. Army, attaining the rank of Captain, and served as a company commander in Europe and Southeast Asia.

 

Other public company boards served on since 2005:  i2 Technologies, Inc. (2008-2010); Carreker Corporation (now part of Fiserv, Inc.) (2004-2007)

 

Other Director Criteria:  Mr. Clark brings over 30 years of experience in the financial industry to the Board. Through his current position as chairman of the board and CEO of BancTec, Inc. and his numerous positions at Electronic Data Systems Corporation, Mr. Clark has demonstrated his strong leadership skills and his ability to understand day-to-day operations, as well as the broader strategic issues facing a public company. In addition, Mr. Clark’s prior service on public company boards and committees provides him with a broad perspective on various governance and other matters.

 

Victor W. Dahir, 64, Director Nominee

 

Mr. Dahir worked for Visa U.S.A. Inc. (now Visa Inc.), a global payment technology company, from 1984 until his retirement in 2005, most recently as Executive Vice President, Finance and Administration and Chief Financial Officer of Inovant LLC, a subsidiary of Visa. He served as the Chief Financial Officer of Visa Inc. from 1991 to 2004 and held other positions of increasing responsibility from 1984 to 1991.

 

Other Director Criteria:  Mr. Dahir brings over 40 years of finance and accounting experience to the Board, including serving over 15 years in the position of CFO of Visa U.S.A., Inc. (now Visa, Inc.). Through these years Mr. Dahir has developed an expertise in financial services and has gained experience in several other areas that will prove valuable to the Board, including risk management, technology, legal, relationship management and banking regulation.

 

Thomas M. Hagerty, 47, Director since 2008

 

Mr. Hagerty is a Managing Director at THL and has been with that firm since 1988. He currently serves as a director of MGIC Investment Corp., a private mortgage insurance company; Fidelity National Financial, Inc., a title insurance company; Fidelity National Information Services, Inc., a financial processing company; and Ceridian Corporation, a processing services company. Mr. Hagerty was the Interim Chief Financial Officer of Conseco, Inc. from July 2000 through April 2001. On December 17, 2002, Conseco, Inc. voluntarily commenced a case under Chapter 11 of the United States Code in the United States Bankruptcy Court, Northern District of Illinois Eastern Division.

 

Other public company boards served on since 2005:  Affordable Residential Communities (1998-2005); Metris Companies Inc. (1999-2005); Syratech Corporation (1997-2005)

 

Other Director Criteria:  Mr. Hagerty is one of the Board Representatives designated by THL, as discussed above in “Part Two — Board of Directors and Governance.” Mr. Hagerty brings over 20 years of finance, banking and managerial experience to the Board that he gained from his positions at THL. In

addition, his service as a director at several public companies throughout the years has provided him with leadership experience and valuable insights and perspectives that he shares with the Board.

 

Scott L. Jaeckel, 39, Director since 2008

 

Mr. Jaeckel is a Managing Director at THL. Mr. Jaeckel worked at THL from 1994 to 1996 and rejoined the firm in 1998. From 1992 to 1994, Mr. Jaeckel worked at Morgan Stanley & Co. Incorporated, a global financial services company, in the Corporate Finance Department. He currently serves as a director of Ceridian Corporation; Paramax Capital Partners, a private capital company; Fidelity Sedgwick Holdings, Inc., a claims processing company; and Warner Music Group Corp., a recorded music and music publishing company.

 

Other public company boards served on since 2005:  Refco, Inc. (2004-2005)

 

Director Criteria:  Mr. Jaeckel is one of the Board Representatives designated by THL, as discussed above in “Part Two — Board of Directors and Governance.” Mr. Jaeckel brings significant finance and managerial experience to the Board that he gained from his years at THL and Morgan Stanley. In addition, due to his service as a director at several public and private companies throughout the years, he is familiar with how various boards handle a wide range of corporate and business issues.

 

Seth W. Lawry, 45, Director since 2008

 

Mr. Lawry is a Managing Director at THL. Mr. Lawry worked at THL from 1989 to 1990 and rejoined the firm in 1994. From 1987 to 1989 and 1992 to 1994, Mr. Lawry worked at Morgan Stanley & Co. Incorporated, a global financial services company, in the Mergers & Acquisitions, Corporate Finance and Equity Capital Markets Departments. He currently serves as a director of Warner Music Group Corp. and is a director of various private and non-profit institutions.

 

Other public company boards served on since 2005:  Fidelity National Information Services, Inc. (2005-2006); Houghton Mifflin Company (2003-2006); ProSiebenSat.1 Media AG (German Exchange) (2003-2007)

 

Director Criteria:  Mr. Lawry is one of the Board Representatives designated by THL, as discussed above in “Part Two — Board of Directors and Governance.” Mr. Lawry brings over 20 years of finance, banking and managerial experience to the Board that he gained from his positions at THL and Morgan Stanley, including experience in mergers and acquisitions and capital markets. In addition, his service as a director at various public and private companies and non-profit institutions provides him with unique and valuable perspectives that he shares with the Board.

 

Ann Mather, 49, Director Nominee

 

From 1999 to 2004, Ms. Mather was Executive Vice President and Chief Financial Officer of Pixar Animation Studios, Inc., a computer animation studio. Prior to her service at Pixar, Ms. Mather was Executive Vice President and Chief Financial Officer at Village Roadshow Pictures, the film production division of Village Roadshow Limited. From 1993 to 1999, she held various executive positions at The Walt Disney Company, including Senior Vice President of Finance and Administration for its Buena Vista International Theatrical Division. Ms. Mather currently serves as a director of Google Inc., an internet search technologies company, Glu Mobile Inc., a publisher of mobile games, and Ariat International, Inc., a privately held manufacturer of footwear for equestrian athletes.

 

Other public company boards served on since 2005:  Central European Media Enterprises Ltd. (2004-2009); Shopping.com Inc. (2004-2005)

 

Director Criteria:  Ms. Mather brings a wealth of financial experience to the Board that she gained from the numerous executive positions she has held throughout the years, including serving as CFO of Pixar Animation Studios. In addition to her financial expertise, Ms. Mather has experience with administration, business affairs, investor relations and human resources issues. Ms. Mather’s service

on various public company boards and committees, including her current service on the board of Google Inc., has provided her with an understanding of the business and strategic issues facing a global company like MoneyGram.

 

Pamela H. Patsley, 53, Director since 2009

 

Ms. Patsley has been Chairman and CEO of the Company since September 2009. From January to September 2009, she served as Executive Chairman of the Corporation. Prior to that, Ms. Patsley 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. She currently serves as a director of Texas Instruments, Inc., a semiconductor design and manufacturing company; and Dr. Pepper Snapple Group, Inc., a beverage company.

 

Other public company boards served on since 2005:  Adolph Coors Company (1996-2005); Molson Coors Brewing Company (2005-2009); Pegasus Solutions, Inc. (2002-2006)

 

Director Criteria:  Ms. Patsley brings a wealth of knowledge and expertise, as well as leadership experience, to the Board that she gained through numerous executive positions that she has held throughout the years, including serving in the roles as CEO, CFO and president of various companies in the payment services industry. Through these roles she has also gained experience in the area of international business. In addition, Ms. Patsley’s service as a director at several public companies throughout the years has provided her with unique insights into various industries and issues facing boards.

 

Ganesh B. Rao, 33, Director since 2008

 

Mr. Rao is a Principal at THL. He worked at THL from 2000 to 2002 and rejoined the firm in 2004. From 1998 to 2000, Mr. Rao worked at Morgan Stanley & Co. Incorporated, a global financial services company, in the Mergers & Acquisitions Department.

 

Director Criteria:  Mr. Rao is one of the Board Representatives designated by THL, as discussed above in “Part Two — Board of Directors and Governance.” Mr. Rao brings significant finance and business experience, including mergers and acquisitions experience, to the Board that he gained through his positions at THL and Morgan Stanley. Mr. Rao’s viewpoints and ability to communicate and work with management has proven valuable to the Board.

 

W. Bruce Turner, 50, Director Nominee

 

Mr. Turner served as the Chief Executive Officer of Lottomatica S.p.A., a global lottery operations and technology services company, from 2006 to 2008. From 2002 to 2006, he served as Chief Executive Officer, as well as other executive roles, of GTECH Holdings Corporation, a global technology services company in the government regulated lottery industry, and now a subsidiary of Lottomatica. From 2001 to 2002, Mr. Turner served as Chairman of GTECH and from 2000 to 2001 he served as Chairman and Acting Chief Executive Officer. Prior to joining GTECH, Mr. Turner was the Managing Director, Gaming Equity Research, of Salomon Smith Barney Inc. from 1993 to 1999. He currently serves as a director of Lottomatica S.p.A.

 

Director Criteria:  Mr. Turner brings significant leadership experience, financial acumen and regulatory experience to the Board that he gained through the numerous executive positions that he has held throughout the years, including serving as chairman of the board and CEO of a public company. Mr. Turner also has substantial public company board and committee experience, through which he has handled a variety of governance, audit, regulatory and international issues. From this experience, Mr. Turner will be able to provide the Board with a diverse perspective and valuable insights.

 

Each non-employee director received compensation for service on the Board and its committees. Directors who were also officers or employees of MoneyGram (only Ms. Patsley and Mr. Ryan) did not receive any special or additional remuneration for service on the Board or any of its committees. MoneyGram’s philosophy is to provide competitive compensation and benefits consistent with attracting and retaining quality non-employee directors.

