MoneyGram 2009 Annual Report Download - page 118

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. On May 12, 2009, the
stockholders of the Company approved a modification of the 2005 Omnibus Incentive Plan to increase the authorization for the issuance
of awards from 7,500,000 shares of common stock to 47,000,000 shares of common stock. As of December 31, 2009, the Company has
remaining authorization to issue awards of up to 12,587,461 shares of common stock.
Stock Options — Prior to 2009, option awards were generally granted with an exercise price equal to the average of the high and low
market price of the Company's common stock on the date of grant. Beginning in 2009, option awards are generally granted with an
exercise price equal to the closing market price of the Company's common stock on the date of grant. No stock options were granted in
2008. Stock options granted in 2007 become exercisable over a three-year period in an equal number of shares each year and have a term
of 10 years. All outstanding stock options contain certain forfeiture and non-compete provisions.
Pursuant to the terms of all options granted in 2009, 50 percent of the options awarded become exercisable through the passage of time
(the "Time-based Tranche") and 50 percent of the options awarded become exercisable upon the achievement of certain conditions (the
"Performance-based Tranche"). The Time-based Tranche generally becomes exercisable over a five-year period in either (a) an equal
number of shares each year or (b) a tranched vesting schedule whereby 15 percent of the Time-based Tranche vests immediately and then
at rates of 10 to 20 percent each year. The Time-based Tranche for options granted to the Company's Chairman and Chief Executive
Officer becomes exercisable over a four-year period in an equal number of shares each year. The Performance-based Tranche becomes
exercisable upon the achievement within five years of grant of the earlier of (a) a pre-defined common stock price for any period of 20
consecutive trading days, (b) a change in control of the Company resulting in a pre-defined per share consideration or (c) in the event the
Company's common stock does not trade on a United States exchange or trading market, a public offering resulting in the Company's
common stock meeting pre-defined equity values. All options granted in 2009 have a term of 10 years. Options granted to the Chairman
and Chief Executive Officer, as well as the Company's former chief executive officer, contain certain forfeiture provisions, including the
continuation of vesting terms for the 12-month period immediately following termination by the Company without cause or voluntary
termination for good reason, as defined by the award agreements. The Company's Chairman and Chief Executive Officer was granted an
option award on August 31, 2009 for 6,300,000 shares, of which 2,000,000 shares will not vest and are subject to forfeiture if the
stockholders of the Company do not approve certain amendments to the MoneyGram International, Inc. 2005 Omnibus Incentive Plan.
On August 31, 2009, options granted to the Company's Chairman and Chief Executive Officer in January and May 2009 were modified to
extend the timeframe under which the Performance-based Tranche may vest to August 31, 2014, provided employment is maintained
through August 31, 2013. There was no incremental expense resulting from this modification.
For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing model for
the Time-based Tranches and a combination of Monte-Carlo simulation and the Black-Scholes single option pricing model for the
Performance-based Tranches. 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 used the simplified method to estimate the expected term of the award and historical
information to estimate the forfeiture rate. 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 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 the Black-Scholes model is based on the United States Treasury yield curve in effect at the time of grant for periods within the
expected term of the option, while the risk-free rate for the Monte-Carlo simulation is based on the five-year United States Treasury yield
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. The following table provides weighted-average grant-date fair value and assumptions utilized to
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