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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.)
Filed by the Registrantþ
Filed by a Party other than the Registranto
Check the appropriate box:
o | Preliminary Proxy Statement | o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
þ | Definitive Proxy Statement | |||||
o | Definitive Additional Materials | |||||
o | Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2. |
MASTERCARD INCORPORATED
Payment of Filing Fee (Check the appropriate box):
þ | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. |
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | |||
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o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
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Very truly yours, | |
-s- Robert W. Selander | |
Robert W. Selander | |
President and Chief Executive Officer |
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1. Elect persons to serve on the Global Board of Directors; | |
2. Approve the MasterCard International Incorporated Senior Executive Annual Incentive Compensation Plan; | |
3. Approve the MasterCard International Incorporated Senior Executive Incentive Plan; and | |
4. Act on any other business which may properly come before the Annual Meeting or any adjournment thereof. |
By Order of the Global Board of Directors | |
-2- Noah J. Hanft | |
Noah J. Hanft | |
Secretary |
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Page | |||||
Introduction | 1 | ||||
Voting Procedures | 1 | ||||
General | 2 | ||||
Solicitation of Proxies | 2 | ||||
Householding | 2 | ||||
The Voting Stock | 3 | ||||
Voting Requirements | 3 | ||||
Stockholders Entitled to Vote | 3 | ||||
Security Ownership of Certain Beneficial Owners and Management | 4 | ||||
Section 16(a) Beneficial Ownership Reporting Compliance | 5 | ||||
Proposal 1 — Election of Directors | 6 | ||||
Nomination of Directors | 6 | ||||
Nominees for Election to the Global Board of Directors | 8 | ||||
Proposal 2 — Approval of the MasterCard International Incorporated Senior Executive Annual Incentive Compensation Plan | 12 | ||||
General | 12 | ||||
Summary of the Annual Plan | 12 | ||||
Federal Income and Employment Tax Consequences | 14 | ||||
Proposal 3 — Approval of the MasterCard International Incorporated Senior Executive Incentive Plan | 15 | ||||
General | 15 | ||||
Summary of the Long-Term Plan | 15 | ||||
Federal Income and Employment Tax Consequences | 17 | ||||
Committees of the Global Board of Directors | 18 | ||||
Audit | 18 | ||||
Compensation | 18 | ||||
Nominating and Corporate Governance | 18 | ||||
Attendance at Meetings | 18 | ||||
Attendance at Meetings by Directors | 18 | ||||
Executive Sessions | 19 | ||||
Attendance at Annual Meetings | 19 | ||||
Stockholder Communications with the Global Board of Directors | 19 | ||||
Executive Officers of the Company | 19 | ||||
Executive Compensation | 21 | ||||
Summary Compensation | 21 | ||||
Long-Term Incentive Plan-Awards In Fiscal Year 2004 | 22 | ||||
Retirement Benefits | 23 | ||||
Employment Agreements and Change-in-Control Agreements | 24 | ||||
Compensation of Directors | 26 | ||||
Compensation Committee Interlocks and Insider Participation | 27 | ||||
Performance Graph | 28 | ||||
Report of Compensation Committee on Executive Compensation | 29 | ||||
Certain Relationships and Related Transactions | 32 | ||||
Auditors Services and Fees | 33 | ||||
Audit Committee Report | 35 | ||||
Other Matters | 36 | ||||
Appendix A — MasterCard International Incorporated Senior Executive Annual Incentive Compensation Plan | A-1 | ||||
Appendix B — MasterCard International Incorporated Senior Executive Incentive Plan | B-1 | ||||
Appendix C — MasterCard Incorporated Audit Committee Charter | C-1 |
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• | notifying in writing Noah J. Hanft, Secretary of MasterCard Incorporated, at 2000 Purchase Street, Purchase, New York 10577; | |
• | executing and returning a subsequent proxy; | |
• | subsequently authorizing the individuals named on its proxy card to vote its interests by calling the toll-free telephone number or by using the Internet as described in the instructions included with its proxy card; or | |
• | appearing in person or by representative with a signed proxy and voting at the Annual Meeting. |
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Shares of Class A | Percent of Class A | Shares of Class B | Percent of Class B | Percent of Total | |||||||||||||||||
Redeemable | Redeemable | Convertible | Convertible | Outstanding | |||||||||||||||||
Common Stock | Common Stock | Common Stock | Common Stock | Common Stock | |||||||||||||||||
Name and Address of | Beneficially | Beneficially | Beneficially | Beneficially | Beneficially | ||||||||||||||||
Beneficial Owner | Owned | Owned | Owned | Owned | Owned | ||||||||||||||||
JPMorgan Chase & Co.(1)(2) | 9.85 million | 11.7 | % | 1.88 million | 11.7 | % | 11.7 | % | |||||||||||||
270 Park Avenue New York, NY 10017 | |||||||||||||||||||||
Citigroup, Inc.(3) | 5.23 million | 6.2 | % | 1.00 million | 6.2 | % | 6.2 | % | |||||||||||||