 

Annual Retainers and Meeting Fees in 2009

 

Non-employee directors received an annual cash retainer of $105,000. The Chair of the Human Resources and Nominating Committee received an additional annual retainer of $7,500. The Chair of the Audit Committee received an additional annual retainer of $15,000. The retainers were paid quarterly, in arrears. Non-employee directors also received a fee of $1,600 for each Board meeting attended and a fee of $1,500 for each committee meeting attended. Fees earned by Messrs. Hagerty, Jaeckel, Lawry and Rao are paid directly to THL Managers VI, LLC.

 

Deferred Compensation

 

After the Spin-Off, MoneyGram’s non-employee directors were eligible to defer, in the form of cash or MoneyGram stock units, retainers and meeting fees earned through December 31, 2004 pursuant to the Deferred Compensation Plan for Directors of MoneyGram International, Inc. (the “2004 director deferred compensation plan”). Deferrals were discontinued under that plan on December 31, 2004 and the Board adopted the 2005 Deferred Compensation Plan for Directors of MoneyGram International, Inc. (the “2005 director deferred compensation plan”) pursuant to which participants could defer retainers and meeting fees earned since January 1, 2005. In November 2005, the 2005 director deferred compensation plan was amended to allow directors to defer their annual restricted stock awards beginning with the 2006 award. In February 2007, the 2005 director deferred compensation plan was further amended to provide for the annual grant of stock unit retainers. On September 4, 2008, the 2005 director deferred compensation plan was amended to eliminate the stock unit retainer and to freeze new contributions into the plan as of December 31, 2008. Effective April 1, 2010, the 2004 director deferred compensation plan was amended to allow for lump sum distributions of small account balances upon resignation from our Board, and the 2005 director deferred compensation plan was terminated. In connection with the plan termination, all account balances in the 2005 director deferred compensation plan will be fully distributed as soon as practicable following May 1, 2011.

 

Voluntary deferrals under the 2004 director deferred compensation plan and the 2005 director deferred compensation plan were credited quarterly and are payable in cash after termination of a director’s service on the Board. Prior to April 1, 2010, amounts deferred in the form of cash received interest at the rate of long-term medium-quality bonds. Effective April 1, 2010, amounts deferred receive interest at a short-term index rate. Prior to April 1, 2010, amounts deferred in the form of stock units were converted to units based on the 12-month average fair market value of our common stock with respect to the 2004 director deferred compensation plan or the value of our common stock on the last business day of the quarter with respect to the 2005 director deferred compensation plan, and were payable upon distribution in cash based on the value of our common stock calculated in accordance with the terms of the applicable plan. All amounts accrued in each director’s stock unit retainer account were converted into MoneyGram common stock on a one-for-one basis at the time such director terminated his or her service as a director of MoneyGram. Dividends payable on the stock unit retainers were credited in cash to the directors’ voluntary deferral account in an amount equal to any dividends paid to MoneyGram common stockholders. Effective April 1, 2010, stock unit accounts were converted to cash accounts which receive interest at a short-term index rate. The 2004 director deferred compensation plan and the 2005 director deferred compensation plan are plans covered under the MoneyGram International, Inc. Outside Directors’ Deferred Compensation Trust, a grantor trust established to fund obligations under the plans in the event of an actual or potential “change of control” (as defined in the trust).

Directors’ Matching Gift Program

 

MoneyGram maintains the MoneyGram International, Inc. Directors’ Matching Gift Program (the “directors’ matching gift program”), which provides for corporate matching of charitable contributions made by non-employee directors, on a dollar-for-dollar basis, up to an aggregate maximum of $5,000 per director each year. On April 12, 2010, the Board terminated the directors’ matching gift program.

 

Other Benefits

 

MoneyGram provided the Independent Directors (Messrs. Hay, Ruiz and Teplin) with accidental death and dismemberment insurance benefits of $300,000 and travel accident insurance benefits of $300,000, when they were traveling on MoneyGram business.

 

2009 DIRECTOR COMPENSATION TABLE

 

 

 

 

Board Voting Recommendation

 

The Board unanimously recommends to the stockholders that they vote “FOR” the election of each director nominee. Each director nominee receiving a majority of the voting power of the then outstanding common stock and B Stock, voting together as a single class, voted with respect to the director, will be elected as a director. This means that the voting power of the stock voted “FOR” a director nominee must exceed the voting power of the stock voted “AGAINST” that director nominee in order for that nominee to be elected as a director. Shares not represented at the meeting and proxies marked “ABSTAIN” have no effect on the election of directors.

 

Holders of the B Stock, who hold approximately 82.6 percent of the voting power of our stock, voting together as a single class with the common stockholders, have indicated their intention to vote in favor of the director nominees listed in this Proposal 1, thereby assuring approval.

 

The Audit Committee of our Board has selected Deloitte as the independent registered public accounting firm to audit MoneyGram’s books and accounts for the fiscal year ending December 31, 2010, subject to ratification by the stockholders. Deloitte has audited the books and accounts of MoneyGram since 2004. Representatives of Deloitte are expected to be present at the meeting with the opportunity to make a statement and to respond to appropriate questions. Stockholder ratification of the appointment of Deloitte as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the Board is submitting the appointment of Deloitte to the stockholders for ratification as a matter of good corporate practice. If this appointment is not ratified by our stockholders, the Audit Committee will reconsider its selection. Even if the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating our independent registered public accounting firm, may in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of MoneyGram and its stockholders.

 

The aggregate fees billed to MoneyGram for fiscal years 2009 and 2008 by Deloitte are as follows (in thousands):

 

 

 

 

The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm, including the fees and terms for those services. The Audit Committee has adopted a policy and procedures governing the pre-approval process for audit, audit-related and permitted non-audit services. The Audit Committee pre-approves audit and audit-related services in accordance with its review and approval of the engagement letter and annual service plan with the independent registered public accounting firm. Tax consultation and compliance services are considered by the Audit Committee on a project-by-project basis. Non-audit and other services will be considered by the Audit Committee for pre-approval based on business purpose, reasonableness of

estimated fees and the potential impact on the firm’s independence. The Chair of the Audit Committee is authorized to grant pre-approval of audit or permissible non-audit services on behalf of the Audit Committee and is required to review such pre-approvals with the full Audit Committee at its next meeting.

 

Board Voting Recommendation

 

The Board unanimously recommends to the stockholders that they vote “FOR” this Proposal 2. The vote required to ratify the appointment of Deloitte as our independent registered public accounting firm for 2010 is a majority of the voting power of the common stock and B Stock outstanding and entitled to vote at this annual meeting of stockholders, voting together as a single class, provided the total number of shares that vote on the proposal represents a majority of the shares of common stock and B stock outstanding on the record date.

 

Holders of the B Stock, who hold approximately 82.6 percent of the voting power of our stock, voting together as a single class with the common stockholders, have indicated their intention to vote in favor of this Proposal 2, thereby assuring its approval.

 

The Audit Committee of the Board was comprised of the following non-employee directors during 2009: Messrs. Teplin (Chair), Hay and Ruiz. All of the members of the Audit Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and the categorical standards for independence in our Corporate Governance Guidelines. In addition, the Board has determined that all members of the Audit Committee are financially literate under the NYSE listing standards and that Mr. Teplin qualifies as an “audit committee financial expert” under the rules of the SEC.

 

The Audit Committee operates under a written charter adopted by the Board, which is evaluated annually. The charter of the Audit Committee is available in the Investor Relations section of our website at www.moneygram.com. The Audit Committee selects, evaluates and, where deemed appropriate, replaces MoneyGram’s independent registered public accounting firm. The Audit Committee also pre-approves all audit services, engagement fees and terms and all permitted non-audit services.

 

Management is responsible for MoneyGram’s internal controls and the financial reporting process. MoneyGram’s independent registered public accounting firm is responsible for performing an independent audit of MoneyGram’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report on MoneyGram’s consolidated financial statements. The Audit Committee’s responsibility is to monitor and oversee these processes.

 

The Audit Committee reviewed MoneyGram’s audited financial statements for fiscal 2009 and met and held discussions with management and Deloitte. Management represented to the Audit Committee, and Deloitte concurred, that MoneyGram’s consolidated financial statements for fiscal 2009 were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee discussed the consolidated financial statements with Deloitte. The Audit Committee discussed with Deloitte matters required to be discussed by Auditing Standards No. 61, as amended (American Institute of Certified Public Accountants, Professional Standards, Volume 1, AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.

 

The Audit Committee also reviewed and discussed with management its assessment and report on the effectiveness of MoneyGram’s internal control over financial reporting as of December 31, 2009, and with Deloitte its attestation report on internal control over financial reporting. These reports are included in the 2009 Form 10-K.

 

Deloitte also provided to the Audit Committee its written disclosures and letter required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with Deloitte the accounting firm’s independence.

 

Based upon the Audit Committee’s review and discussions set forth above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the 2009 Form 10-K filed with the SEC.

 

Respectfully submitted,

 

Albert M. Teplin (Chair)
Jess T. Hay
Othón Ruiz Montemayor

 

After careful consideration, on February 17, 2010, the Board unanimously determined that it would be in the best interests of the Company and our stockholders to amend the 2005 incentive plan to (i) increase the aggregate number of shares that may be granted to an eligible person in any calendar year under the 2005 incentive plan from 10 million to 12 million shares, (ii) include an additional provision for Internal Revenue Code (the “Code”) Section 162(m) limitations for performance awards denominated in shares and (iii) provide clarification regarding the limitation on performance awards denominated in cash.

