Western Union 2006 Annual Report Download - page 92

WESTERN UNION 2006 Annual Report 90
Bridge Loan
On September 27, 2006, FFMC entered into an unsecured
bridge financing facility in an aggregate principal amount
of $2.4 billion (the “Bridge Loan”) with a syndicate of
lenders. On September 29, 2006, FFMC borrowed under
the Bridge Loan an aggregate principal amount equal to
$2.4 billion in connection with the spin-off. The Bridge Loan
was repaid on November 17, 2006 with proceeds from
the issuance of the 2011 Notes, 2036 Notes, and Floating
Rate Notes, together with the proceeds of approximately
$400 million of commercial paper the Company issued.
|| 16. Stock Compensation Plans
Stock Compensation Plans After
the Spin-Off and Conversion of Existing
Awards Under First Data Plans
Prior to and in connection with the spin-off, the Company
adopted and First Data as its sole stockholder prior to the
spin-off approved, The Western Union Company 2006
Long-Term Incentive Plan (“2006 LTIP”) and The Western
Union Company 2006 Non-Employee Director Equity
Compensation Plan (“2006 Director Plan”). The 2006 LTIP
provides for the granting of stock options, restricted stock
awards and units, unrestricted stock awards, and other
equity-based awards, to employees and other key individuals
who perform services for the Company. The 2006 Director
Plan provides for the granting of equity-based awards to
non-employee directors of the Company.
Options granted under the 2006 LTIP are issued
with exercise prices equal to the fair market value of
Western Union common stock on the grant date, have
10-year terms, and vest over four equal annual increments
beginning 12 months after the date of grant. Compensation
expense related to stock options is recognized over the
requisite service period. The requisite service period
for stock options is the same as the vesting period, with
the exception of retirement eligible employees, who
have shorter requisite service periods ending when the
employees become retirement eligible.
Restricted stock awards and units granted under
the 2006 LTIP typically become 100% vested on the three
year anniversary of the grant date. The fair value of the
awards granted is measured based on the fair market
value of the shares on the date of grant, and the related
compensation expense is recognized over the requisite
service period which is the same as the vesting period.
A maximum of 120.0 million shares of common stock
ma y b e a war de d u nde r t he 20 0 6 LTI P. As of
December 31, 2006, the Company has issued 6.4 million
options and 1.1 million restricted stock awards and units to
certain employees of the Company under the 2006 LTIP.
On September 29, 2006, the Company awarded a
founders’ grant of either restricted stock awards or units
to certain employees who are not otherwise eligible to
receive stock-based awards under the 2006 LTIP. These
awards vest in two equal annual increments on the
first and second anniversary of the grant date. The fair
value of the awards granted was measured based on the
when-issued closing price of the Company’s common
stock of $19.13 on the grant date and is being recognized
ratably over the vesting period. Included in the 1.1 million
restricted stock awards and units issued under the 2006
LTIP described in the preceding paragraph, were 0.3 million
restricted stock awards or units issued in connection with
the founders’ grant.
Options granted under the 2006 Director Plan are
issued at prices equal to the fair market value of Western
Union common stock at the grant date, have 10-year terms,
and vest immediately. Since options and stock units under
this plan vest immediately, compensation expense is
recognized on the date of grant based on the fair market
value of the awards when granted. Awards under the plan
may be settled immediately unless the participant elects
to defer the receipt of the common shares under applicable
plan rules. A maximum of 1.5 million shares of common
stock may be awarded under the 2006 Director Plan. As
of December 31, 2006, the Company has issued 0.2 million
options and 0.1 million unrestricted stock units to non-
employee directors of the Company.
At the time of the spin-off, First Data converted stock
options, restricted stock awards, and restricted stock units
(collectively, “Stock-Based Awards”) on First Data stock
held by First Data and Western Union employees. For First
Data employees, one replacement First Data Stock-Based
Award and one Western Union Stock-Based Award were
distributed for every First Data Stock-Based Award
held prior to the spin-off, which maintained both the pre-
conversion aggregate intrinsic value and the ratio of
the exercise price per share to the fair market value per
share. For Western Union employees, outstanding
First Data Stock-Based Awards were converted to new
Western Union Stock-Based Awards at a conversion ratio
of 2.1955 Western Union Stock-Based Awards for every
First Data Stock-Based Award held prior to the spin-off.
The conversion was based on the pre-distribution First
Data closing price with due bills of $42.00 relative to the
Western Union when-issued closing price of $19.13 on
September 29, 2006. The new Western Union Stock-Based
Awards maintained both the pre-conversion aggregate
intrinsic value of each option and the ratio of the exercise
price per share to the fair market value per share.
Substantially all converted Stock-Based Awards are subject
to the terms and conditions applicable to the original First
Data stock options, restricted stock awards and restricted
stock units. These Western Union options are considered
to have been issued under the 2006 LTIP.