MoneyGram 2007 Annual Report Download - page 117

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
restricted stock units; (d) dividend equivalents; (e) performance based awards; and (f) stock and other stock-based awards. Shares
covered by forfeited and cancelled awards become available for new grants, as well as shares that are withheld for full or partial payment
to the Company of the exercise price of awards. Shares that are withheld as satisfaction of tax obligations relating to an award, as well as
previously issued shares used for payment of the exercise price or satisfaction of tax obligations relating to an award, become available
for new grants through May 10, 2015. The Company plans to satisfy stock option exercises and vesting of awards through the issuance of
treasury stock. As of December 31, 2007, the Company has remaining authorization to issue awards of up to 6,434,391 shares of common
stock.
Stock Options — Option awards are granted with an exercise price equal to the market price (average of the high and low price) of the
Company's common stock on the date of grant. Stock options granted in 2007 and 2006 under the 2005 Omnibus Incentive Plan become
exercisable over a three-year period in an equal number of shares each year and have a term of ten years. Stock options granted in 2005
under the 2004 Omnibus Incentive Plan become exercisable over a three-year period in an equal number of shares each year and have a
term of ten years and stock options granted in 2004 under the 2004 Omnibus Incentive Plan become exercisable in a five-year period in
an equal number of shares each year and have a term of seven years. All outstanding stock options contain certain forfeiture and non-
competition provisions.
For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing model and
the assumptions set forth in the following table. Expected volatility is based on the historical volatility of the price of the Company's
common stock since the spin-off on June 30, 2004. The Company uses historical information to estimate the expected term and forfeiture
rates of options. The expected term represents the period of time that options are expected to be outstanding, while the forfeiture rate
represents the number of options that will be forfeited by grantees due primarily to termination of employment. In addition, the Company
considers any expectations regarding future activity which could impact the expected term and forfeiture rate. The risk-free rate for
periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation
cost, net of expected forfeitures, is recognized using a straight-line method over the vesting or service period.
2007 2006 2005
Expected dividend yield 0.7% 0.6% 0.2%
Expected volatility 29.1% 26.5% 24.1%
Risk-free interest rate 4.6% 4.7% 3.8%
Expected life 6.5 years 6.5 years 5 years
Following is a summary of stock option activity:
Weighted-
Weighted Average Aggregate
Average Remaining Intrinsic
Exercise Contractual Value
Shares Price Term ($000)
Options outstanding at December 31, 2006 4,099,514 $ 19.52
Granted 426,000 28.83
Exercised (362,432) 17.01
Forfeited (85,782) 23.72
Options outstanding at December 31, 2007 4,077,300 $ 20.63 4.70 years $ —
Vested or expected to vest at December 31, 2007 3,912,587 $ 20.37 4.56 years $ —
Options exercisable at December 31, 2007 3,109,547 $ 19.15 3.87 years $ —
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