 

The 2005 incentive plan was approved by our stockholders in May 2005 at the 2005 annual meeting of stockholders and amendments were approved by our stockholders in May 2009 at the 2009 annual meeting of stockholders. The purpose of the 2005 incentive plan is to promote the interests of MoneyGram and our stockholders by aiding us in attracting and retaining employees, officers, consultants, advisors and non-employee directors (“eligible participants”) who we expect will contribute to our growth and financial performance for the benefit of our stockholders.

 

The 2005 incentive plan authorizes the grant of stock options and other forms of stock-based compensation. The Board believes that stock-based compensation is a very important factor in attracting and retaining experienced and talented employees who can contribute significantly to the management, growth and profitability of our business. Additionally, the Board believes that stock-based compensation aligns the interests of our management with the interests of our stockholders. The availability of stock-based compensation not only increases employees’ focus on the creation of stockholder value, but also enhances employee retention and generally provides increased motivation for our employees to contribute to the future success of MoneyGram. The 2005 incentive plan is the only plan pursuant to which the Company can grant stock options and other forms of stock-based compensation.

 

As of March 31, 2010, approximately 15.6 million shares remained available for future awards under the 2005 incentive plan, which number does not include 2 million of the 12 million options awarded to Ms. Patsley as such shares are subject to forfeiture pending stockholder approval of this Proposal 3. In connection with the appointment of Pamela H. Patsley as CEO of the Company, on August 31, 2009, the Board granted her options to purchase 6.3 million shares, subject to approval of this Proposal 3. Since joining the Company in January 2009, Ms. Patsley has been granted options to purchase an aggregate of 12 million shares. Except with respect to the option to purchase 2 million shares (allocated pro-rata between time-vested and stock performance vested), the option will not vest and is subject to forfeiture if the stockholders of the Company do not approve this Proposal 3 due to the 2005 incentive plan’s current limitation on the aggregate number of shares that may be issued to an individual in any calendar year.

 

In addition, in order to ensure exemption from Section 162(m) of the Code, it is proposed that the 2005 incentive plan have an annual share-based limit rather than an annual dollar limit with respect to performance awards denominated in shares (which are intended to represent “qualified performance-based compensation” within the meaning of Section 162(m) of the Code), including but not limited to restricted stock and restricted stock units. The proposed amendment provides for an annual share-based limit of 2 million shares per person. With respect to performance awards denominated in cash, in order to ensure exemption from Section 162(m) of the Code, the proposed amendment clarifies that the annual maximum amount payable to an eligible participant for performance awards denominated in cash shall be $5 million in value.

 

For the reasons discussed above, the Board believes that adoption of the amendments is needed to implement the Company’s strategic plan and goals and is in the best interests of MoneyGram and our stockholders.

The following is a summary of the material terms of the 2005 incentive plan. This summary is qualified in its entirety by reference to the 2005 incentive plan. A copy of the 2005 incentive plan, as amended, is attached as Appendix A to this proxy statement and is marked to show the proposed changes.

 

The Human Resources and Nominating Committee administers the 2005 incentive plan and has full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the 2005 incentive plan. In addition, the committee can specify whether, and under what circumstances, awards to be received under the 2005 incentive plan or amounts payable under such awards may be deferred automatically or at the election of either the holder of the award or the committee. Subject to the provisions of the 2005 incentive plan, the committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The committee has authority to interpret the 2005 incentive plan and establish rules and regulations for the administration of the 2005 incentive plan.

 

The committee may delegate its powers under the 2005 incentive plan to one or more directors, except that the committee may not delegate its powers to grant awards to executive officers or directors who are subject to Section 16 of the Exchange Act, or in a way that would violate Section 162(m) of the Code. In addition, the committee may authorize one or more of our non-director officers to grant stock options under the 2005 incentive plan, provided that stock option awards made by these officers may not be made to executive officers or directors who are subject to Section 16 of the Exchange Act. The Board may also exercise the powers of the committee at any time, so long as its actions would not violate Section 162(m) of the Code.

 

Any employee, officer, consultant, advisor or non-employee director providing services to us or any of our affiliates, who is selected by the committee, is eligible to receive an award under the 2005 incentive plan. As of the date of this proxy statement, approximately 2,500 employees, officers and directors were eligible as a class to be selected by the committee to receive awards under the 2005 incentive plan.

 

The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2005 incentive plan is currently 47 million. Certain awards under the 2005 incentive plan are subject to limitations as follows:

 

 

The committee may adjust the number of shares and share limits described above in the case of a stock dividend or other distribution, including a stock split, merger or other similar corporate transaction or event, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the 2005 incentive plan.

 

If an award is terminated, forfeited or cancelled without the issuance of any shares or if shares covered by an award are not issued for any other reason, then the shares previously set aside for such

award are available for future awards under the 2005 incentive plan. If shares of restricted stock awarded under the 2005 incentive plan are forfeited or otherwise reacquired by us prior to vesting, those shares are again available for awards under the 2005 incentive plan. In addition, shares withheld as payment of the purchase or exercise price of an award or in satisfaction of tax obligations relating to an award are again available for granting awards, except that, after May 10, 2015, any previously issued shares withheld in connection with the satisfaction of tax obligations relating to restricted stock will not be available again for granting awards. Prior to May 10, 2015, any previously issued shares that are used as payment of the purchase or exercise price of an award or in satisfaction of tax obligations relating to an award will again be available for awards under the 2005 incentive plan.

 

The 2005 incentive plan permits the granting of:

 

 

Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the 2005 incentive plan or any other compensation plan. Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of our common stock, other securities or property, or any combination of these in a single payment, installments or on a deferred basis. The exercise price per share under any stock option and the grant price of any SAR may not be less than the fair market value of our common stock on the grant date of such option or SAR except to satisfy legal requirements of foreign jurisdictions or if the award is in substitution for an award previously granted by an entity acquired by us. Determinations of fair market value under the 2005 incentive plan are made in accordance with methods and procedures established by the committee. The term of awards are not longer than 10 years from the grant date.

 

Stock Options.  The holder of an option is entitled to purchase a number of shares of our common stock at a specified exercise price during a specified time period, all as determined by the committee. The option exercise price may be payable either in cash or, at the discretion of the committee, in other securities or other property having a fair market value on the exercise date equal to the exercise price.

 

Stock Appreciation Rights.  The holder of a SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date or, at the committee’s discretion, as of any time during a specified period before or after the exercise date) of a specified number of shares of our common stock over the grant price of the SAR. SARs vest and become exercisable in accordance with a vesting schedule established by the committee.

 

Restricted Stock and Restricted Stock Units.  The holder of restricted stock will own shares of our common stock subject to restrictions imposed by the committee (including, for example, restrictions on the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the committee. The holder of restricted stock units will have the right, subject to any restrictions imposed by the committee, to receive shares of our common stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the committee. The minimum vesting period for these awards is three years from the grant date, unless the award is conditioned on personal performance, or the performance of MoneyGram or its affiliates, in which case

the minimum vesting period is one year from the grant date; provided, however, that such minimum vesting period will not apply to grants of up to 200,000 shares of restricted stock and restricted stock units to non-employee directors. If this Proposal 3 is approved by our stockholders, there will be an annual share-based limit of 2 million shares per person. The committee also may permit accelerated vesting in the case of a participant’s death, disability or retirement, or a change of control of MoneyGram. If the participant’s employment or service as a director terminates during the vesting period for any other reason, the restricted stock and restricted stock units will be forfeited, unless the committee determines that it would be in our best interest to waive the remaining restrictions.

 

Dividend Equivalents.  The holder of a dividend equivalent is entitled to receive payments (in cash, shares of our common stock, other securities or other property) equivalent to the amount of cash dividends paid by us to our stockholders, with respect to the number of shares determined by the committee. Dividend equivalents are subject to other terms and conditions determined by the committee.

 

Performance Awards.  The committee may grant awards under the 2005 incentive plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. A performance award may be payable in cash or stock and will be conditioned solely upon the achievement of one or more objective performance goals established by the committee in compliance with Section 162(m) of the Code. In order to comply with Section 162(m) of the Code, under the 2005 incentive plan, the committee is required to certify that the applicable performance goals have been met prior to payment of any performance awards to participants. The maximum amount that may be paid with respect to performance awards to any participant in the aggregate in any calendar year is $5 million in value, whether payable in cash, stock (other than stock options) or other property. If this Proposal 3 is approved by our stockholders, the annual maximum amount payable to an eligible participant for performance awards denominated in cash will be $5 million in value and for awards denominated in shares, the annual limit will be 2 million shares. Subject to these limitations, the committee has sole discretion to designate participants and the type and amount of awards under the 2005 incentive plan. The committee must determine the length of the performance period, establish the performance goals for the performance period, and determine the amounts of the performance awards for each participant no later than 90 days after the beginning of each performance period according to the requirements of Section 162(m) of the Code.

 

Performance goals must be based solely on one or more of the following business criteria, applied on a corporate, subsidiary, division, business unit or line of business basis: sales, revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit, operating profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings), earnings per share, earnings per share from continuing operations, operating income, pre-tax income, operating income margin, net income, margins (including one or more of gross, operating and net income margins), returns (including one or more of return on actual or pro forma assets, net assets, equity, investment, capital and net capital employed), stockholder return (including total stockholder return relative to an index or peer group), stock price, economic value added, cash generation, cash flow, unit volume, working capital, market share, cost reductions and strategic plan development and implementation. The measure of performance may be set by reference to an absolute standard or a comparison to specified companies or groups of companies, or other external measures. The committee may establish rules during the first 90 days of a performance period to permit the committee to adjust any evaluation of the performance under the applicable goals to exclude the effect of certain events, including asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; and gains or losses from the disposition of businesses or assets or from the early extinguishment of debt.

