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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
Or 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-32877
MA-20210630_G1.JPG
Mastercard Incorporated
(Exact name of registrant as specified in its charter)
Delaware 13-4172551
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
2000 Purchase Street 10577
Purchase, NY (Zip Code)
(Address of principal executive offices)
(914) 249-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange of which registered
Class A Common Stock, par value $0.0001 per share
MA
New York Stock Exchange
1.1% Notes due 2022
MA22
New York Stock Exchange
2.1% Notes due 2027
MA27
New York Stock Exchange
2.5% Notes due 2030
MA30
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)
Yes
☒


No
☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer ☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
Yes
☐
No ☒
As of July 26, 2021, there were 978,828,818 shares outstanding of the registrant’s Class A common stock, par value $0.0001 per share; and 7,946,224 shares outstanding of the registrant’s Class B common stock, par value $0.0001 per share.


MA-20210630_G2.JPG
MASTERCARD INCORPORATED FORM 10-Q
TABLE OF CONTENTS
PART I
5
30
43
44
PART II
46
46
46
46
46
48
-

2 MASTERCARD JUNE 30, 2021 FORM 10-Q

In this Report on Form 10-Q (“Report”), references to the “Company,” “Mastercard,” “we,” “us” or “our” refer to the business conducted by Mastercard Incorporated and its consolidated subsidiaries, including our operating subsidiary, Mastercard International Incorporated, and to the Mastercard brand.
Forward-Looking Statements
This Report contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements. When used in this Report, the words “believe”, “expect”, “could”, “may”, “would”, “will”, “trend” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements that relate to the Company’s future prospects, developments and business strategies.
Many factors and uncertainties relating to our operations and business environment, all of which are difficult to predict and many of which are outside of our control, influence whether any forward-looking statements can or will be achieved. Any one of those factors could cause our actual results to differ materially from those expressed or implied in writing in any forward-looking statements made by Mastercard or on its behalf, including, but not limited to, the following factors:
•regulation directly related to the payments industry (including regulatory, legislative and litigation activity with respect to interchange rates and surcharging)
•the impact of preferential or protective government actions
•regulation of privacy, data, security and the digital economy
•regulation that directly or indirectly applies to us based on our participation in the global payments industry (including anti-money laundering, counter financing of terrorism, economic sanctions and anti-corruption; account-based payment systems; and issuer practice regulation)
•the impact of changes in tax laws, as well as regulations and interpretations of such laws or challenges to our tax positions
•potential or incurred liability and limitations on business related to any litigation or litigation settlements
•the impact of the global coronavirus (COVID-19) pandemic and measures taken in response
•the impact of competition in the global payments industry (including disintermediation and pricing pressure)
•the challenges relating to rapid technological developments and changes
•the challenges relating to operating a real-time account-based payment system and to working with new customers and end users
•the impact of information security incidents, account data breaches or service disruptions
•issues related to our relationships with our stakeholders (including loss of substantial business from significant customers, competitor relationships with our customers, banking industry consolidation, merchants’ continued focus on acceptance costs and unique risks from our work with governments)
•exposure to loss or illiquidity due to our role as guarantor and other contractual obligations
•the impact of global economic, political, financial and societal events and conditions, including adverse currency fluctuations and foreign exchange controls
•reputational impact, including impact related to brand perception and lack of visibility of our brands in products and services
•the inability to attract, hire and retain a highly qualified and diverse workforce, or maintain our corporate culture
•issues related to acquisition integration, strategic investments and entry into new businesses
•issues related to our Class A common stock and corporate governance structure
Please see a complete discussion of these risk factors in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. We caution you that the important factors referenced above may not contain all of the factors that are important to you. Our forward-looking statements speak only as of the date of this Report or as of the date they are made, and we undertake no obligation to update our forward-looking statements.

