Exhibit 10.5
THE WESTERN UNION COMPANY
2006 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT — TERMS AND CONDITIONS

1.   These Terms and Conditions form part of the Stock Option Agreement (the
“Agreement”) pursuant to which you have been granted a Nonqualified Stock Option
(“Stock Option”) under The Western Union Company 2006 Non-Employee Director
Equity Compensation Plan (the “Plan”). A copy of the Plan is enclosed for your
convenience. The terms of the Plan are hereby incorporated in this Agreement by
reference and made a part hereof. Any capitalized terms used in this Agreement
that are not defined herein shall have the meaning set forth in the Plan.   2.  
The number of common shares of The Western Union Company (the “Company”) subject
to the Stock Option, and the option exercise price, are specified in the
attached Award Notice (which forms part of the Agreement).   3.   Subject to the
other provisions of this Agreement and the terms of the Plan, at any time or
times on or after the Date of Grant specified in the attached Award Notice, but
not later than the tenth anniversary of such Date of Grant, you may exercise
this Stock Option as to the number of shares of common stock of the Company
(“Common Stock”) which, when added to the number of shares of Common Stock as to
which you have theretofore exercised under this Stock Option, if any, will not
exceed the total number of shares of Common Stock covered hereby. This Stock
Option may not be exercised for a fraction of a share of Common Stock of the
Company.   4.   This Stock Option may not be exercised unless the following
conditions are met:

  (a)   Legal counsel for the Company must be satisfied at the time of exercise
that the issuance of shares upon exercise will comply with applicable U.S.
federal, state, local and foreign laws.     (b)   You pay the exercise price as
follows: (i) by giving notice to the Company or its designee of the number of
whole shares of Common Stock to be purchased and by making payment therefor in
full (or arranging for such payment to the Company’s satisfaction) either (A) in
cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of previously owned whole shares of Common Stock
(which you have held for at least six months or which you have purchased on the
open market) having an aggregate Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (C) except as may be prohibited by applicable law, in cash by a
broker-dealer acceptable to the Company to whom you have submitted an
irrevocable notice of exercise (i.e., also known as “cashless exercise”) or
(D) by a combination of (A) and (B) and (ii) by executing such documents as the
Company may reasonably request.

5.   In the event that you cease to be a Non-Employee Director for any reason,
you will continue to have the right to exercise this Stock Option in accordance
with the other provisions of this Agreement and the applicable provisions of the
Plan until and including the tenth anniversary of the Date of Grant specified in
the attached Award Notice.   6.   As long as you continue service to the
Company, you may transfer Stock Options to a Family Member or Family Entity
without consideration; provided, however, in the case of a transfer of Stock
Options to a limited liability company or a partnership which is a Family
Entity, such transfer may be for consideration consisting solely of an entity
interest in the limited liability company or partnership to which the transfer
is made. Any transfer of Stock Options shall be in a form acceptable to the
Committee, shall be signed by you and shall be effective only upon written
acknowledgement by the Committee of its receipt and acceptance of such notice.
If a Stock Option is transferred to a Family

 