 

Stock Awards.  The committee may grant unrestricted shares of our common stock, subject to terms and conditions determined by the committee and the limitations in the 2005 incentive plan.

 

Other Stock-Based Awards.  The committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to our common stock, subject to terms and conditions determined by the committee and the limitations in the 2005 incentive plan.

 

Duration, Termination and Amendment.  Unless discontinued or terminated by the Board, the 2005 incentive plan will expire on May 10, 2015. No awards may be made after that date. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the 2005 incentive plan prior to expiration may extend beyond the expiration of the 2005 incentive plan through the award’s normal expiration date.

 

The Board may amend, alter, suspend, discontinue or terminate the 2005 incentive plan at any time, although stockholder approval must be obtained for any action that would increase the number of shares of our common stock available under the 2005 incentive plan, increase the award limits under the 2005 incentive plan, permit awards of options or SARs at a price less than fair market value, permit repricing of options or SARs, or cause Section 162(m) of the Code to become unavailable with respect to the 2005 incentive plan. Stockholder approval is also required for any action that requires stockholder approval under the rules and regulations of the SEC, the NYSE or any other securities exchange or the Financial Industry Regulatory Authority that are applicable to us.

 

Without the approval of our stockholders, the committee will not reprice, adjust or amend the exercise price of any options or the grant price of any SAR previously awarded, whether through amendment, cancellation and replacement grant or any other means, except in connection with a stock dividend or other distribution, including a stock split, merger or other similar corporate transaction or event, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the 2005 incentive plan.

 

Unless otherwise provided by the committee, awards under the 2005 incentive plan may only be transferred by will or by the laws of descent and distribution.

 

Grant of Options and SARs.  The grant of a stock option or SAR is not expected to result in any taxable income for the recipient.

 

Exercise of Options and SARs.  Upon exercising a non-qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we will generally be entitled at that time to an income tax deduction for the same amount. The holder of an incentive stock option generally will have no taxable income upon exercising the option (except that an alternative minimum tax liability may arise), and we will not be entitled to an income tax deduction. Upon exercising a SAR, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally deductible by us.

 

Disposition of Shares Acquired Upon Exercise of Options and SARs.  The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR will depend on how long the shares have been held and whether the shares were acquired by exercising an incentive stock option or by exercising a non-qualified stock option or SAR. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under an option or SAR, except that we may be entitled to an income tax deduction in the case of the disposition of shares acquired under an incentive stock option before the applicable incentive stock option holding periods set forth in the Code have been satisfied.

Awards Other than Options and SARs.  As to other awards granted under the 2005 incentive plan that are payable either in cash or shares of our common stock that are either transferable or not subject to substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date of receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.

 

As to an award that is payable in shares of our common stock that are restricted from transfer and subject to substantial risk of forfeiture, unless a special election is made by the holder of the award under the Code, the holder must recognize ordinary income equal to the excess of (i) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.

 

Income Tax Deduction.  Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, and assuming that, as expected, stock options, SARs and certain other performance awards paid under the 2005 incentive plan are “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, we will generally be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2005 incentive plan.

 

Application of Section 16.  Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to the Code, shares received through the exercise of a stock option or SAR may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period.

 

Application of Section 409A of the Code.  The committee will administer and interpret the 2005 incentive plan and all award agreements in a manner consistent with the intent to satisfy the requirements of Section 409A of the Code to avoid any adverse tax results thereunder to a holder of an award. If any provision of the 2005 incentive plan or any award agreement would result in such adverse consequences, the committee may amend that provision or take other necessary action to avoid any adverse tax results and no such action will be deemed to impair or otherwise adversely affect the rights of any holder of an award under the 2005 incentive plan.

 

Delivery of Shares for Tax Obligation.  Under the 2005 incentive plan, the committee may permit participants receiving or exercising awards, subject to the discretion of the committee and upon such terms and conditions as it may impose, to deliver shares of our common stock (either shares received upon the receipt or exercise of the award or shares previously owned by the participant) to us to satisfy federal and state tax obligations.

 

As described above, the award to Ms. Patsley was made under the 2005 incentive plan prior to the date of this annual meeting of stockholders. Options to purchase 2 million of the 12 million shares granted to Ms. Patsley would be forfeited if stockholders do not approve this Proposal 3.

 

The committee in its sole discretion will determine the number and types of awards that will be granted. Thus, it is not possible to determine the benefits that will be received by eligible participants in the future if the amended 2005 incentive plan were to be approved by the stockholders. The closing price of a share of our common stock as reported on the NYSE on March 31, 2010 was $3.81.

 

The following table sets forth the number of common shares covered by options and other awards granted to current and former executive officers listed in the Summary Compensation Table (the “Named Executives”), director nominees and the specified groups set forth below under the 2005 incentive plan as of March 31, 2010:

 

 

 

The following table provides information about our common stock that may be issued as of March 31, 2010 under the 2005 incentive plan and the 2004 incentive plan, which are our only existing equity compensation plans. The 2004 incentive plan was approved by Viad prior to the Spin-Off. No further awards can be made pursuant to the 2004 incentive plan.

 

 

 

 

Board Voting Recommendation

 

The Board unanimously recommends to the stockholders that they vote “FOR” this Proposal 3. The vote required to amend the 2005 incentive plan is a majority of the voting power of the common stock and B Stock outstanding and entitled to vote at this annual meeting of stockholders, voting together as a single class, provided the total number of shares that vote on the proposal represents a majority of the shares of common stock and B Stock outstanding on the record date.

Affiliates of THL have provided an executed Proxy appointing two executive officers of MoneyGram as attorneys and proxies to vote their shares “FOR” the amendments to the 2005 incentive plan at this annual meeting of stockholders. In addition, holders of the B Stock, who hold approximately 82.6 percent of the voting power of our stock, voting together as a single class with the common stockholders, have indicated their intention to vote in favor of this Proposal 3, thereby assuring its approval.

 

The following table sets forth information concerning beneficial ownership of our common stock and Series B Stock by those persons known by us to be the beneficial owners of more than five percent of our outstanding common stock as of March 31, 2010. Except as otherwise indicated, a person has sole voting and investment power with respect to the common stock beneficially owned by that person. We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, beneficial ownership generally includes voting or investment power over securities. The number of shares shown as beneficially owned in the table below are calculated pursuant to Rule 13d-3(d)(1) of the Exchange Act. Under Rule 13d-3(d)(1), shares not outstanding that are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. Therefore the aggregate beneficial ownership percentages shown in the table below total more than 100 percent.

 

 

 

 

 

The following table sets forth information as of March 31, 2010 concerning beneficial ownership of our common stock by each director, director nominee, the Named Executives and all of our directors, director nominees and executive officers as a group. Except as otherwise indicated, a person has sole voting and investment power with respect to the common stock beneficially owned by that person. We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, beneficial ownership generally includes voting or investment power over securities. The number of shares shown as beneficially owned in the table below are calculated pursuant to Rule 13d-3(d)(1) of the Exchange Act. Under Rule 13d-3(d)(1), shares not outstanding that are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. Therefore the aggregate beneficial ownership percentages shown in the table below total more than 100 percent.

 

 

 

 

The Human Resources and Nominating Committee of the Board has reviewed and discussed with management the Compensation Discussion and Analysis section that follows and, based on such review and discussion, has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

Respectfully Submitted,

 

Seth W. Lawry (Chair)
Jess T. Hay
Scott L. Jaeckel

 

The following discussion should be read in conjunction with the Summary Compensation Table and related tables and narrative disclosure under “Part Four — Other Important Information — Executive Compensation” in this proxy statement that describe the compensation of the Company’s Chairman and CEO and the Named Executives. The Named Executives for 2009 include the following current executive officers of the Company:

 

 

Under SEC rules, the following persons, who are no longer employed by the Company, are also included as Named Executives for 2009 (with their respective termination dates indicated in parentheses):

 

 

Mr. Ryan is included as a Named Executive because he served as the Company’s principal executive officer for a portion of 2009. Messrs. Parrin and Woods are included as Named Executives because each served as principal financial officer during a portion of 2009. Mr. Hameed is included as one of the three most highly compensated executive officers after the CEO and CFO who was serving as an executive officer at the end of 2009. Mmes. Dutra and Stemper are included as Named Executives because each would have been one of the next three most highly compensated executive officers after the CEO and CFO except for the fact that they were not serving as executive officers at the end of 2009.

 

For a description of the separation arrangements between the Company and Messrs. Ryan and Parrin and Mmes. Dutra and Stemper respectively, see footnotes 14, 15, 16 and 17 to the “2009 Details Behind All Other Compensation Column Table” under “Part Four — Other Important Information — Executive Compensation” in this proxy statement. For a description of the separation arrangements between Messrs. Woods and Hameed, see footnotes 1 and 2, respectively, to the “Severance Agreements — Potential Payments and Benefits Upon Termination” table under “Part Four — Other Important Information — Executive Compensation” in this proxy statement.

 

Current global economic conditions have affected and may continue to affect market practice with respect to certain executive compensation arrangements. Other factors affecting the Company’s executive compensation arrangements include a private equity company’s majority ownership of the Company on a diluted basis upon conversion of their Series B Stock, the Company’s significant leverage position and its recapitalization in 2008 following significant losses in its investment portfolio. The Human Resources and Nominating Committee (the “Committee”) continues to monitor these effects and how they may impact the Company’s executive compensation strategy now and in the future and, in particular, the Company’s ability to attract and retain high-caliber executive and employee talent.