399 Park Avenue New York, NY 10043 | |||||||||||||||||||||
Bank of America Corporation(4) | 5.08 million | 6.0 | % | .97 million | 6.0 | % | 6.0 | % | |||||||||||||
100 North Tryon Street Charlotte, NC 28255 | |||||||||||||||||||||
EURO Kartensysteme GmbH(5) | 4.39 million | 5.2 | % | .84 million | 5.2 | % | 5.2 | % | |||||||||||||
Solmsstrasse 6 60486 Frankfurt/ Main Germany | |||||||||||||||||||||
Europay France S.A.S.(6) | 4.22 million | 5.0 | % | .80 million | 5.0 | % | 5.0 | % | |||||||||||||
44, rue Cambronne 75740 Paris Cedex 15 France |
(1) | Based on a Schedule 13G/ A Information Statement filed on February 10, 2005, JPMorgan Chase & Co. shares voting power with respect to its Common Stock with its wholly owned subsidiaries, Chase Manhattan Bank USA, National Association, and JPMorgan Chase Bank, National Association. The Schedule 13G/ A indicated that JPMorgan Chase & Co. shares voting power with respect to 9,854,664 class A redeemable shares and 1,877,079 class B convertible shares of Common Stock. |
(2) | The amended and restated certificate of incorporation of the Company provides that, in any vote for the election of directors, no stockholder, together with its affiliates, shall be entitled to exercise voting power in excess of 7% of the outstanding shares entitled to vote. Accordingly, MasterCard will not consider any shares voted by JPMorgan Chase & Co. in excess of 7.0 million with respect to Proposal 1 — Election of Directors. |
(3) | Based on a Schedule 13G/ A Information Statement filed on February 11, 2005, Citigroup, Inc. shares investment and voting power with respect to its Common Stock with Citicorp, Citigroup Holdings Company and Citibank, N.A., its subsidiaries. The Schedule 13G/ A indicated that Citigroup, Inc., Citigroup Holdings Company, and Citicorp had shared voting and dispositive power with respect to 5,233,234 class A redeemable shares and 996,803 class B convertible shares of Common Stock. Citibank, N.A. had shared voting and dispositive power with respect to 4,766,618 class A redeemable shares and 877,925 class B convertible shares of Common Stock. Citigroup, Inc., Citicorp and Citibank, N.A. share the same address listed above. Citigroup Holdings Company’s address as indicated by the Schedule 13G/ A is One Rodney Square, Wilmington, DE 19801. |
(4) | Bank of America Corporation’s Common Stock reflects the Common Stock held by its subsidiaries on a consolidated basis. |
(5) | Based on a Schedule 13G Information Statement filed on March 4, 2004, EURO Kartensysteme GmbH has sole voting and dispositive power with respect to 4,385,734 class A redeemable shares and 835,397 class B convertible shares of Common Stock. |
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(6) | Based on a Schedule 13G Information Statement filed on February 13, 2004, Europay France S.A.S. has sole voting and dispositive power with respect to 4,224,803 class A redeemable shares and 804,724 class B convertible shares of Common Stock. |
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• | one-third of the members of the Company’s Global Board of Directors will be representatives of the Company’s European stockholders; | |
• | one-third of the members of the Company’s Global Board of Directors will be representatives of the Company’s U.S. stockholders; | |
• | the President and Chief Executive Officer of the Company will be a director; and | |
• | the remaining directors will be apportioned among the representatives of stockholders from the Company’s other regions in accordance with the percentage of Common Stock owned by the stockholders of those regions. |
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• | the experience and qualifications of the individual nominee, particularly in connection with the bankcard industry; | |
• | the seniority and decision-making authority of the nominee within his or her institution; | |
• | the region with which the nominee is associated; | |
• | whether the nominee is an officer of or otherwise represents a financial institution that is principally a card issuing or merchant acquiring member of MasterCard International; | |
• | the size of the financial institution of which the nominee is an officer or representative, the extent of such institution’s business with the Company (in terms of revenues, issuing volumes and/or acquiring volumes), and the degree of such institution’s relative dedication to the Company’s brands; | |
• | whether the financial institution of which the nominee is an officer or representative is of particular strategic importance to the Company; | |
• | the overall composition and diversity of the Global Board of Directors; and | |
• | the requirements of the Company’s bylaws described above. |
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U.S. Representatives |
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Europe Representatives |
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Asia/Pacific Representatives |
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Canada Representative |