MASTERCARD JUNE 30, 2021 FORM 10-Q 3

PART I


PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Item 1. Consolidated financial statements (unaudited)
Mastercard Incorporated
Index to consolidated financial statements (unaudited)
Page
Consolidated Statement of Operations — Three and Six Months Ended June 30, 2021 and 2020
6
Consolidated Statement of Comprehensive Income — Three and Six Months Ended June 30, 2021 and 2020
7
Consolidated Balance Sheet — June 30, 2021 and December 31, 2020
8
Consolidated Statement of Changes in Equity — Three and Six Months Ended June 30, 2021 and 2020
9
Consolidated Statement of Cash Flows — Six Months Ended June 30, 2021 and 2020
11
12

MASTERCARD JUNE 30, 2021 FORM 10-Q 5

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Operations (Unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
  (in millions, except per share data)
Net Revenue $ 4,528  $ 3,335  $ 8,683  $ 7,344 
Operating Expenses
General and administrative 1,718  1,368  3,394  2,862 
Advertising and marketing 216  93  335  247 
Depreciation and amortization 186  145  349  289 
Provision for litigation 67  22  67  28 
Total operating expenses 2,187  1,628  4,145  3,426 
Operating income 2,341  1,707  4,538  3,918 
Other Income (Expense)
Investment income 3  8  4  24 
Gains (losses) on equity investments, net 243  75  337  (99)
Interest expense (106) (101) (213) (170)
Other income (expense), net (3) 1  2  4 
Total other income (expense) 137  (17) 130  (241)
Income before income taxes 2,478  1,690  4,668  3,677 
Income tax expense 412  270  774  564 
Net Income $ 2,066  $ 1,420  $ 3,894  $ 3,113 
Basic Earnings per Share $ 2.09  $ 1.41  $ 3.93  $ 3.10 
Basic weighted-average shares outstanding 990  1,004  992  1,005 
Diluted Earnings per Share $ 2.08  $ 1.41  $ 3.91  $ 3.08 
Diluted weighted-average shares outstanding 994  1,008  996  1,009 

The accompanying notes are an integral part of these consolidated financial statements.

6 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Comprehensive Income (Unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
  (in millions)
Net Income $ 2,066  $ 1,420  $ 3,894  $ 3,113 
Other comprehensive income (loss):
Foreign currency translation adjustments 143  36  (55) (245)
Income tax effect (9) 15  24  29 
Foreign currency translation adjustments, net of income tax effect 134  51  (31) (216)
Translation adjustments on net investment hedges (61) (29) 72  (9)
Income tax effect 14  6  (16) 2 
Translation adjustments on net investment hedges, net of income tax effect (47) (23) 56  (7)
Cash flow hedges (4) —  (1) (189)
Income tax effect 1  3  —  42 
Reclassification adjustments for cash flow hedges 3  1  4  1 
Income tax effect (1) —  (1) — 
Cash flow hedges, net of income tax effect (1) 4  2  (146)
Defined benefit pension and other postretirement plans —  —  —  — 
Income tax effect —  —  —  — 
Reclassification adjustment for defined benefit pension and other postretirement plans (1) (1) (1) (1)
Income tax effect —  —  —  — 
Defined benefit pension and other postretirement plans, net of income tax effect (1) (1) (1) (1)
Investment securities available-for-sale
1  4  2  (3)
Income tax effect (1) (2) (1) — 
Investment securities available-for-sale, net of income tax effect —  2  1  (3)
Other comprehensive income (loss), net of tax 85  33  27  (373)
Comprehensive Income $ 2,151  $ 1,453  $ 3,921  $ 2,740 

The accompanying notes are an integral part of these consolidated financial statements.