 

Recognizing that there are evolving market views regarding executive compensation, the Company has made several changes in its compensation policies and practices to align them with current market practices. The Company has also eliminated or otherwise amended certain of its perquisites, retiree medical benefits, and the MoneyGram Supplemental Pension Plan (the “supplemental pension plan”) because the Company viewed these benefits as no longer in line with market practice.

 

Generally, the objectives of the Company’s executive compensation and benefit program are to:

 

 

Each element of the Company’s executive compensation and benefit program is designed to support and advance these general objectives. The Committee continues to review the appropriateness and application of this strategy in light of changes in the broader economy, particularly as those changes affect compensation practices.

 

The Committee periodically reviews the performance criteria and targets under the Company’s executive compensation programs to ensure they do not provide an incentive for executives to take excessive or unnecessary risks. Each plan affecting direct compensation provides a clawback mechanism that allows the Committee to seek reimbursement of incentives paid or stock options provided to a Named Executive if, after payment, it is determined that the Named Executive acted in a manner significantly contrary to MoneyGram’s interest. Additionally, 50 percent of any stock option grant made to a Named Executive in 2009 will vest over a four to five-year time horizon in order to encourage Named Executives to focus on long-term Company performance, with the remaining 50 percent subject to stock performance-based vesting.

 

Incentive plan metrics are reviewed against Board-approved business and financial plans and our incentive plans include pre-determined maximum payout limits or caps. The Company’s goal is to develop compensation arrangements that are appropriate and reasonably consistent with market practice and with the long-term interests and personnel needs of the Company.

 

Our executive officers are paid a base salary and have opportunities to earn annual and long-term incentives based on performance. They also participate in other retirement and welfare benefit arrangements on the same basis as other employees, and are entitled to certain perquisites and

deferred compensation. The Committee believes these programs serve our competitive interests and enhance our ability to attract key talent, which was a particular focus in 2009.

 

Role of the Human Resources and Nominating Committee

 

The Committee is responsible for reviewing and approving the compensation for the Named Executives, other than the CEO, which includes base salaries, annual cash incentive and long-term incentives (together referred to as “Direct Compensation”) and other benefits and perquisites. The Committee is also responsible for recommending compensation for the CEO to the Board. The Committee’s goal is to assist the Board in fulfilling its oversight responsibilities related to setting, monitoring and implementing the Company’s compensation strategy and programs. The Committee holds meetings as needed throughout the year and also considers and takes action by written consent in lieu of a meeting when appropriate. The Committee meets annually to conduct a comprehensive review of Named Executives’ compensation. For the Named Executives, other than the CEO, the Committee gives serious consideration to recommendations made by the CEO. These recommendations are based on the Company’s performance and individual performance evaluations, competitive market data and feedback provided by the Company’s human resources staff and Hewitt Associates, LLC (“Hewitt”), an independent compensation consultant available to management and the Committee. In 2009, the Committee’s review process focused on merit and market adjustment increases in base salary, annual incentives and long-term incentive awards.

 

Role of the Board of Directors

 

The Board of Directors sets the objectives and goals, and the base salary, target annual incentive and long-term incentive awards for the CEO, taking into account recommendations from the Committee based on the Committee’s formal evaluation of the CEO’s performance.

 

Role of Compensation Consultant

 

In 2009, the Company retained Hewitt to provide consulting and advisory services on executive pay for the Named Executives. Hewitt’s primary responsibilities included (i) advising management in its development of compensation-related proposals and Committee materials, (ii) providing and interpreting market data and information on executive compensation best practices and trends and (iii) providing context for recommendations on executive compensation packages for the Named Executives. Hewitt has served as an advisor to the Company since 2004, and, from time to time, as requested by the Committee, Hewitt has met with the Committee to provide information and recommendations. In 2009, however, the Committee did not meet directly with any Hewitt representative, but instead received and reviewed such information and recommendations in materials developed by Hewitt and Company management.

 

For 2009, the aggregate amount of fees the Company paid to Hewitt for executive and director compensation services was $55,540. The aggregate amount of fees the Company paid to Hewitt for additional services provided by Hewitt was $238,390. These additional services include Hewitt’s services as the actuary for the MoneyGram Pension Plan (the “pension plan”) and the supplemental pension plan and ongoing services in support of those plans. Hewitt also provides ongoing services with respect to stock option valuations required at various times throughout the year. Although the decision to engage Hewitt for these other services was made by management and not formally approved by the Board or the Committee, the Committee was aware that Hewitt was providing such additional services to the Company.

 

Role of Chief Executive Officer

 

Our CEO is engaged in setting executive compensation (other than her own compensation). Our CEO recommends salary adjustments for the Named Executives based on individual performance evaluations and her assessment of individual performance, ensuring that the aggregate annual adjustments are

within the budget. The CEO’s recommendations are reviewed and approved by the Committee after discussion and adjustment, if appropriate.

 

The Committee considered a variety of information in setting compensation for 2009, including Company performance, the benchmarking results from the 2009 Compensation Peer Group (as described below) and the individual circumstances of the particular Named Executive, such as tenure, experience, scope and scale of role, individual performance and internal pay equity.

 

To ensure that the Company’s compensation programs remain fair and competitive in the marketplace, the Committee annually reviews and evaluates specific compensation levels for each Named Executive relative to our Compensation Peer Group (as described below). The Compensation Peer Group consists of companies that the Committee believes are representative of the executive talent pool for which we compete on the basis of industry and scope of operations (the “Compensation Peer Group”). The Company notes, however, that its ownership structure, overall leverage and circumstances leading to its 2008 recapitalization somewhat differentiate the Company from its Compensation Peer Group.

 

The Committee utilizes the data from the Compensation Peer Group when considering executive compensation. The average annual revenue of the Compensation Peer Group is $2.14 billion while the Company’s 2009 annual revenue was $1.17 billion. As such, the Compensation Peer Group information is adjusted based on comparative revenue metrics appropriate for the size of the Company (the “Compensation Peer Group Data”).

 

In November 2008, the Committee selected the following companies to comprise the 2009 Compensation Peer Group:

 

 

Benchmarking Targets and Analysis

 

The Compensation Peer Group Data is one of the many factors considered by the Committee and provides a contextual backdrop for the Committee’s deliberations. Generally, the Committee targets each Named Executive’s base salary and annual cash incentive compensation opportunity, assuming that MoneyGram and individual performance targets are met, between the 50th and 75th percentile level of the Compensation Peer Group Data for comparable functional roles. The Committee may, however, position Named Executives’ base salary and annual cash incentive compensation above or below the Compensation Peer Group Data depending upon factors such as internal pay equity and the Named Executive’s overall role and responsibilities, individual performance and experience.

As a result of the Committee’s compensation decisions for 2009, the following table sets forth how each Named Executive ranked in relation to the Compensation Peer Group Data:

 

 

Actual base salary for each Named Executive, with the exception of Mmes. Benson and Dutra, was at or below the 50th percentile of the Compensation Peer Group Data. Actual base salary for Mmes. Benson and Dutra was between the 50th and 75th percentile of the Compensation Peer Group Data.

 

The annual cash incentive opportunity for each Named Executive was at or below the 50th percentile with the exception of Ms. Dutra who was above the 75th percentile due to her specialized industry expertise, years of service and institutional operations knowledge.

 

For 2009, the Company’s executive compensation and benefits programs consisted of the elements outlined in the table below:

 

 

Base salary provides a level of base compensation designed to attract and retain high-caliber, top-executive talent. Increases to base salary for the Named Executives may be comprised of merit, promotion, internal equity considerations and/or market adjustments. Merit increases are determined on an annual basis, usually in the first quarter, based on the Named Executives’ performance for the previous year. Promotions and market adjustments to base salary are considered by the Committee when appropriate during the year.

 

Base salary increases for the Named Executives are generally determined by the Committee based on the Compensation Peer Group Data, recommendations made by the CEO (for Named Executives other than the CEO), individual performance evaluations and salary increase guidelines set by the Committee. Salary increase guidelines for 2009 were tied directly to the Compensation Peer Group Data and individual performance.

 

Due to economic and market conditions in 2009, Named Executives did not receive increases in base salary levels except in the following limited circumstances. Effective September 1, 2009, Ms. Patsley’s

position changed from serving as Executive Chairman on a part-time basis to serving as Chairman and CEO on a full-time basis. In recognition of her full-time employment and additional role as CEO, Ms. Patsley received a promotional increase of 70 percent of her base salary. Mr. O’Malley received a market adjustment increase of 17 percent of his base salary effective August 2009 and Mr. Hameed received a market adjustment increase of 9.25 percent of his base salary effective September 2009. The adjustments for Messrs. O’Malley and Hameed were based on their considerable experience, responsibilities, value to the Company and the Compensation Peer Group Data.

 

The MoneyGram International, Inc. Performance Bonus Plan, as amended and restated February 17, 2010 (the “annual cash incentive plan”), was designed to focus Named Executives on achieving the Company’s annual financial goals and to drive value creation for stockholders. The Committee established a target incentive opportunity for each Named Executive that was expressed as a percentage of base salary (or salary paid) during the applicable year. Annual incentive payments could exceed the targeted level, up to a maximum of twice the annual target incentive opportunity, if performance exceeds targeted levels. If the Company performs at the threshold level, the annual target incentive opportunity is decreased by 50 percent, and if the Company performs below the threshold level, the annual target incentive opportunity is zero. Actual cash incentive awards depend on achievement of annual performance goals established by the Committee for MoneyGram, and overall individual performance. The Committee, with input from management, determines the Company financial objectives for the participants with a goal of placing the appropriate focus on desired results and key initiatives.

