First Data 2009 Annual Report Download - page 255

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited) (Continued)
The Company made no option grants and recognized no compensation cost related to options in 2007, 2006
or 2005. Tax expense related to stock option activity was $67 thousand, and $690 thousand for the years ended
December 31, 2006 and 2005 respectively. No tax expense was recognized in 2007 related to stock option
activity.
As a result of the redemption features in the Stock Option Plan, the Company expects to repurchase
61 thousand outstanding Shares in 2008.
The intrinsic value of options outstanding and exercisable as of December 31, 2007 was $5.6 million. The
total intrinsic value of options exercised during the years ended December 31, 2007, 2006, and 2005, was $1.9
million, $3.9 million, and $9.0 million, respectively.
NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures and non-cash financing activities for the years ended December 31,
2007, 2006, and 2005 are as follows (in thousands):
2007 2006 2005
Supplemental cash flow information:
Cash paid for income taxes ............................ $72,315 $58,195 $51,780
Cash paid for interest ................................. 15,693 17,687 4,340
Supplemental non-cash financing activities:
Capital contribution for services paid on the Company’s
behalf ........................................... $ — $ — $30,434
NOTE 17—RELATED PARTIES
The Company has multiple relationships with JPMorgan Chase and FDC as described below.
JPMorgan Chase
JPMorgan Chase serves as the Company’s primary bank and provides depository accounts, as well as
investment, treasury management, and hedging services. Amounts related to these services are included in
interest and other income, interest expense and operating expenses on the combined statements of income and
comprehensive income.
Pursuant to a referral agreement, JPMorgan Chase is obligated to refer customers for credit and debit card
processing services to the Company. Fees related to these referrals offset revenue on the combined statements of
income and comprehensive income. The payable related to these services is included in current liabilities on the
combined balance sheets.
JPMorgan Chase has agreed to indemnify the Company against certain losses, if any, which would result
from the provision of bankcard processing services to certain merchants. Pursuant to these indemnification
agreements, the Company pays JPMorgan Chase an indemnification fee which is included in operating expenses
on the combined statements of income and comprehensive income.
In addition to referral and indemnification agreements, the Company has entered into various contracts with
JPMorgan Chase relating to transaction services. Under these contracts both the Company and JPMorgan Chase
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