MASTERCARD JUNE 30, 2021 FORM 10-Q 7

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet (unaudited)
June 30, 2021 December 31, 2020
  (in millions, except per share data)
Assets
Current assets:
Cash and cash equivalents $ 6,216  $ 10,113 
Restricted cash for litigation settlement 586  586 
Investments 544  483 
Accounts receivable 2,773  2,646 
Settlement due from customers 937  1,706 
Restricted security deposits held for customers 1,806  1,696 
Prepaid expenses and other current assets 2,217  1,883 
Total current assets 15,079  19,113 
Property, equipment and right-of-use assets, net of accumulated depreciation and amortization
of $1,508 and $1,390, respectively
1,839  1,902 
Deferred income taxes 454  491 
Goodwill 7,661  4,960 
Other intangible assets, net of accumulated amortization of $1,638 and $1,489, respectively
3,613  1,753 
Other assets 6,265  5,365 
Total Assets $ 34,911  $ 33,584 
Liabilities, Redeemable Non-controlling Interests and Equity
Current liabilities:
Accounts payable $ 547  $ 527 
Settlement due to customers 569  1,475 
Restricted security deposits held for customers 1,806  1,696 
Accrued litigation 906  842 
Accrued expenses 5,564  5,430 
Current portion of long-term debt 649  649 
Other current liabilities 1,256  1,228 
Total current liabilities 11,297  11,847 
Long-term debt 13,250  12,023 
Deferred income taxes 394  86 
Other liabilities 3,401  3,111 
Total Liabilities 28,342  27,067 
Commitments and Contingencies
Redeemable Non-controlling Interests 29  29 
Stockholders’ Equity
Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,397 and 1,396 shares issued and 980 and 987 shares outstanding, respectively
—  — 
Class B common stock, $0.0001 par value; authorized 1,200 shares, 8 shares issued and outstanding
—  — 
Additional paid-in-capital 5,053  4,982 
Class A treasury stock, at cost, 417 and 409 shares, respectively
(39,729) (36,658)
Retained earnings 41,771  38,747 
Accumulated other comprehensive income (loss) (653) (680)
Mastercard Incorporated Stockholders' Equity 6,442  6,391 
Non-controlling interests 98  97 
Total Equity 6,540  6,488 
Total Liabilities, Redeemable Non-controlling Interests and Equity $ 34,911  $ 33,584 

The accompanying notes are an integral part of these consolidated financial statements.

8 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Changes in Equity (Unaudited)
Three Months Ended June 30, 2021
Stockholders’ Equity
Common Stock Additional
Paid-In
Capital 		Class A
Treasury
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Mastercard Incorporated Stockholders’ Equity Non-
Controlling
Interests 		Total Equity
Class A Class B
(in millions)
Balance at March 31, 2021 $ —  $ —  $ 4,949  $ (38,024) $ 40,140  $ (738) $ 6,327  $ 98  $ 6,425 
Net income
—  —  —  —  2,066  —  2,066  —  2,066 
Activity related to non-controlling interests —  —  —  —  —  —  —  —  — 
Redeemable non-controlling interest adjustments —  —  —  —  (1) —  (1) —  (1)
Other comprehensive income (loss) —  —  —  —  —  85  85  —  85 
Dividends
—  —  —  —  (434) —  (434) —  (434)
Purchases of treasury stock
—  —  —  (1,705) —  —  (1,705) —  (1,705)
Share-based payments
—  —  104  —  —  —  104  —  104 
Balance at June 30, 2021 $ —  $ —  $ 5,053  $ (39,729) $ 41,771  $ (653) $ 6,442  $ 98  $ 6,540 
Six Months Ended June 30, 2021
Stockholders’ Equity
   
Common Stock 		Additional
Paid-In
Capital 		Class A
Treasury
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Mastercard Incorporated Stockholders' Equity Non-
Controlling
Interests 		Total
Equity
  Class A Class B
  (in millions)
Balance at December 31, 2020 $ —  $ —  $ 4,982  $ (36,658) $ 38,747  $ (680) $ 6,391  $ 97  $ 6,488 
Net income —  —  —  —  3,894  —  3,894  —  3,894 
Activity related to non-controlling interests —  —  —  —  —  —  —  1  1 
Redeemable non-controlling interest adjustments —  —  —  —  (2) —  (2) —  (2)
Other comprehensive income (loss) —  —  —  —  —  27  27  —  27 
Dividends —  —  —  —  (868) —  (868) —  (868)
Purchases of treasury stock —  —  —  (3,075) —  —  (3,075) —  (3,075)
Share-based payments —  —  71  4  —  —  75  —  75 
Balance at June 30, 2021 $ —  $ —  $ 5,053  $ (39,729) $ 41,771  $ (653) $ 6,442  $ 98  $ 6,540 