 

The Committee reviewed the annual incentive targets to ensure the Company’s executive compensation program was competitive with the market. On March 24, 2009, the Committee increased annual incentive targets for Mr. O’Malley (from 55 percent to 60 percent of base earnings) based on its review of the Compensation Peer Group Data and in light of his considerable experience, responsibilities and value to the Company.

 

Annual incentive targets are based on job responsibilities, including with respect to other executives, and Compensation Peer Group Data. Consistent with our compensation objectives, as executives assume greater responsibilities, a larger proportion of their compensation is linked to Company performance. For 2009, the Named Executives, other than Mr. O’Malley, maintained the same annual incentive targets as 2008.

 

The Committee determined the 2009 target incentive opportunity for each Named Executive under the annual cash incentive plan as follows:

 

 

Performance Metrics and Results

 

In 2009, the Committee established the following metrics to measure performance: net revenue; earnings before interest, taxes, depreciation and amortization (“EBITDA”); and capital expenditure

efficiency (amount not to exceed), each adjusted for certain items as approved by the Committee. The performance levels for each metric, relative weighting and the actual levels achieved are as follows (dollars in millions):

 

 

Threshold levels are set such that they may be attained with satisfactory Company performance. Maximum levels are set such that they may only be attained with exceptional company performance and the amount must be attained inclusive of funding for the maximum incentive payment.

 

(1) The metric for net revenue as established by the Committee was net fee and other revenue for the money transfer and bill payment products. The results achieved were adjusted by the Committee from reported results by $1.2 million.

 

(2) The results achieved for EBITDA were adjusted by the Committee and reconcile to reported EBITDA as follows (dollars in millions):

 

 

The adjustments determined by the Committee were for items not indicative of the underlying management performance or were deemed not to be within the control of management.

 

(3) The metric for capital expenditure efficiency includes amounts for property and equipment as well as payments for signing bonuses. The metric is established to incentivize management to spend less than the performance level.

 

Based upon the results achieved and relative weighting as shown in the table, the 2009 level of achievement for the Named Executives was 52.8 percent of target with the exception of Mr. Woods whose offer letter provided he would receive a guaranteed bonus for 2009 of $132,000, which was equal to 50 percent of his annual incentive target bonus.

 

An annual incentive funding limit is established for each Named Executive based on MoneyGram’s EBITDA. Once the formula has been applied, the Committee has the ability to apply negative discretion to lower the actual incentive amounts below the amount established by the funding formula. The Committee did not exercise any negative discretion to lower actual incentives for Named Executives in 2009.

 

Stock Options

 

Recruitment and retention of Named Executives, as well as the alignment of the financial interests of the Named Executives with those of the stockholders, were the primary factors that influenced the Committee’s decisions on stock option grants in 2009. Due to the Company’s stock price, ownership structure, overall leverage and senior management turnover, the Committee recognized that recruiting to fill vacant leadership positions and securing existing executives was critically important and presented certain challenges. The stock option program was designed to include both time-based and stock performance-based vesting criteria in connection with any option grant. The vesting criteria are designed to provide a direct retention effect on Named Executives and to encourage the creation of long-term stockholder value. In consideration for participation in the stock option program, all option grantees, including Named Executives, were required to sign a post-employment restriction agreement providing for non-disclosure, non-solicitation and non-competition following termination of employment. For all Named Executives, any unvested options are forfeited upon termination of employment and returned to the pool of options available for grant.

 

When determining the size of the option grants to Named Executives and other option grantees, the Committee sought to create a pool of available shares that was approximately 10 percent of the total shares outstanding, assuming full conversion of the Company’s preferred stock and taking into consideration the dilution of the Company’s common stock over time. The Committee intended the individual 2009 grants to be in lieu of routine annual grants. The size of individual option grants was determined based on an option grantee’s individual role, responsibilities, experience and overall value to the Company.

 

For options granted in 2009, 50 percent of the shares are considered time-vested and 50 percent of the shares are considered stock performance-vested. The options have a ten-year term. The per share purchase price of the shares subject to the options is the higher of $1.50 or the fair market value of our common stock as of the grant date. In recognition of the fact the Company did not have a long-term incentive program for much of 2008 and 2009, those option grantees who were employed on or before December 31, 2008, 15 percent of the time-vested portion of the option vested on the 31st day following the grant date. For option grantees who were employed after December 31, 2008, the time-vested portion of the option does not begin to vest until one year following the grant date. Individual grants to the Named Executives are discussed in the “Outstanding Equity Awards at December 31, 2009” table under “Part Four — Other Important Information — Executive Compensation” in this proxy statement.

 

Ms. Patsley’s time-based options vest in four equal annual installments beginning one year from the grant date. For Named Executives hired prior to 2009, which includes Ms. Benson and Messrs. O’Malley, Hempsey and Hameed, the time-based vesting schedule is 15 percent on the 31st day after the grant date, 20 percent on the first, second and third anniversary of the grant date, 10 percent on the fourth anniversary of the grant date and 15 percent on the fifth anniversary of the grant date. For Named Executives hired during 2009, other than Ms. Patsley, which includes Mr. Woods, the time-based vesting schedule is in five equal annual installments, beginning one year from the grant date. The vesting schedule for Mr. Ryan’s time-based options was 15 percent on the grant date, 20 percent on March 15, 2010, 2011 and 2012, 15 percent on March 15, 2013 and 10 percent on March 15, 2014. With respect to stock performance-vested shares, shares vest in two installments when the value of the common stock of the Company reaches a certain price per share for a period of 20 consecutive trading days for each

installment during the five-year period following the grant date. The table below sets forth the total number of options granted to each Named Executive during 2009:

 

 

Upon termination of their employment, Messrs. Ryan, Woods and Hameed forfeited unvested options of 7,400,000, 4,250,000 and 1,618,750, respectively. No options were granted to Mr. Parrin and Mmes. Dutra and Stemper because Mr. Parrin and Ms. Stemper were no longer employed by the Company and Ms. Dutra’s September 2009 separation arrangement had already been agreed upon when option grants were made in August 2009.

 

MoneyGram International, Inc. Performance Unit Incentive Plan

 

Historically, the Committee granted performance-based stock units under the MoneyGram International, Inc. Performance Unit Incentive Plan (the “performance-based stock unit plan”). For the Named Executives, other than Mr. Hempsey, for the 2007-2009 performance period, the key corporate financial objectives and weighting were 70 percent earnings per share and 30 percent net revenue. The threshold performance level for earnings per share and net revenue were $1.56 and $699.1 million, respectively. The target performance level for earnings per share and net revenue were $1.79 and $801.0 million, respectively. The maximum performance level for earnings per share and net revenue were $2.06 and $898.9 million, respectively. Due to substantial losses in the Company’s investment portfolio and the impact from the 2008 recapitalization, the performance-based stock unit plan financial objectives were not attained for the 2007-2009 performance period. Consequently, those Named Executives did not earn a payout under the performance-based stock unit plan for the performance period.

 

For Mr. Hempsey, for the 2007-2009 performance period, the key corporate financial objectives and weighting were 70 percent operating income and 30 percent net revenue of the money transfer business. The threshold performance level for operating income and net revenue were $181.2 million and $556.0 million, respectively. The target performance level for operating income and net revenue were $207.6 million and $638.0 million, respectively. The maximum performance level for operating income and net revenue were $237.0 million and $702.8 million, respectively. Due to substantial losses in the Company’s investment portfolio and the impact from the 2008 recapitalization, the performance-based stock unit plan financial objectives were not attained for the 2007-2009 performance period. Consequently, Mr. Hempsey did not earn a payout under the performance-based stock unit plan for the performance period.

 

There are no other outstanding performance periods under the performance-based stock unit plan. The Committee does not anticipate utilizing the performance-based stock unit plan in the future.

 

A portion of the Named Executives’ compensation includes other market competitive, non-variable compensation and benefits. The other compensation and benefit programs help us effectively recruit and

retain high-caliber talent, while competing for talent with other companies that commonly offer similar programs.

 

During 2009, the Committee made certain reductions in the Company’s other compensation and benefits programs as part of the Company’s overall cost reduction efforts and to align our compensation practices with current market practices. These reductions consisted of the following:

 

 

Retirement Benefits and Deferred Compensation

 

The Company’s retirement benefits and deferred compensation plans consist of the following:

 

 

Each of these plans is discussed in “Part Four — Other Important Information — Executive Compensation — Retirement Plans” in this proxy statement.

 

Perquisites

 

The Company’s perquisites are a component of our overall compensation program. On February 9, 2009, the Committee approved the elimination of certain perquisites for eligible Named Executives in the United States, in keeping with the competitive landscape and the Company’s expense control initiatives. The Committee believes that with these changes, its perquisite program remains competitive in the market. The following perquisites were eliminated for Named Executives in the United States:

 

 

As disclosed in our proxy statement for the Company’s 2009 annual meeting of stockholders, the Company aircraft remains for sale and is not being used for business or personal use.

 

In 2009, certain of the Named Executives were eligible for, but may not have received, the following perquisites:

 

 

In 2009, the Company paid $6,795 in temporary relocation and $4,762 in relocation tax gross up expenses for Mr. Hameed. Temporary commuting expenses for Messrs. Woods and Hameed were also paid in the amounts of $30,338, and $30,769, respectively, in lieu of their relocation to the Company’s headquarters. If Messrs. Woods and Hameed had remained employed by the Company, their respective eligibility for payment of commuting expenses would have terminated in 2010.

 

In 2010, in the Committee’s continuing effort to maintain competitive compensation practices, the Committee eliminated the following perquisites effective April 12, 2010 for the CEO and US-based Executive Vice Presidents: financial counseling services; health club subsidy; and annual physical examination. Affected officers will be provided a $15,000 increase in base salary in lieu of these benefits.

