First Data 2014 Annual Report Download - page 79

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management stockholders’ agreement include restrictions on transfers, lock ups, right of first refusal, registration rights, and a confidentiality, non-
solicitation and non-compete covenant. The expense associated with this plan is recorded by FDC. The number of shares authorized under the stock plan was
180 million as of December 31, 2014.
The participants of the stock plan have the right to require FDH 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.
The Company defers recognition of substantially all of the stock-based compensation expense related to stock options and non-vested restricted stock awards
and units. Due to the nature of call rights associated with stock options, the Company will recognize expense related to most options only upon certain
liquidity or employment termination events. The nature of the call rights associated with stock options creates a performance condition that is not considered
probable until the occurrence of one of the events described above. The call rights create a performance condition as they allow FDH to repurchase options at
the lesser of the fair value or the exercise price upon an option holder’s voluntary termination.
Stock-based compensation expense will be recognized related to certain restricted stock awards and units only upon a liquidity or employment termination
event which triggers vesting. For the remaining awards that vest based solely on service conditions, expense is recognized over the requisite service period.
Under certain circumstances, the Company may redeem common stock held by its employees on behalf of its parent company, FDH.
Total stock-based compensation expense recognized in the “Selling, general, and administrative” line item of the Consolidated Statements of Operations
resulting from stock options, non-vested restricted stock awards, and non-vested restricted stock units was as follows:
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2014 $ 50.5
2013 39.1
2012 12.4
During 2014, approximately $37 million of stock-based compensation expense was recognized as a result of the departure of certain executive officers.
During 2013, approximately $20 million of stock-based compensation expense was recognized as a result of granting an executive officer shares of common
stock of FDH and fully vested restricted stock units.
The Company has a deferred compensation plan for non-employee directors that allows each of these directors to defer their annual compensation. The plan
is unfunded. For purposes of determining the investment return on the deferred compensation, each director’s account is treated as if credited with a number
of shares of FDH stock determined by dividing the deferred compensation amount by the first Board approved fair value of the stock 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 are recorded as a liability and are adjusted to fair value quarterly. As of
December 31, 2014 and 2013, the balance of this liability was $1 million.
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During the years ended December 31, 2014, 2013, and 2012, time-based options were granted under the stock plan. The time-based options have a
contractual term of 10 years. Time-based options vest equally over a three to five year period from the date of issuance. The outstanding time-based options
also have certain accelerated vesting provisions that become effective upon a change in control, a qualified public offering, or certain termination events.
As of December 31, 2014, there was approximately $154 million of total unrecognized compensation expense related to non-vested stock options that will
only be recognized upon a qualified public offering or certain liquidity or employment termination events.
During 2014, 2013, and 2012, FDH paid $15 million, $22 million, and $3 million, respectively, to repurchase shares from employees that terminated
employment with the Company.
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