Latin America and the Caribbean Representative |
President and CEO |
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Name and Position | Dollar Value($) | ||||
Robert W. Selander | $ | 2,813,000 | |||
President & CEO | |||||
Alan J. Heuer | $ | 1,204,000 | |||
Chief Operating Officer | |||||
Jerry McElhatton | $ | 525,000 | |||
President, Global Technology & Operations | |||||
Christopher D. Thom | $ | 757,000 | |||
Chief Risk Officer | |||||
Noah J. Hanft | $ | 556,000 | |||
General Counsel & Corporate Secretary | |||||
Executive Officers as a Group | $ | 7,398,000 | |||
Non-Executive Director Group | $ | 0 | |||
Non-Executive Officer Employee Group | $ | 0 |
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• | Revenue | |
• | Earnings (including earnings before interest, taxes, depreciation and amortization; earnings before interest and taxes; and earnings before or after taxes) | |
• | Operating income | |
• | Net income | |
• | Profit margins | |
• | Earnings per share | |
• | Return on assets | |
• | Return on equity | |
• | Return on invested capital | |
• | Economic value-added | |
• | Stock price | |
• | Gross dollar volume | |
• | Total shareholder return | |
• | Market share |
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• | Book value | |
• | Expense management | |
• | Cash flow |
• | Participants in the Annual Plan will recognize in the year of payment ordinary income equal to the cash payment of an award, subject to applicable income and employment tax withholding by the Company. Absent a deferral election, under current guidance, awards under the Annual Plan will not be subject to Section 409A of the Code (“Section 409A”), which imposes restrictions on non-qualified deferred compensation arrangements. Moreover, in the event of a deferral, the MasterCard International Incorporated Deferral Plan will be operated in good faith compliance with Section 409A during 2005 and will be amended to comply with Section 409A, in the time and manner required under guidance issued under Section 409A. In the event of a deferral election, employment tax withholding by the Company will occur in the year the award would be paid, absent the deferral election, not at actual payment. | |
• | The Company expects that it will be entitled to claim a deduction for United States income tax purposes equal to the amount of ordinary income recognized by the participant without regard to the $1 million per year limit under Section 162(m) if the Annual Plan is approved by Stockholders and otherwise satisfies the requirements of Section 162(m) and other relevant provisions of the Code. Section 162(m) limits the deductibility of compensation paid to each of certain highly paid corporate executives to no more than $1 million per year except for qualified performance-based compensation defined in applicable tax regulations. Generally, the executives subject to this limit consist of individuals who, on the last day of the taxable year, are the chief executive officer or any of the four highest compensated officers (other than the President and Chief Executive Officer). |
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• | Revenue | |
• | Earnings (including earnings before interest, taxes, depreciation and amortization; earnings before interest and taxes; and earnings before or after taxes) | |
• | Operating income | |
• | Net income | |
• | Profit margins | |
• | Earnings per share | |
• | Return on assets | |
• | Return on equity | |
• | Return on invested capital | |
• | Economic value-added | |
• | Stock price | |
• | Gross dollar volume | |
• | Total shareholder return | |
• | Market share | |
• | Book value | |
• | Expense management | |
• | Cash flow |
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• | Participants in the Long-Term Plan will recognize in the year of payment ordinary income equal to the cash payment of an award, subject to applicable income and employment tax withholding by the Company. Both the Long-Term Plan and, in the event of a deferral, the MasterCard International Incorporated Deferral Plan, will be operated in good faith compliance with Section 409A during 2005 and will be amended to comply with section 409A, in the time and manner required under guidance issued under Section 409A. In the event of a deferral election, employment tax withholding by the Company will occur in the year the award would be paid, absent the deferral election, not at actual payment. | |
• | The Company expects that it will be entitled to claim a deduction for United States income tax purposes equal to the amount of ordinary income recognized by the participant without regard to the $1 million per year limit under Section 162(m) if the Long-Term Plan is approved by Stockholders and otherwise satisfies the requirements of Section 162(m) and other relevant provisions of the Code. Section 162(m) limits the deductibility of compensation paid to each of certain highly paid corporate executives to no more than $1 million per year except for qualified performance-based compensation defined in applicable tax regulation. Generally, the executives subject to this limit consist of individuals who, on the last day of the taxable year, are the chief executive officer or any of the four highest compensated officers (other than the chief executive officer). |