 

Additional information on the value of perquisites offered to each Named Executive in 2009, as well as the valuation methods for such perquisites, can be found in “Part Four — Other Important Information — Executive Compensation — 2009 Summary Compensation Table” in this proxy statement.

 

Pamela H. Patsley

 

On January 21, 2009, the Board appointed Ms. Patsley as Executive Chairman of the Company and elected her Chairman of the Board. In connection with Ms. Patsley’s appointment, she entered into an Employment Agreement with the Company, effective January 21, 2009, which continues, subject to the agreement’s termination provisions, for a period of four years. In determining Ms. Patsley’s total compensation package, the Committee undertook an analysis of the scope and responsibilities of the position, as well as the Compensation Peer Group Data. Under the terms of her initial Employment Agreement, Ms. Patsley was required to devote 50 percent of her time to MoneyGram, which entitled her to receive an initial annual base salary of $500,000, subject to annual review. Ms. Patsley participates in the annual cash incentive plan covering the other Named Executives. Her annual target incentive opportunity was 50 percent of base salary earnings, with a maximum percentage of twice the annual target incentive opportunity, if the Company’s performance exceeds targeted levels.

 

Ms. Patsley is also eligible to participate in other benefit programs, and to receive perquisites including financial planning services, a health club subsidy, an annual physical examination and reserved parking, all in accordance with the terms and conditions of applicable MoneyGram policies as may be in effect and/or amended from time to time. If Ms. Patsley’s employment is terminated for a reason other than cause (as defined in the agreement), death or disability, or if she is terminated for good reason (as defined in the agreement), she is entitled to receive a severance allowance in an amount equal to her then-current base salary plus a pro rata portion of her then current annual target incentive opportunity. If Ms. Patsley’s employment is terminated for cause (as defined in the agreement) or by her resignation without good reason (as defined in the agreement), she would receive her base salary through the date of termination, reimbursement for any unreimbursed business expenses properly incurred by her, employee benefits, if any, as to which she was entitled under the employee benefit plans of the Company, such rights as she would have under any equity grant, and any rights that she would have under director and officer insurance then maintained by the Company. In addition, MoneyGram would continue certain benefits and accelerate the vesting of a portion of stock option awards. Under the agreements, Ms. Patsley is subject to a one-year post-employment non-competition provision.

 

In addition, in connection with her appointment as Executive Chairman, and pursuant to the 2005 incentive plan, Ms. Patsley was granted a non-qualified stock option to purchase 4.7 million shares of common stock of MoneyGram. 50 percent of the option is considered time-vested and 50 percent of the option is considered stock performance-vested. The option expires on January 21, 2019. The time-vested portion of the option vests in equal installments over four years on the anniversary of the grant date. The stock performance-vested portion of the option vests in two installments when the value of the common stock of the Company reaches a certain price per share for a period of 20 consecutive trading days for each installment during the five-year period following the grant date.

On May 12, 2009, in recognition of the amount of time Ms. Patsley was devoting to the Company as Executive Chairman, the Board approved an amendment to Ms. Patsley’s January 21, 2009 employment agreement to increase Ms. Patsley’s annual target incentive opportunity from 50 percent to 100 percent of her base salary. All other terms of the agreement remained in effect and unchanged. In addition, Ms. Patsley was granted a non-qualified option to purchase 1 million shares of common stock of MoneyGram. The option expires on May 12, 2019. The option vests based on time and stock performance factors similar to Ms. Patsley’s prior option grant.

 

On August 31, 2009, in connection with her appointment to CEO, Ms. Patsley was granted a non-qualified stock option to purchase 6.3 million shares of common stock of MoneyGram. Except with respect to the option to purchase 2 million shares (allocated pro-rata between time-vested and stock performance-vested), the option will not vest and is subject to forfeiture if the stockholders of the Company do not approve Proposal 3. The option expires on August 31, 2019. The option vests based on time and stock performance factors similar to Ms. Patsley’s prior option grants.

 

On September 1, 2009, the Board amended and restated Ms. Patsley’s employment agreement dated January 21, 2009, as amended, to reflect Ms. Patsley’s assumption of the position of CEO in a full-time capacity for the period commencing on September 1, 2009 and ending on August 31, 2013. In connection therewith, Ms. Patsley’s base salary was increased to $850,000, and she received a special one-time signing bonus in the amount of $250,000 (less applicable withholdings) payable in a lump sum within 30 days of September 1, 2009. In addition, if Ms. Patsley’s employment is terminated by the Company without cause (as defined by the agreement and other than by reason of death or disability, as defined in the agreement) or if Ms. Patsley resigns for good reason (as defined in the agreement), she shall be entitled to a severance payment equal to two times her then current base salary if terminated prior to August 31, 2012 or a severance payment equal to one and one-half times her then current base salary if terminated on or after August 31, 2012.

 

John Hempsey

 

In 2009, Mr. Hempsey was designated as an Executive Officer of the Company. Consistent with standard practice in the United Kingdom, Mr. Hempsey entered into a service agreement (the “Hempsey service agreement”) with the Company’s subsidiary, MoneyGram International Limited, at his time of hire in 2003. The Hempsey service agreement continues unless and until terminated by either the Company giving 12 months’ prior notice or Mr. Hempsey giving six months’ prior notice in writing. The Hempsey service agreement provides that Mr. Hempsey is entitled to (i) an initial base salary, subject to annual review by the Committee, (ii) participation in the annual cash incentive plan, MoneyGram’s long-term incentive plans and employee benefit plans, and (iii) specified medical benefits, retirement benefits and perquisites.

 

Under the terms of the Hempsey service agreement, Mr. Hempsey receives an annual base salary of $345,422, subject to annual review. He participates in the annual cash incentive plan, similar to the other Named Executives. His annual target incentive opportunity is 50 percent of base salary earnings. Mr. Hempsey is also eligible to participate in other benefit programs, and to receive perquisites, including financial planning services, a health club subsidy and an annual physical examination. Consistent with standard practice in the United Kingdom, Mr. Hempsey also receives a car allowance, congestion charge reimbursement and a gross retirement allowance of 11 percent of base salary per annum in lieu of pension contributions. Under the Hempsey service agreement, Mr. Hempsey is also subject to restrictive covenants, including non-competition and non-solicitation.

 

If Mr. Hempsey’s employment is terminated for a reason other than cause (as defined in the agreement) he will be eligible for a statutory payment of (i) 380 Gross British Pounds Sterling times one and one-half times his number of years of service; and (ii) two weeks full pay per year of service, with a minimum of one month’s pay and basic pay, cash allowance and continued participation in the benefits schemes or a payment in lieu of benefits in kind during his notice period. If Mr. Hempsey resigns from the Company or if his employment is terminated for cause, no payment is due to him. If the Company asks

Mr. Hempsey to leave prior to the end of his notice period, the Company would be required to make a payment in lieu of notice which includes basic pay, cash allowance and continued participation in the benefits schemes or a payment in lieu of benefits in kind.

 

On April 21, 2010, Mr. Hempsey and MoneyGram International Ltd. entered into a Compromise Agreement pursuant to which Mr. Hempsey’s employment will terminate effective April 30, 2010. Pursuant to the Compromise Agreement, Mr. Hempsey will receive a severance payment of 149,238 pounds, a statutory payment of 3,420 pounds and a notice payment of 214,961 pounds.

 

Jean C. Benson

 

On May 11, 2009, the Committee approved a one-time recognition payment of $20,000 (less applicable withholdings) for Ms. Benson to reflect the additional responsibilities she performed in 2009, including serving as interim principal financial officer during the Company’s search for a CFO. The amount of the recognition payment was based upon the length of time Ms. Benson performed these additional responsibilities.

 

Mubashar Hameed

 

On May 11, 2009, the Committee approved a supplemental payment in the maximum amount of $50,000 (less applicable withholdings) payable in equal monthly installments between May 1, 2009 and May 31, 2010 to Mr. Hameed to offset housing and airfare expenses for travel between his home and the Company’s headquarters in lieu of his relocation. This supplemental payment ceased upon his termination of employment on January 25, 2010.

 

Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement

 

Each of the Named Executives has entered into an Employee Trade Secret, Confidential Information and Post-Employment Restriction Agreement. Under this agreement, each Named Executive agrees to confidentiality and non-disparagement obligations that extend indefinitely. In addition, under this agreement, each Named Executive agrees to non-competition provisions with respect to general competitors and specific conflicting organizations, and a non-solicitation restriction with respect to employees and customer relationships for defined periods of time.

 

The objective of the Company’s severance benefits is to provide financial protection in the event of a termination that could disrupt the careers of the Named Executives. The severance benefits allow the Named Executives to focus on corporate performance and maximizing value for the benefit of stockholders in the event of a change of control or other termination by providing an economic means for the Named Executives to transition away from employment with the Company. Participation by a Named Executive in any plan or agreement requires approval by the Committee. For a description of the Company’s severance plans, see “Part Four — Other Important Information — Executive Compensation — Severance Plans” in this proxy statement.

 

Severance Agreements

 

In 2009, the Company began to revise its severance practices for Named Executives away from severance plans, including change of control severance plans, to individual severance agreements. These individual severance agreements only provide for severance if a Named Executive’s employment is terminated by the Company without cause and do not provide change of control severance benefits. On August 11, 2009, the Committee approved a form of severance agreement for participating Named Executives who are not covered under existing severance plans. These Named Executives include

Messrs. Woods and Hameed. The form of severance agreement for Named Executives provides for severance in an amount equal to one year of a Named Executive’s annual base salary and a pro rata portion of the Named Executive’s then current annual target incentive opportunity.