MASTERCARD JUNE 30, 2021 FORM 10-Q 9

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Changes in Equity (Unaudited) - (Continued)
Three Months Ended June 30, 2020
Stockholders’ Equity
Common Stock Additional
Paid-In
Capital 		Class A
Treasury
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Mastercard Incorporated Stockholders’ Equity Non-
Controlling
Interests 		Total Equity
Class A Class B
(in millions)
Balance at March 31, 2020 $ —  $ —  $ 4,735  $ (33,531) $ 35,273  $ (1,079) $ 5,398  $ 25  $ 5,423 
Net income —  —  —  —  1,420  —  1,420  —  1,420 
Activity related to non-controlling interests —  —  —  —  —  —  —  3  3 
Redeemable non-controlling interest adjustments —  —  —  —  (3) —  (3) —  (3)
Other comprehensive income (loss) —  —  —  —  —  33  33  —  33 
Dividends —  —  —  —  (402) —  (402) —  (402)
Purchases of treasury stock —  —  —  (75) —  —  (75) —  (75)
Share-based payments —  —  97  2  —  —  99  —  99 
Balance at June 30, 2020 $ —  $ —  $ 4,832  $ (33,604) $ 36,288  $ (1,046) $ 6,470  $ 28  $ 6,498 
Six Months Ended June 30, 2020
Stockholders’ Equity
   
Common Stock 		Additional
Paid-In
Capital 		Class A
Treasury
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Mastercard Incorporated Stockholders' Equity Non-
Controlling
Interests 		Total
Equity
  Class A Class B
  (in millions)
Balance at December 31, 2019 $ —  $ —  $ 4,787  $ (32,205) $ 33,984  $ (673) $ 5,893  $ 24  $ 5,917 
Net income —  —  —  —  3,113  —  3,113  —  3,113 
Activity related to non-controlling interests —  —  —  —  —  —  —  4  4 
Redeemable non-controlling interest adjustments —  —  —  —  (5) —  (5) —  (5)
Other comprehensive income (loss) —  —  —  —  —  (373) (373) —  (373)
Dividends —  —  —  —  (804) —  (804) —  (804)
Purchases of treasury stock —  —  —  (1,405) —  —  (1,405) —  (1,405)
Share-based payments —  —  45  6  —  —  51  —  51 
Balance at June 30, 2020 $ —  $ —  $ 4,832  $ (33,604) $ 36,288  $ (1,046) $ 6,470  $ 28  $ 6,498 

The accompanying notes are an integral part of these consolidated financial statements.