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Long-term | |||||||||||||||||||||||||
Annual Compensation | Compensation | ||||||||||||||||||||||||
Name and | Other Annual | LTIP | All Other | ||||||||||||||||||||||
Principal Position | Year | Salary | Bonus | Compensation(1) | Payouts(2) | Compensation(3) | |||||||||||||||||||
Robert W. Selander | 2004 | $ | 800,000 | $ | 2,500,000 | $ | 246,804 | $ | 4,827,025 | $ | 892,431 | ||||||||||||||
President & CEO | 2003 | $ | 800,000 | $ | 1,900,000 | $ | 280,231 | $ | 4,899,490 | $ | 1,343,973 | ||||||||||||||
2002 | $ | 800,000 | $ | 3,100,000 | $ | 271,342 | $ | 3,986,500 | $ | 1,723,330 | |||||||||||||||
Alan J. Heuer | 2004 | $ | 650,000 | $ | 1,200,000 | $ | 172,307 | $ | 3,088,050 | $ | 168,321 | ||||||||||||||
Chief Operating Officer | 2003 | $ | 650,000 | $ | 600,000 | $ | 189,187 | $ | 4,556,100 | $ | 1,654,461 | ||||||||||||||
2002 | $ | 643,750 | $ | 1,150,000 | $ | 193,431 | $ | 2,989,000 | $ | 176,018 | |||||||||||||||
Jerry McElhatton | 2004 | $ | 625,000 | $ | 525,000 | $ | 144,572 | $ | 2,541,525 | $ | 156,855 | ||||||||||||||
President Global | 2003 | $ | 625,000 | $ | 525,000 | $ | 164,190 | $ | 3,521,310 | $ | 1,487,020 | ||||||||||||||
Technology and Operations | 2002 | $ | 620,833 | $ | 900,000 | $ | 175,646 | $ | 2,292,500 | $ | 721,720 | ||||||||||||||
Christopher D. Thom | 2004 | $ | 575,000 | $ | 725,000 | $ | 154,506 | $ | 2,616,425 | $ | 921,808 | ||||||||||||||
Chief Risk Officer | 2003 | $ | 575,000 | $ | 500,000 | $ | 145,940 | $ | 2,534,300 | $ | 519,186 | ||||||||||||||
2002 | $ | 568,750 | $ | 700,000 | $ | 149,034 | $ | 2,166,500 | $ | 563,432 | |||||||||||||||
Noah J. Hanft | 2004 | $ | 375,000 | $ | 500,000 | $ | 123,390 | $ | 719,775 | $ | 210,022 | ||||||||||||||
General Counsel and | 2003 | $ | 350,000 | $ | 250,000 | $ | 118,086 | $ | 480,155 | $ | 252,031 | ||||||||||||||
Corporate Secretary | 2002 | $ | 350,000 | $ | 450,000 | $ | 90,780 | $ | 325,500 | $ | 320,892 |
(1) | Amounts represent payments in lieu of perquisites (for fiscal years 2004, 2003, and 2002 respectively: Mr. Selander — $56,000, $56,000, $56,000; Mr. Heuer — $45,000, $45,000, $45,000; Mr. McElhatton — $45,000, $45,000, $45,000; Mr. Thom — $45,000, $45,000, $45,000; Mr. Hanft — $45,000, $45,000, $35,000) and reimbursement for tax obligations (for fiscal years 2004, 2003, and 2002, respectively: Mr. Selander — $190,804, $224,231, $215,342; Mr. Heuer — $127,307, $144,187, $148,431; Mr. McElhatton — $99,572, $119,190, $130,646; Mr. Thom — $109,506, $100,940, $104,034; Mr. Hanft — $78,390, $73,086, $55,781). |
(2) | Includes payments under the Executive Incentive Plan as follows: 20% of the award earned for the 2000-2002 performance period and 80% of the award earned for the 2002-2004 performance period. |
(3) | Includes for fiscal 2004, a special bonus for services related to the Europay conversion and integration (Mr. Selander — $333,333; Mr. Thom — $100,000; Mr. Hanft — $125,000); payouts under the Company’s discontinued Value Appreciation Plan related to the exercise of vested rights tied to (i) value appreciation of a portfolio of member bank stocks through September 30, 2004 and, (ii) beginning October 1, 2004, earnings on investments in third-party investment vehicles (Mr. Selander — $279,615; Mr. Thom — $398,755); matching contributions under the Company’s Shared Profit and Savings Plan (Mr. Selander — $12,300; Mr. Heuer — $12,300; Mr. McElhatton — $12,300; Mr. Thom — $12,300; Mr. Hanft — $12,300); profit sharing contributions under the Company’s Shared Profit and Savings Plan (Mr. Selander — $20,500; Mr. Heuer — $20,500; Mr. McElhatton — $20,500; Mr. Thom — $20,500; Mr. Hanft — $20,500); Company contributions to both a non-qualified defined benefit and defined contribution plan — the Annuity Bonus Plan (Mr. Selander — $209,884; Mr. Heuer — $132,401; Mr. McElhatton — $120,531; Mr. Thom — $107,596; Mr. Hanft — $51,198); the dollar value of the benefit of premiums paid for a split-dollar life insurance policy projected on an actuarial basis (Mr. Thom — $281,425); the full amount of all premiums paid by the Company for Executive Life |
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Insurance coverage (Mr. Selander — $36,800; Mr. Heuer — $3,120; Mr. McElhatton — $3,524; Mr. Thom — $1,232; Mr. Hanft — $1,024). |
Estimated Future Payouts Under Non-Stock | |||||||||||||||||||||
Number of | Price-Based Units | ||||||||||||||||||||
Units | Performance or Other Period | ||||||||||||||||||||
Name | Awarded | Until Maturation | Threshold($) | Target($) | Maximum($) | ||||||||||||||||
Robert W. Selander | 41,000 | 1/1/2004–12/31/2006 | $ | 2,050,000 | $ | 4,100,000 | $ | 8,200,000 | |||||||||||||
President and CEO | |||||||||||||||||||||
Alan J. Heuer | 24,500 | 1/1/2004–12/31/2006 | $ | 1,225,000 | $ | 2,450,000 | $ | 4,900,000 | |||||||||||||