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    Member or Family Entity, the Stock Option may not thereafter be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of by such
Family Member or Family Entity except by will or the laws of descent and
distribution.   7.   Regardless of any action the Company takes with respect to
any or all income tax, social insurance, payroll tax, payment on account or
other tax-related items related to your participation in the Plan and legally
applicable to you (“Tax-Related Items”), you acknowledge that the ultimate
liability for all Tax-Related Items is and remains your responsibility and may
exceed the amount actually withheld by the Company. You further acknowledge that
the Company (i) makes no representations or undertakings regarding the treatment
of any Tax-Related Items in connection with any aspect of the Stock Option,
including but not limited to, the grant, vesting, exercise of the Stock Option,
the issuance of shares of Common Stock upon exercise, the subsequent sale of
shares of Common Stock acquired pursuant to the exercise of the Stock Option and
the receipt of any dividends; and (ii) do not commit to and are under no
obligation to structure the terms of the grant or any aspect of the Stock Option
to reduce or eliminate your liability for the Tax-Related Items or achieve any
particular tax result. Further, if you have become subject to tax in more than
one jurisdiction between the Grant Date and the date of any relevant taxable or
tax withholding event (“Tax Date”), as applicable, you acknowledge that the
Company may be required to withhold or account for Tax-Related Items in more
than one jurisdiction.       Prior to the Tax Date, you will pay or make
adequate arrangements satisfactory to the Company to satisfy all Tax-Related
Items. In this regard, you authorize the Company or its agent, at its
discretion, to satisfy the obligations with regard to all Tax-Related Items by
one or a combination of the following: (A) accept a cash payment in U.S. dollars
in the amount of Tax-Related Items, (B) withhold whole shares of Common Stock
which would otherwise be delivered to you having an aggregate Fair Market Value,
determined as of the Tax Date, or withhold an amount of cash from any cash
compensation which would otherwise be payable to you by the Company equal to the
amount necessary to satisfy the Tax-Related Items, or (C) withhold from proceeds
of the sale of shares of Common Stock acquired pursuant to the exercise of the
Stock Option either through a voluntary sale or through a mandatory sale
arranged by the Company (on your behalf pursuant to this authorization).      
To avoid any negative accounting treatment, the Company may withhold or account
for Tax-Related Items by considering applicable minimum statutory withholding
amounts or other applicable withholding rates. If the obligation for Tax-Related
Items is satisfied by withholding in shares of Common Stock, for tax purposes,
you are deemed to have been issued the full number of shares of Common Stock
subject to the exercised Stock Option, notwithstanding that a number of shares
of Common Stock are held back solely for the purpose of paying the Tax-Related
Items due as a result of any aspect of Director’s participation in the Plan.
Finally, you shall pay to the Company any amount of Tax-Related Items that the
Company may be required to withhold or account for as a result of your
participation in the Plan that cannot be satisfied by the means previously
described. The Company may refuse to issue or deliver the shares of Common Stock
or the proceeds of the sale of shares of Common Stock to the Director, if
Director fails to comply with his or her obligations in connection with the
Tax-Related Items.   8.   The Board or Committee may amend or terminate the Plan
and the Committee may amend (or its delegate may amend) these Terms and
Conditions. No amendment may impair your rights as an option holder without your
consent. The determination of such impairment shall be made by the Committee in
its sole discretion.

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9.   The Committee (or its delegate) administers the Plan and has discretion to
interpret the Plan and this Agreement. Any decision or interpretation rendered
by the Committee or its delegate shall be final, conclusive and binding on you
and all persons claiming under or through you. By accepting this grant or other
benefit under the Plan, you and each person claiming under or through you shall
be conclusively deemed to have indicated acceptance and ratification of, and
consent to, any action taken under the Plan by the Committee or its delegate  
10.   This Award is discretionary, non-binding for future years and there is no
promise or guarantee that such grants will be offered to the Director in future
years.   11.   The Company is not providing any tax, legal or financial advice,
nor is the Company making any recommendations regarding your participation in
the Plan, or your acquisition or sale of the shares of Common Stock acquired
pursuant to the exercise of the Stock Option. You are hereby advised to consult
with your own personal tax, legal and financial advisors regarding your
participation in the Plan before taking any action related to the Plan.   12.  
The validity, construction, interpretation, administration and effect of the
Plan and this Agreement and rights relating to the Plan and to this Agreement,
shall be governed by the substantive laws, but not the choice of law rules, of
the State of Delaware in the United States of America, as provided in the Plan.
For purposes of litigating any dispute that arises directly or indirectly under
the Stock Option or the Agreement, the parties hereby submit to and consent to
the jurisdiction of the State of Colorado in the United States of America, and
agree that such litigation shall be conducted only in the courts of Arapahoe
County in the State of Colorado in the United States of America, or the federal
courts for the United States of America for the District of Colorado, and no
other courts, where this grant is made and/or to be performed.   13.   If one or
more provisions of this Agreement shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby and
the invalid, illegal or unenforceable provisions shall be deemed null and void;
however, to the extent permissible by law, any provisions which could be deemed
null and void shall first be construed, interpreted or revised retroactively to
permit this Agreement to be construed as to foster the intent of this Agreement
and the Plan.   14.   The Company may, in its sole discretion, decide to deliver
any documents related to current or future participation in the Plan by
electronic means. Director hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through an online or
electronic system established and maintained by the Company or a third party
designated by the Company.   15.   The Company reserves the right to impose
other requirements on your participation in the Plan, on the Stock Option and on
any shares of Common Stock purchased upon exercise of the Stock Option under the
Plan, to the extent the Company determines it is necessary or advisable in order
to comply with local law or facilitate the administration of the Plan, and to
require you to sign any additional agreements or undertakings that may be
necessary to accomplish the foregoing.

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