 

Severance Plan

 

The Company’s existing Amended and Restated MoneyGram International, Inc. Executive Severance Plan (the “severance plan”) (Tier II) provides change of control severance benefits to Ms. Benson and Mr. O’Malley, whose employment with the Company began prior to 2008. Mr. Hempsey participates in the MoneyGram International, Inc. UK Senior Executive Severance Plan Tier II, amended and restated February 27, 2008 (the “UK severance plan”). These severance plans provide change of control severance benefits if, within a specified period of time after a change of control of MoneyGram, the executives’ employment is terminated either by the Company without cause, or by the executive for good reason. For details regarding amounts Ms. Benson and Messrs. O’Malley and Hempsey would be entitled to receive under the severance plan and UK severance plan, see the table under “Part Four — Other Important Information — Executive Compensation — Severance Plans — Potential Payments and Benefits upon Termination (Change of Control)” in this proxy statement.

 

As of September 24, 2009, there were no remaining participants in the severance plan (Tier I), which provided higher severance benefits than the severance plan (Tier II).

 

Other than Ms. Benson and Messrs. O’Malley and Hempsey, no other Named Executives participate in the above described severance plans, and the Company did not add any participants to these plans in 2009.

 

Special Severance Plan

 

The MoneyGram International, Inc. Special Severance Plan (the “special severance plan”) (Tier II), which was adopted in connection with the 2008 recapitalization, provided severance benefits to Ms. Benson and Mr. O’Malley if their respective employment was terminated either by the Company without cause, or by either of them respectively for good reason, provided that the separation occurred on or before March 24, 2010. The potential payments and benefits under the special severance plan (Tier II) would have been reduced by the service period from the date of the recapitalization through the date of separation. The special severance plan (Tier II) expired on March 24, 2010 and no longer applies. For details regarding amounts Ms. Benson and Mr. O’Malley would have been entitled to receive under the special severance plan (Tier II), see the table under “Part Four — Other Important Information — Executive Compensation — Special Severance Plan — Potential Payments and Benefits Upon Termination (Outside Change of Control)” in this proxy statement.

 

Messrs. Ryan and Parrin and Mmes. Dutra and Stemper received benefits under the special severance plan (Tier I) following termination of their employment. For a description of Messrs. Ryan and Parrin and Mmes. Dutra and Stemper separation arrangements, see footnotes 14, 15, 16 and 17, respectively, to the “2009 Details Behind All Other Compensation Column Table” under “Part Four — Other Important Information — Executive Compensation” in this proxy statement.

 

Prior to 2009, the Company’s stock ownership guidelines provided that Named Executives should purchase Company stock in an amount equal to a multiple of the Named Executive’s annual base salary. The multiple for the CEO was five times annual base salary, and the multiple for other Named Executives was three times annual base salary. In 2009, based on a number of factors including the change in ownership structure and decline in the Company’s stock price during 2008, the change in the Company’s senior management, market volatility and global economic conditions, the Committee decided to suspend its evaluation of Named Executive compliance with our current guidelines. The Company intends to evaluate its stock ownership guidelines in 2010.

The Company maintains policies and procedures for transactions in MoneyGram securities that are designed to ensure compliance with all insider trading rules. The Company’s policies and procedures also prohibit officers and directors from engaging in any transaction in which they may profit from short-term speculative swings in the value of MoneyGram securities, including “short sales” (selling borrowed securities that the seller hopes can be purchased at a lower price in the future), “short sales against the box” (selling owned, but not delivered securities) and hedging transactions.

 

The Company’s ability to deduct compensation expense for federal income tax purposes is subject to the limitations of Section 162(m) of the Code. Section 162(m) limits deductibility to $1 million for certain executive officers unless certain conditions are met. To date, the Company has designed and administered its executive compensation program so that all compensation paid by the Company to the Named Executives, other than severance, qualified as deductible compensation expense. Although the Committee is mindful of the limitation imposed by Section 162(m) of the Code, it also recognizes that facts and circumstances may render compliance with those limitations inappropriate, at odds with the best interests of MoneyGram or out of step with then prevailing competitive market conditions. In such event, the Committee’s priority will be determining what is in the best interest of MoneyGram and its stockholders rather than compliance with the technical limitations imposed by the Code.

 

The annual cash incentive plan and the stock option terms provide that the Committee may seek reimbursement of incentives paid or stock options provided to a Named Executive if, after payment, it is determined that the Named Executive engaged in misconduct, acted in a manner significantly contrary to MoneyGram’s interest or breached a non-competition agreement. To date, the Committee has not exercised this right with respect to any plan award previously paid.

 

2010 Base Salary Increases

 

The Committee continues to use the Compensation Peer Group Data as a guide in setting base salaries for Named Executives between the 50^th and 75^th percentile. In addition, when setting base salaries for Named Executives, the Committee considers each Named Executive’s principal job duties and responsibilities, individual performance, level of experience and internal equity. The Committee’s decisions regarding base salaries of those Named Executives who remain employed by the Company are set forth below.

 

Based upon Ms Patsley’s September 2009 appointment to the CEO position and resulting changes in her compensation arrangements at that time, the Committee recommended that the Board maintain Ms. Patsley’s current base salary for 2010. Ms. Patsley’s base salary falls between the 50^th and 75^th percentile of the Compensation Peer Group Data.

 

The Committee approved a salary increase for Ms. Benson of $10,101, resulting in a 2010 annual base salary of $262,621. Ms. Benson’s 2010 annual base salary is above the 75^th percentile of the Compensation Peer Group Data based on the Committee’s view of Ms. Benson’s specific duties and responsibilities and individual performance in executing those responsibilities. The Committee also approved a salary increase for Mr. O’Malley of $13,125, resulting in a 2010 annual base salary of $388,125. Mr. O’Malley’s annual base salary falls between the 50th and 75th percentile of the Compensation Peer Group Data based on the Committee’s view of Mr. O’Malley’s duties and responsibilities and individual performance. Mr. Hempsey’s 2010 annual base salary of $346,388 is equivalent to his 2009 annual base salary and falls below the 50^th percentile of the Compensation Peer Group Data. As discussed above, Mr. Hempsey’s employment will terminate effective April 30, 2010.

As discussed above, the Committee eliminated the following perquisites effective April 12, 2010 for the CEO and US-based Executive Vice Presidents: financial counseling services; health club subsidy; and annual physical examination. Affected officers (including Ms. Patsley and Mr. O’Malley) will be provided a $15,000 increase in base salary in lieu of these benefits.

 

The annual cash incentive plan continues to be designed to focus Named Executives on achieving the annual financial goals and to drive value creation for stockholders. In February 2010, the Committee amended the annual cash incentive plan to change it from one that paid incentives based primarily on overall Company financial performance to a plan that awards incentives based on an expanded set of criteria as follows: overall Company performance, business unit performance (where applicable), and individual performance and contribution to the Company. The Committee continues to establish an annual target incentive opportunity for each Named Executive that is expressed as a percentage of base salary. Annual incentive payments may exceed the targeted level up to a maximum of twice the annual target incentive opportunity, if performance exceeds targeted levels. At the threshold level, the annual target incentive opportunity is decreased by 50 percent, and if Company performance falls below the threshold level, the annual target incentive opportunity decreases to zero. Actual cash incentive awards depend on achievement of annual performance goals established by the Committee for MoneyGram, and overall individual performance. The Committee, with input from management, determines the financial objectives for the Named Executives in order to place the appropriate focus on desired results and key initiatives.

 

To align the Named Executives annual incentive compensation opportunities with the Company’s plan and its growth objectives, the Committee set the 2010 executives’ annual incentive compensation award targets for performance by establishing a grid based on the total Company’s net revenue and EBITDA performance, each adjusted for certain items as approved by the Committee.

 

		Percent				Percent
		Weighting				Weighting
Performance Metric		at Target				at Maximum
Net Revenue			40	%			80	%
EBITDA			60	%			120	%

 

For most Named Executives, the above metrics determine 100 percent of their annual cash incentive opportunity. Net revenue metrics relating to the performance of their respective regional business units determine 50 percent of the annual cash incentive opportunity for Messrs. O’Malley and Hempsey, while the above metrics determine the other 50 percent of their respective annual cash incentive opportunities.

 

The Company continues to target annual cash incentive opportunity for each Named Executive at the 50^th percentile of the Compensation Peer Group Data. The 2010 annual cash incentive opportunity for the Named Executives is at or below the 50^th percentile.

 

The Committee reviews the Compensation Peer Group annually to confirm that the Compensation Peer Group includes companies that are most comparable to the Company on the basis of industry focus and scope of operations. Based on these considerations, the Committee added the following companies to the Compensation Peer Group for 2010: Dollar Financial Corp., Advance America Cash Advance Centers and Jack Henry & Associates Inc. The Committee removed the following companies from the Compensation Peer Group for 2010: Advanta Corp., Jones Lang LaSalle, Lawson Software, Inc., and Metavante (acquired by Fidelity National Information Services). The Committee notes that given the Company’s 2008 recapitalization and its current ownership structure and overall leverage, the Company may need to utilize non-comparable compensation practices to attract and retain Named Executives.

The Committee selected the following companies to comprise the 2010 Compensation Peer Group:

 

 

The following tables and accompanying narrative disclosure should be read in conjunction with the Compensation Discussion and Analysis above, which sets forth the objectives of MoneyGram’s executive compensation and benefit programs.

 

 

 

 

2009 DETAILS BEHIND ALL OTHER COMPENSATION COLUMN TABLE