10 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Cash Flows (Unaudited)
  Six Months Ended June 30,
  2021 2020
  (in millions)
Operating Activities
Net income $ 3,894  $ 3,113 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of customer and merchant incentives 651  468 
Depreciation and amortization 349  289 
(Gains) losses on equity investments, net (337) 99 
Share-based compensation 152  127 
Deferred income taxes (15) 29 
Other 32  (32)
Changes in operating assets and liabilities:
Accounts receivable (158) 299 
Settlement due from customers 769  1,213 
Prepaid expenses (995) (679)
Accrued litigation and legal settlements 63  (61)
Restricted security deposits held for customers 110  178 
Accounts payable (92) (82)
Settlement due to customers (906) (1,187)
Accrued expenses 27  (855)
Net change in other assets and liabilities 187  398 
Net cash provided by operating activities 3,731  3,317 
Investing Activities
Purchases of investment securities available-for-sale (261) (78)
Purchases of investments held-to-maturity (173) (82)
Proceeds from sales of investment securities available-for-sale 140  256 
Proceeds from maturities of investment securities available-for-sale 69  100 
Proceeds from maturities of investments held-to-maturity 156  84 
Purchases of property and equipment (146) (201)
Capitalized software (191) (191)
Purchases of equity investments (87) (150)
Acquisition of businesses, net of cash acquired (4,200) (183)
Settlement of interest rate derivative contracts —  (175)
Other investing activities (9) (6)
Net cash used in investing activities (4,702) (626)
Financing Activities
Purchases of treasury stock (3,067) (1,383)
Dividends paid (873) (804)
Proceeds from debt, net 1,282  3,959 
Contingent consideration paid (64) — 
Tax withholdings related to share-based payments (125) (141)
Cash proceeds from exercise of stock options 44  65 
Other financing activities 2  (5)
Net cash (used in) provided by financing activities (2,801) 1,691 
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents (24) (49)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (3,796) 4,333 
Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period 12,419  8,969 
Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period $ 8,623  $ 13,302 

The accompanying notes are an integral part of these consolidated financial statements.

MASTERCARD JUNE 30, 2021 FORM 10-Q 11

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to consolidated financial statements (unaudited)
Note 1. Summary of Significant Accounting Policies
Organization
Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International” and together with Mastercard Incorporated, “Mastercard” or the “Company”), is a technology company in the global payments industry that connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide, enabling them to use electronic forms of payment instead of cash and checks.
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Mastercard and its majority-owned and controlled entities, including any variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Investments in VIEs for which the Company is not considered the primary beneficiary are not consolidated and are accounted for as equity method or measurement alternative method investments and recorded in other assets on the consolidated balance sheet. At June 30, 2021 and December 31, 2020, there were no significant VIEs which required consolidation and the investments were not considered material to the consolidated financial statements. The Company consolidates acquisitions as of the date in which the Company has obtained a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the 2021 presentation. The Company follows accounting principles generally accepted in the United States of America (“GAAP”).
The balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of December 31, 2020. The consolidated financial statements for the three and six months ended June 30, 2021 and 2020 and as of June 30, 2021 are unaudited, and in the opinion of management, include all normal recurring adjustments that are necessary to present fairly the results for interim periods. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year.
The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for Quarterly Reports on Form 10-Q. Reference should be made to the Mastercard’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures, including a summary of the Company’s significant accounting policies.
Note 2. Acquisitions
During the six months ended June 30, 2021, the Company acquired businesses for $4.4 billion in cash consideration. These acquisitions align with the Company’s strategy to grow, diversify and build the Company’s business.
On March 5, 2021, Mastercard acquired a majority of the Corporate Services business of Nets Denmark A/S for €3.0 billion (approximately $3.6 billion as of the date of acquisition) in cash consideration based on a €2.85 billion enterprise value, adjusted for cash and net working capital at closing. The business acquired is primarily comprised of clearing and instant payment services and e-billing solutions. In relation to this acquisition, the Company’s preliminary estimate of net assets acquired primarily relates to intangible assets, including goodwill of $2.1 billion, of which $0.8 billion is expected to be deductible for local tax purposes. The goodwill arising from this acquisition is primarily attributable to the synergies expected to arise through geographic, product and customer expansion, the underlying technology and workforce acquired.
On June 9, 2021, Mastercard acquired a 100% equity interest in Ekata, Inc. (“Ekata”) for cash consideration of $861 million, based on an $850 million enterprise value, adjusted for cash and net working capital at closing. The acquisition of Ekata is expected to broaden the Company’s digital identity verification capabilities. The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after the acquisition date and none of the goodwill is expected to be deductible for local tax purposes.
Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for the valuation techniques Mastercard utilizes to fair value the respective components of business combinations.

