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Exhibit 10
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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)
TAAM ASSOCIATES, INC. )
)
Plaintiff, )
)
v. ) C.A. No. 16305-NC
)
JAMES F. CALVANO, ROBBIN L. AYERS, )
JOHN M. FOWLER, BRIAN J. FITZPATRICK, )
WILLIAM D. GUTH, SANFORD MILLER, )
MONEYGRAM PAYMENT SYSTEMS, INC., )
AND VIAD CORP., )
)
Defendants. )
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CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of MoneyGram
Payment Systems, Inc., ("MoneyGram" or the "Company") since prior to the
transaction herein complained of and continuously to date.
2. MoneyGram is a corporation duly organized and existing under the
laws of the State of Delaware. The Company was founded by American Express in
1988 and became a separate publicly-traded company in 1996 following its
federally mandated divesture by First Data Corporation, a former subsidiary of
American Express. MoneyGram provides money wire transfer and express bill
payment services, phone card sales and money orders through agent locations
throughout the United States.
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3. Defendant Viad Corp. ("Viad") is a Delaware corporation based in
Phoenix, Arizona and provides payment services, airline catering, convention
services and travel and leisure services.
4. Defendant James F. Calvano is Chairman of the Board and Chief
Executive Officer of the Company.
5. Defendant Robbin L. Ayers is an Executive Vice President and
Director of the Company.
6. Defendant John M. Fowler is an Executive Vice President and
Director of the Company.
7. Defendants Brian J. Fitzpatrick, William D. Guth and Sanford
Miller are Directors of the Company.
8. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of MoneyGram and owe them the
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action on its own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
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10. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of April 10, 1997, there were approximately 16,625,000 shares
of MoneyGram common stock outstanding owned by hundreds, if not thousands, of
record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether defendants have breached their
fiduciary and other common law duties owned by them to plaintiff and the
members of the class; and (ii) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
(d) Defendants have acted in manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent
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or varying adjudications with respect to individual members of the Class, which
would establish incompatible standards of conduct for defendants, or
adjudications with respect to individual members of the Class which would, as
a practical matter, be dispositive of the interests of other members or
substantially impair or impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
11. On January 28, 1998, MoneyGram announced earnings for the fourth
quarter ending December 31, 1997 that were substantially below analysts'
estimates. The Company noted that the fourth-quarter results included charges
for impairment reserves on certain underperforming agent contacts, entered into
prior to 1996, with guaranteed minimum commission payments. Charges were also
recorded for non-recurring expenses of converting MoneyGram operations, which
had been conducted under licenses held by First Data Corporation in various
state jurisdictions, to licenses issued directly to MoneyGram. Additionally, the
Company also took reserves for miscellaneous asset write downs and other items.
As a result of this temporary earnings downturn, the price of MoneyGram stock
has declined and does not reflect the intrinsic value of the Company.
12. On April 6, 1998, MoneyGram and Viad announced that they had
entered into a definitive merger agreement whereby Viad will acquire MoneyGram
in a transaction valued at $287 million. Under the terms of the transaction
as presently proposed, Viad will commence a cash tender offer for all of
MoneyGram's
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outstanding common shares at a price of $17.00 per share. The tender offer will
be followed by a merger in which any untendered shares of MoneyGram will be
acquired for $17.00 per share in cash.
13. Defendants have attempted to portray the Viad offer as fair to the
Company's shareholders by claiming that the $17 per share offer represents 22.5
times analyst's projected earnings for 1998. However, this analysis is flawed
and significantly undervalues the Company because, under Generally Accepted
Accounting Principles ("GAAP"), the Company's projected earnings do not reflect
the value of the Company's $58 million deferred tax asset. Additionally,
analysts' projections of the Company's earnings for 1998 are far from uniform.
For example, James Marks of Credit Suisse First Boston estimates that the
Company will achieve earnings per share of $1.31, which would reduce the price
to earnings multiple on Viad's offer to 13.
14. The price to earnings multiple analysis is also flawed and
seriously undervalues the Company because, under GAAP, MoneyGram's earnings are
significantly reduced by contract amortization charges that are the result of
the Company's separation from First Data Corporation and are not indicative of
conditions under which new agent contracts are being signed. Furthermore, the
projections used by defendants to portray the offer as "fair" are significantly
lower than other estimates. Since, according to the joint press release "[t]he
wire transfer market has been growing 20 to 30 percent per year for the last
ten years," defendants' reliance
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on the price to earnings multiple analysis to justify the offer is seriously
flawed.
15. By entering into the agreement with Viad, the MoneyGram Board has
initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction were not the result of an auction
process or active market check; they were arrived at without a full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the MoneyGram shareholders.
16. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of MoneyGram's
highest transactional value.
17. The Individual Defendants have violated the fiduciary duties owed
to the public shareholders of MoneyGram. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the Company
and invite other bidders, and defendants' failure to provide a market check
demonstrate a clear absence of the exercise of due care and of loyalty to
MoneyGram's public shareholders.
18. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
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(a) Undertake an appropriate evaluation of MoneyGram's net
worth as a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an
attempt to obtain the best value for MoneyGram's public shareholders.
19. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Viad without making the requisite effort to obtain the
best offer possible.
20. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of MoneyGram's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of MoneyGram common stock.
21. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of MoneyGram common stock is
materially in excess of the amount offered for those securities in their merger
giving due consideration to the anticipated operating results, net asset value,
cash flow, and profitability of the Company;
(b) The merger price in not the result of an appropriate
consideration of the value of MoneyGram because the MoneyGram Board approved
the proposed merger without undertaking
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steps to accurately ascertain MoneyGram's value through open bidding or at
least a "market check mechanism"; and
(c) By entering into the agreement with Viad, the Individual Defendants
have allowed the price of MoneyGram stock to be capped, thereby depriving
plaintiff and the Class of the opportunity to realize any increase in the value
of MoneyGram stock.
22. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
23. Defendant Viad has knowingly aided and abetted the breaches of
fiduciary duty committed by the other defendants to the detriment of
MoneyGram's public shareholders. Indeed, the proposed merger could not take
place without the active participation of Viad. Furthermore, Viad and its
shareholders are the intended beneficiaries of the wrongs complained of and
would be unjustly enriched absent relief in this action.
24. Plaintiff and the other members of the Class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment against defendants as follows:
A. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
B. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under,
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in concert with, or for them, from proceeding with, consummating, or closing
the proposed transaction;
C. In the event that the proposed transaction is consummated, rescinding it
and setting it aside, or awarding rescissory damages to the Class;
D. Awarding compensatory damages against defendants, individually and
severally, in an amount to be determined at trial, together with pre-judgment
and post-judgment interest at the maximum rate allowable by law, arising from
the proposed transaction;
E. Awarding plaintiff its costs and disbursements and reasonable allowances
for fees of plaintiff's counsel and experts and reimbursement of expenses; and
F. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By /s/ ILLEGIBLE
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
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