Chief Operating Officer | |||||||||||||||||||||
Jerry McElhatton | 18,500 | 1/1/2004–12/31/2006 | $ | 925,000 | $ | 1,850,000 | $ | 3,700,000 | |||||||||||||
President Global | |||||||||||||||||||||
Technology and Operations | |||||||||||||||||||||
Christopher D. Thom | 17,250 | 1/1/2004–12/31/2006 | $ | 862,500 | $ | 1,725,000 | $ | 3,450,000 | |||||||||||||
Chief Risk Officer | |||||||||||||||||||||
Noah J. Hanft | 7,000 | 1/1/2004–12/31/2006 | $ | 350,000 | $ | 700,000 | $ | 1,400,000 | |||||||||||||
General Counsel and | |||||||||||||||||||||
Corporate Secretary |
(1) | The performance units were granted under the Company’s Executive Incentive Plan. Each performance unit has a target value equal to $100. The actual value of each unit will be calculated based on the Company’s performance over a three-year period based on a combination of qualitative and quantitative measures that include: improving profitable share with key members in key markets; improving customer focused strategy; achieving corporate financial targets (including attaining a predetermined level of earnings before interest, taxes, depreciation and amortization (“EBITDA”), operating expense and return on equity (“ROE”)) and enhancing organizational capabilities. Each unit will be valued at target ($100) if, on a weighted-average basis, target performance is achieved for all of the performance measures. Each unit will be valued at threshold ($50) if, on a weighted-average basis, threshold performance is achieved. Each unit will be valued at maximum ($200) if, on a weighted-average basis, superior performance is achieved. The units will have no value if performance is below threshold. Determinations as to the achievement of performance levels will be made by the Compensation Committee in its sole discretion. The Compensation Committee will determine the unit value based on interpolation in the event that performance between threshold and target or target and superior is achieved. The values above are meant to be a framework and not an absolute, and the Compensation Committee may make negative adjustments to the unit value of the performance units awarded to reflect additional or amended performance measures or criteria or the impact of a significant event, occurrence or charge to earnings. |
% of Performance | ||||
Twelve-Month Cycle Ending on the Following Anniversary of the Date of Grant | Units Vested | |||
1st Anniversary | 262/3 | % | ||
2nd Anniversary | 262/3 | % | ||
3rd Anniversary | 262/3 | % | ||
4th Anniversary | 0 | % | ||
5th Anniversary | 20 | % |
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MasterCard Accumulation Plan (MAP) |
Pay Credit | ||||
for Current | ||||
Completed Years of Service at December 31 of Prior Plan Year | Plan Year | |||
0 – 4 | 4.50 | % | ||
5 – 9 | 5.75 | % | ||
10 – 14 | 8.00 | % | ||
15 – 19 | 10.00 | % | ||
20 – 29 | 12.00 | % |
Minimum | ||||
Pay Credit | ||||
for Current | ||||
Age on Birthday in Current Plan Year | Plan Year | |||
50 – 54 | 9.00 | % | ||
55 – 59 | 12.00 | % | ||
60+ | 14.00 | % |
Supplemental Retirement Benefits |
Supplemental Executive Retirement Plan (“SERP”) |
Annuity Bonus Plan |
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Estimated Annual Retirement Benefits Payable to Certain Executive Officers |
Year of 65th | Estimated Annual | |||||||
Name | Birthday | Benefit(1) | ||||||
Robert W. Selander | 2015 | $ | 61,000 | |||||
Alan J. Heuer | 2006 | $ | 253,000 | (2) | ||||
Jerry McElhatton | 2004 | $ | 213,000 | (2) | ||||
Christopher D. Thom | 2013 | $ | 52,000 | |||||
Noah J. Hanft | 2018 | $ | 93,000 |
(1) | Assumes MAP account balances increase with interest credits of 4.75% per year. |
(2) | Amount will be reduced by Social Security benefits. |
MasterCard Shared Profit and Savings Plan |
Employment Agreements |
Mr. Selander |
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• | A pro rata portion of his target bonus; | |
• | Severance pay in the form of base salary continuation and his average annual incentive bonus, received over the prior three years, for a period of 36 months, subject to recalculation to be payable over the period until he is eligible to retire (without any increase in the amount payable); | |
• | Continued participation in the Company’s health, life insurance and disability plans and Company payment of COBRA premiums; | |
• | Immediate SERP vesting and an additional SERP benefit equal to the amount of benefits he would have accrued under any Company tax-qualified pension and savings plans until he is eligible to retire; | |
• | Continued vesting of any long-term incentive awards; and | |
• | Outplacement assistance. |
Messrs. Heuer, McElhatton, Thom and Hanft |
• | A pro rata portion of his target bonus; | |
• | Severance pay in the form of base salary continuation and his average annual incentive bonus, received over the prior two years, for a period (through March 31, 2005 for Mr. McElhatton and 24 months for Messrs. Heuer, Thom and Hanft), subject, in Messrs. Heuer’s, Thom’s and Hanft’s cases, to recalculation to be payable over the period until the applicable executive is eligible to retire (without any increase in the amount payable); |