12 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is in the process of obtaining additional information necessary to finalize the valuation of the acquired assets and liabilities assumed as of the acquisition dates for the Nets and Ekata acquisitions. Therefore, the preliminary fair values set forth below use information available as of June 30, 2021 and are subject to adjustment as additional information is obtained and the valuations are completed. The initial purchase price allocation, as of the acquisition dates, is noted below:
(in millions)
Assets:
Cash and cash equivalents $ 228 
Other current assets 27 
Other intangible assets 1,917 
Goodwill 2,692 
Other assets 15 
Total assets 4,879 
Liabilities:
Other current liabilities 81 
Deferred income taxes 359 
Other liabilities 11 
Total liabilities 451 
Net assets acquired $ 4,428 
The following table summarizes the identified intangible assets acquired during the six months ended June 30, 2021:
Acquisition Date Fair Value Weighted-Average Useful Life
(in millions) (in years)
Developed technologies $ 366  12.3
Customer relationships 1,530  19.0
Other 21  8.0
Other intangible assets $ 1,917  17.6
Proforma information related to these acquisitions was not included because the impact on the Company’s consolidated results of operations was not considered to be material.
In 2020, the Company acquired several businesses in separate transactions for total consideration of $1.1 billion. As of June 30, 2021, the Company had finalized the purchase accounting for $185 million of the businesses acquired and is evaluating and finalizing the purchase accounting for the remainder of businesses acquired during 2020. For the preliminary estimated and final fair values of the purchase price allocations, as of the acquisition dates, refer to Note 2 (Acquisitions) to the consolidated financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

MASTERCARD JUNE 30, 2021 FORM 10-Q 13

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Revenue
The Company’s disaggregated net revenue by source and geographic region were as follows:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in millions)
Revenue by source:
Domestic assessments $ 2,056  $ 1,474  $ 3,854  $ 3,157 
Cross-border volume fees 1,076  637  2,008  1,854 
Transaction processing 2,612  1,901  4,963  4,101 
Other revenues 1,475  1,081  2,822  2,143 
Gross revenue 7,219  5,093  13,647  11,255 
Rebates and incentives (contra-revenue) (2,691) (1,758) (4,964) (3,911)
Net revenue $ 4,528  $ 3,335  $ 8,683  $ 7,344 
Net revenue by geographic region:
North American Markets $ 1,605  $ 1,243  $ 3,096  $ 2,577 
International Markets 2,879  2,042  5,497  4,675 
Other 1
44  50  90  92 
Net revenue $ 4,528  $ 3,335  $ 8,683  $ 7,344 
1    Includes revenues managed by corporate functions.
The Company’s customers are generally billed weekly, however, the frequency is dependent upon the nature of the performance obligation and the underlying contractual terms. The Company does not typically offer extended payment terms to customers. The following table sets forth the location of the amounts recognized on the consolidated balance sheet from contracts with customers:
June 30,
2021 		December 31,
2020
(in millions)
Receivables from contracts with customers
Accounts receivable
$ 2,593  $ 2,505 
Contract assets
Prepaid expenses and other current assets 75 59 
Other assets 321 245 
Deferred revenue 1
Other current liabilities 430 355 
Other liabilities 206 143 
1    Revenue recognized from performance obligations satisfied during the three and six months ended June 30, 2021 and 2020 was $291 million and $471 million and $206 million and $395 million, respectively.

