First Data 2008 Annual Report Download - page 167

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Each employee who invests has the right to require Holdings to repurchase the shares and options upon the employee's termination due to death or
disability. The put rights expire one year after the termination event or upon a change in control. The repurchase price for the shares is their fair market value
at the time of repurchase. The repurchase price for the options is their intrinsic value at the time of repurchase.
Additionally, Holdings has the right to repurchase stock and options upon termination of employment for any reason. These call rights expire on the
earliest of 180 days after the termination event, a change in control, or September 24, 2012. Depending on the cause of termination, Holdings has the right to
repurchase shares at either the fair market value at the time of repurchase or the lesser of fair market value or the original price paid by the employee to
purchase the shares. Holdings may repurchase vested options at their intrinsic value at the time of repurchase. During 2008, Holdings paid $3.8 million to
repurchase shares from employees that terminated employment with the Company.
Total stock-based compensation expense recognized in the Consolidated Statements of Operations resulting from stock options, non-vested restricted
stock awards and non-vested restricted stock units was $16.6 million pretax and zero for the year ended December 31, 2008 and for the period from
September 25, 2007 to December 31, 2007, respectively. Stock-based compensation expense is recognized in the "Selling, general and administrative" line
item of the Consolidated Statements of Operations. As of December 31, 2008, there was approximately $59 million of total unrecognized compensation cost
related to non-vested stock options and restricted stock which is expected to be recognized over a weighted-average period of 3.8 years.
On July 1, 2008, FDC and its parent, Holdings, purchased the remaining 18.2% and 13.6% of the outstanding equity of Money Network, respectively,
not already owned by the Company. The consideration paid by Holdings consisted of 6 million shares of its common stock. Due to certain repurchase features
associated with the Holdings shares so issued, FDC recognized $2.4 million in stock compensation expense (included in total stock based compensation
expense noted above) in the year ended December 31, 2008 and expects to recognize an additional $5.1 million on a straight line basis through December 31,
2010. FDC subsequently purchased Holdings' interest in Money Network for an amount equivalent to the value of the shares issued by Holdings as purchase
consideration (excess of value of shares issued by Holdings over the stock compensation expense to be recognized).
In 2008, the Board of Directors approved a deferred compensation plan for non-employee directors that allows each of these directors to defer their
annual compensation. Each director's account will be credited with a number of shares of Holdings stock determined by dividing the deferred amount by the
first fair value of the stock approved during the year. The account balance will be paid in cash upon termination of Board service, certain liquidity events or
other certain events at the fair value of the stock at the time of settlement. Due to the cash settlement provisions, the account balances will be recorded as a
liability and adjusted to fair value quarterly. For 2008, the deferral applied only to compensation for the second half of the year. At December 31, 2008 the
balance of this liability was immaterial.
Stock Options
During the year ended December 31, 2008, time options and performance options were granted under the new stock plan. During the successor period
from September 25, 2007 through December 31, 2007, no options were granted. Generally, time options and performance options were granted equally based
on a multiple of the employee's investment in shares of Holdings and have a contractual term of 10 years. Time options vest equally over a five-year period
and performance options vest based upon Company EBITDA targets for the years 2008 through 2012. These EBITDA targets have both annual and
cumulative components. The options also have certain accelerated vesting provisions upon a change in control, an initial public offering, and certain
termination events.
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