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• | Continued participation in the Company’s health, life insurance and disability plans and Company payment of COBRA premiums; | |
• | Immediate SERP vesting; | |
• | Immediate vesting of any special awards grants and continued vesting of any other long-term incentive awards; and | |
• | Relocation assistance for Mr. McElhatton and Mr. Thom. |
Change-in-Control Agreements |
• | A severance payment equal to two times the average base salary and bonus (three times in the case of the President and Chief Executive Officer), payable through March 31, 2005 for Mr. McElhatton and over a 24-month period for Messrs. Heuer, Thom and Hanft (36 months in the case of the President and Chief Executive Officer), subject to recalculation to be payable over the period until the executive is eligible to retire (without any increase in the amount payable); | |
• | Continued coverage under the executive’s individual long-term disability plan for the applicable period referenced above; | |
• | Continued coverage in the medical, dental, hospitalization and vision care plans for up to 18 months; | |
• | Accelerated vesting of performance units including special grants awarded prior to the change-in-control under the Executive Incentive Plan, with payout at 125% of target; | |
• | Accelerated vesting of special grants awarded pursuant to the Executive Incentive Plan, nonqualified retirement and deferred compensation benefits; | |
• | Lump sum payment equal to the value of unvested qualified plan benefits; | |
• | Outplacement assistance; and | |
• | An excise tax gross-up for any taxes incurred as a result of Section 4999 of the Internal Revenue Code. |
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March 31, | December 31, | |||||||
2003 | 2004 | |||||||
MasterCard | 100 | 162.8 | ||||||
S&P Financial Index | 100 | 146.8 | ||||||
S&P 500 Index | 100 | 142.9 |
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• | Executive officer goals should be linked with shareholder interests. The Company’s compensation and reward systems serve as a tool for reinforcing the link between rewards and the achievement of business results consistent with the organization’s expected values and behaviors. | |
• | Pay should be performance-based. The Company provides a total compensation program consisting of fixed and variable pay, with an emphasis on variable pay to reward short- and long-term performance versus established goals and objectives. | |
• | Compensation opportunities must be competitive to attract and retain talented employees. Each year, the Compensation Committee assesses the competitiveness of total compensation levels for executives as more fully described below. |
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Compensation Committee: | |
William F. Aldinger | |
Donald L. Boudreau | |
Baldomero Falcones Jaquotot | |
Robert W. Pearce | |
Lance L. Weaver |
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Audit Committee: | |
Norman C. McLuskie, Chairman | |
Donald L. Boudreau | |
Baldomero Falcones Jaquotot | |
Bernd M. Fieseler | |
Robert W. Pearce | |
March 16, 2005 |
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By Order of the Global Board of Directors | |
-s- Noah J. Hanft | |
Noah J. Hanft | |
Secretary |
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1. | PURPOSE |
2. | DEFINITIONS |
(i) if (a) at any time three stockholders have become entitled to cast at least 45 percent of the votes eligible to be cast by all the stockholders of MasterCard Incorporated on any issue, (b) at any time, a plan or agreement is approved by the stockholders of MasterCard Incorporated to sell, transfer, assign, lease or exchange (in one transaction or in a series of transactions) all or substantially all of the Company’s or MasterCard Incorporated’s assets, (c) at any time, a plan is approved by the stockholders of MasterCard Incorporated for the sale, liquidation or dissolution of the Company or MasterCard Incorporated or (d) at any time MasterCard Incorporated shall cease to be the sole class B member of the Company or otherwise cease to control substantially all voting rights in the Company. The foregoing notwithstanding, a reorganization in which the stockholders of MasterCard Incorporated continue to have all of the ownership rights in the continuing entity shall not in and of itself be deemed a “Change in Control” under (b), (c) and/or (d); | |
(ii) the approval by the stockholders of MasterCard Incorporated of (a) any consolidation or merger involving MasterCard Incorporated in which MasterCard Incorporated is not the continuing or surviving corporation or pursuant to which shares of stock of MasterCard Incorporated would be converted into cash, securities or other property, other than a merger in which the holders of the stock |
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immediately prior to the merger will have the same proportionate ownership interest (i.e., still own 100% of total) of common stock of the surviving corporation immediately after the merger; | |
