What is the primary purpose of these newly adopted severance plans?

The primary purpose of the Executive Severance Plan and the Change in Control (CIC) Severance Plan is to provide defined financial and benefit protections to eligible senior executives in specific termination scenarios. This includes providing security to executives whose employment might be impacted by a change in control or a termination without their fault, thereby aiding in executive retention and aligning executive interests with those of the company and its shareholders during periods of transition.

Who is eligible to participate in these severance plans?

Eligibility is generally for members of the company's Executive Committee or other selected employees who do not have a written employment agreement with the company. Specific selections are made by the CEO or Compensation Committee, with some eligibility requirements requiring selection at least six months prior to a change in control for the CIC Plan.

What triggers severance payments under the Executive Severance Plan?

Severance payments under the Executive Severance Plan are triggered primarily by termination by the Company without 'Cause' or by the Eligible Member for 'Good Reason'. Accrued payments (salary, vacation, target bonus) are provided in cases of death, disability, or mandatory retirement, but substantial severance packages are only provided for the "without cause" or "for good reason" termination events.

What are the key differences between the Executive Severance Plan and the CIC Plan?

The CIC Plan offers more generous and extended severance benefits compared to the Executive Severance Plan. Specifically, the CIC Plan provides for a longer period of base salary continuation (24 months vs. 18 months) and bonus payments (average of prior two years vs. 1.5x prior year's bonus), as well as extended health coverage (24 months vs. 18 months), for eligible employees whose employment is terminated without cause or for good reason within a defined period (6 months before to 2 years after) a 'Change-in-Control'.

Are there any conditions for receiving severance payments?

Yes, a significant condition for receiving severance payments under both plans is the eligible employee's execution of a separation agreement and release of claims within 60 days of termination. This agreement typically includes non-competition and non-solicitation restrictions for a period matching the severance duration (e.g., 18 or 24 months).

MA 8-K: Leadership Changes

Summary

Mastercard Inc. filed an 8-K on July 31, 2009, reporting the adoption of two new executive severance plans: the Executive Severance Plan and the Change in Control (CIC) Severance Plan, both effective August 1, 2009. These plans aim to provide defined benefits to eligible executives under specific termination circumstances, including "without cause" or "for good reason" scenarios, and during a change in control event. The Executive Severance Plan outlines benefits for eligible executive committee members not covered by individual employment agreements, providing for accrued payments upon death, disability, or mandatory retirement, and more extensive severance packages including salary continuation, bonus payments, and benefits continuation upon termination without cause or for good reason. The CIC Plan offers enhanced severance, including longer periods of salary and bonus continuation and benefits coverage, for eligible employees whose employment is terminated without cause or for good reason within a specified window around a change in control event. These plans are designed to comply with Section 409A of the Internal Revenue Code and ERISA. Investors should note that these are executive compensation and retention tools, outlining potential costs to the company in specific scenarios, and do not represent a change in the company's core business operations or financial performance at this time. The terms are subject to modification by the Compensation Committee, with specific protections for eligible employees for a period following a change in control.

Key Highlights

1Mastercard adopted a new Executive Severance Plan and a Change in Control (CIC) Severance Plan, effective August 1, 2009.
2These plans cover eligible executives who do not have existing employment agreements.
3The Executive Severance Plan provides for accrued payments upon death, disability, or mandatory retirement, and severance for terminations without cause or for good reason.
4Severance under the Executive Plan includes up to 18 months of base salary continuation, 1.5x-2x prior year's bonus in continuation, COBRA/retiree health coverage, and outplacement services.
5The CIC Plan offers more extensive severance benefits for terminations without cause or for good reason occurring within a defined period before or after a change in control.
6CIC Plan severance includes up to 24 months of base salary continuation, average of the prior two years' bonus in continuation, extended health coverage, and outplacement services.
7Both plans require the execution of a separation agreement and release, including non-competition and non-solicitation clauses.
8The plans are designed to comply with Section 409A of the Internal Revenue Code and ERISA.

Mastercard Inc 8-K Report, Executive Changes (Jul 31, 2009)

Summary

Key Highlights

Frequently Asked Questions