(iii) any “person” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than MasterCard Incorporated or a subsidiary or employee benefit plan or trust maintained by MasterCard Incorporated any of its subsidiaries, becoming (together with its “affiliates” and “associates”, as defined in Rule 12b-2 under the Exchange Act) the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than twenty-five percent (25%) of the stock of MasterCard Incorporated outstanding at the time, without the prior approval of the Board; or | |
(iv) a majority of the voting directors of MasterCard Incorporated proposed on a slate for election by stockholders of MasterCard Incorporated are rejected by a vote of such stockholders. |
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3. | ELIGIBILITY |
4. | PERFORMANCE UNIT AWARDS |
5. | UNIT VALUE |
Performance Level | Unit Value | |||
Below Threshold | $ | 0 | ||
Threshold | $ | 50 | ||
Target | $ | 100 | ||
Superior | $ | 200 |
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6. | VESTING |
% of Performance | ||||
Twelve-Month Cycle Ending on the Following Anniversary of the Date of Grant | Units Vested | |||
1st Anniversary | 262/3 | % | ||
2nd Anniversary | 262/3 | % | ||
3rd Anniversary | 262/3 | % | ||
4th Anniversary | 0 | % | ||
5th Anniversary | 20 | % |
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7. | PAYMENT |
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8. | TERM |
9. | ADMINISTRATION |
10. | GENERAL PROVISIONS |
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11. | APPROVAL OF PLAN BY STOCKHOLDERS |
12. | AMENDMENT AND TERMINATION |
(a) The methodology for determining Performance Units and Unit Value may be changed, on a prospective basis, at any time. | |
(b) Upon termination of the Plan, the Board or the Committee may provide for the immediate termination of all outstanding Performance Units in exchange for a cash payment equal to the then value of the Performance Units that are outstanding, vested (pursuant to Section 6), and as to which the Committee has certified the Performance Level in accordance with section 5(b). Except in the case of a termination of the Plan as a consequence of a Change of Control, payments for vested awards on termination of the Plan shall not be made before the Committee has certified the Performance Level in accordance with section 5(b). The Board or the Committee also may terminate the Plan and adopt a successor plan or may amend the Plan, and give participants equivalent value in the successor plan or the amended plan for their vested Performance Units in the Plan and equivalent credit in the successor plan or the amended plan for unvested outstanding Performance Units in the Plan. |
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I. | PURPOSE |
A. Provide assistance to the Board of Directors in fulfilling its responsibility to the shareholders and potential shareholders of MasterCard Incorporated (the “Corporation”) with respect to its oversight of: | |
(i) The quality and integrity of the Corporation’s financial statements; | |
(ii) The Corporation’s compliance with legal and regulatory requirements; | |
(iii) The independent auditor’s qualifications and independence; and | |
(iv) The performance of the Corporation’s internal audit function and independent auditors. | |
B. Following the Corporation’s registration under the Securities Exchange Act of 1934, as amended, submit the report that SEC rules require be included in the Corporation’s annual proxy statement. |
II. | STRUCTURE AND OPERATIONS |
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III. | MEETINGS |
IV. | RESPONSIBILITIES AND DUTIES |
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(a) Obtain and review a report by the Corporation’s independent auditors describing: (i) the auditing firm’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditing firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the auditing firm, and any steps taken to deal with any such issues; and (iii) to assess the auditor’s independence, all relationships between the independent auditors and the Corporation; |
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(b) Ensure the rotation of the lead audit partner in accordance with the requirements of the Sarbanes-Oxley Act and related SEC rules, and consider whether there should be regular rotation of the audit firm itself. | |
(c) Confirm with any independent auditors retained to provide audit services for any fiscal year that the lead (or coordinating) audit partner (having primary responsibility for the audit), the audit partner responsible for reviewing the audit and any other audit personnel, as applicable, have not performed audit services for the Corporation for any period that is prohibited under the Sarbanes-Oxley Act and related SEC rules. | |
(d) Take into account the opinions of management and the Corporation’s internal auditors. |
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(i) with respect to any issues that arise with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance, and independence of the Corporation’s independent auditors or the performance of the internal audit function; | |
(ii) following meetings of the Committee at such intervals as the Committee may determine; and |
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(iii) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities. | |
The Committee shall provide such recommendations as the Committee may deem appropriate. The report to the Board of Directors may take the form of an oral report by the Chairman or any other member of the Committee designated by the Committee to make such report. |
V. | ANNUAL PERFORMANCE EVALUATION |
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MASTERCARD INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
for the Annual Meeting of Stockholders
on May 9, 2005
P
RO
X
Y
The undersigned hereby constitute(s) and appoint(s) Baldomero Falcones Jaquotot, Robert W. Selander and Noah J. Hanft, and each or any of them, attorneys and proxies of the undersigned, with full power of substitution of each, and with all the powers the undersigned would possess if personally present, to appear and vote all shares of common stock of MasterCard Incorporated the undersigned is entitled to vote at the Annual Meeting of Stockholders of MasterCard Incorporated to be held on May 9, 2005, and at any adjournment thereof, upon the matters referred to in the Notice of Annual Meeting and Proxy Statement for said meeting and in their discretion upon such other business as may properly come before the meeting or any adjournment. The undersigned hereby revokes any proxies heretofore given and ratifies and confirms all that each of said attorneys and proxies, or any substitute or substitutes, shall lawfully do or cause to be done by reason thereof, upon the matters referred to in the Notice of Annual Meeting and Proxy Statement for said meeting.
This proxy when properly executed will be voted in the manner directed, or if no choice is specified, “FOR” each of the proposals listed on the reverse side. Discretionary authority is hereby conferred as to all other matters that may come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE PROPOSALS.
SEE REVERSE
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ANNUAL MEETING OF STOCKHOLDERS
OF MASTERCARD INCORPORATED
May 9, 2005 at 11:00 a.m.
At Our Offices
2000 Purchase Street
Purchase, New York 10577
THERE ARE THREE WAYS TO VOTE YOUR PROXY
TELEPHONE VOTING
This method of voting is available for stockholders located in the U.S. and Canada.
Your telephone vote authorizes the named proxies on the proxy card to vote in the same manner as if you had returned your proxy card. On a touch tone telephone, callTOLL FREE 1-800-849-5629.You will be asked to enterONLYthe CONTROL NUMBER shown below. Have your proxy card ready, then follow the prerecorded instructions. Available 24 hours a day, 7 days a week until 5:00 p.m. Eastern time on May 6, 2005.
INTERNET VOTING
Pursuant to Section 212(c) of the Delaware General Corporation Law, stockholders may validly grant proxies over the Internet. Your Internet vote authorizes the named proxies on the proxy card to vote your shares in the same manner as if you had returned your proxy card.
Visit the Internet voting website athttp://proxy.georgeson.com.Enter the COMPANY NUMBERand CONTROL NUMBER shown below and follow the instructions on your screen. Available 24 hours a day, 7 days a week until 5:00 p.m. Eastern time on May 6, 2005.
VOTING BY MAIL
Simply mark, sign and date your proxy card and return it in the reply envelope enclosed.
COMPANY NUMBER
CONTROL NUMBER
If you are voting by telephone or the Internet, please do not mail your proxy card
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
Please mark
vote as in
this example.
FOR | WITHHOLD | |||||||
ALL | FROM ALL | |||||||
NOMINEES | NOMINEES | |||||||
1. | Election of Directors: Nominees:(01) William F. Aldinger, (02) Silvio Barzi, (03) Donald L. Boudreau, (04)Augusto M. Escalante, (05) Richard D. Fairbank, (06) Baldomero Falcones Jaquotot, (07) Bernd M. Fieseler, (08) Iwao Iijima, (09) Michel Lucas, (10) Norman C. McLuskie, (11) Siddharth N. Mehta, (12) Robert W. Pearce, (13) Michael T. Pratt, (14) Robert W. Selander, (15) Dato’ Tan Teong Hean, (16) Jac Verhaegen, (17) Lance L. Weaver and (18) Robert B. Willumstad | o o | o FOR ALL NOMINEES EXCEPT AS NOTED | |||||
Set forth below is the aggregate number of shares of class A redeemable and class B convertible common stock of MasterCard Incorporated owned by the stockholder named herein on March 18, 2005, the record date for determining stockholders eligible to vote at the annual meeting. |
FOR | AGAINST | ABSTAIN | ||||||||
2. | Approval of the MasterCard International Incorporated Senior Executive Annual Incentive Compensation Plan; and | o | o | o | ||||||
FOR | AGAINST | ABSTAIN | ||||||||
3. | Approval of the MasterCard International Incorporated Senior Executive Incentive Plan. | o | o | o |
Shares of class A redeemable common stock held | Shares of class B convertible common stock held |