14 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Earnings Per Share
The components of basic and diluted earnings per share (“EPS”) for common shares were as follows:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in millions, except per share data)
Numerator
Net income $ 2,066  $ 1,420  $ 3,894  $ 3,113 
Denominator
Basic weighted-average shares outstanding 990  1,004  992  1,005 
Dilutive stock options and stock units 4  4  4  4 
Diluted weighted-average shares outstanding 1
994  1,008  996  1,009 
Earnings per Share
Basic $ 2.09  $ 1.41  $ 3.93  $ 3.10 
Diluted $ 2.08  $ 1.41  $ 3.91  $ 3.08 
1    For the periods presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.
Note 5. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported on the consolidated balance sheet that total to the amounts shown on the consolidated statement of cash flows.
June 30,
2021 		December 31,
2020
(in millions)
Cash and cash equivalents $ 6,216  $ 10,113 
Restricted cash and restricted cash equivalents
Restricted cash for litigation settlement 586  586 
Restricted security deposits held for customers 1,806  1,696 
Prepaid expenses and other current assets 15  24 
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 8,623  $ 12,419 
Note 6. Investments
The Company’s investments on the consolidated balance sheet include both available-for-sale and held-to-maturity securities (see Investments section below). The Company classifies its investments in equity securities of publicly traded and privately held companies within other assets on the consolidated balance sheet (see Equity Investments section below).
Investments
Investments on the consolidated balance sheet consisted of the following:
June 30,
2021 		December 31,
2020
(in millions)
Available-for-sale securities $ 365  $ 321 
Held-to-maturity securities 179  162 
Total investments $ 544  $ 483 

MASTERCARD JUNE 30, 2021 FORM 10-Q 15

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Available-for-Sale-Securities
The major classes of the Company’s available-for-sale investment securities and their respective amortized cost basis and fair values were as follows:
  June 30, 2021 December 31, 2020
  Amortized
Cost 		Gross
Unrealized
Gain 		Gross
Unrealized
Loss 		Fair
Value 		Amortized
Cost 		Gross
Unrealized
Gain 		Gross
Unrealized
Loss 		Fair
Value
(in millions)
Municipal securities $ 6  $ —  $ —  $ 6  $ 10  $ —  $ —  $ 10 
Government and agency securities 133  —  —  133  64  —  —  64 
Corporate securities 223  3  —  226  246  1  —  247 
Total $ 362  $ 3  $ —  $ 365  $ 320  $ 1  $ —  $ 321 
The Company’s corporate and municipal available-for-sale investment securities held at June 30, 2021 and December 31, 2020 primarily carried a credit rating of A- or better. Corporate securities are comprised of commercial paper and corporate bonds. Municipal securities are comprised of state tax-exempt bonds and are diversified across states and sectors. Government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds which are denominated in the national currency of the issuing country. Unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income.
The maturity distribution based on the contractual terms of the Company’s investment securities at June 30, 2021 was as follows:
  Available-For-Sale
  Amortized Cost Fair Value
  (in millions)
Due within 1 year $ 167  $ 167 
Due after 1 year through 5 years 195  198 
Total $ 362  $ 365 
Investment income on the consolidated statement of operations primarily consists of interest income generated from cash, cash equivalents, time deposits, and realized gains and losses on the Company’s investment securities. The realized gains and losses from the sales of available-for-sale securities for the three and six months ended June 30, 2021 and 2020 were not significant.
Held-to-Maturity Securities
The Company classifies time deposits with maturities greater than three months but less than one year as held-to-maturity. Time deposits are carried at amortized cost on the consolidated balance sheet and are intended to be held until maturity. The cost of these securities approximates fair value.
Equity Investments
Included in other assets on the consolidated balance sheet are equity investments with readily determinable fair values (“Marketable securities”) and equity investments without readily determinable fair values (“Nonmarketable securities”). Marketable securities are publicly traded companies and are measured using unadjusted quoted prices in their respective active markets. Nonmarketable securities that do not qualify for equity method accounting are measured at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer (“measurement alternative”).
The following table is a summary of the activity related to the Company’s equity investments:
  Balance at December 31, 2020 Purchases (Sales), net
Changes in Fair Value 1
Other 2
Balance at June 30, 2021
(in millions)
Marketable securities $ 476  $ —  $ 145  $ 40  $ 661 
Nonmarketable securities 696  82  192  (36) 934 
Total equity investments $ 1,172  $ 82  $ 337  $ 4  $ 1,595 
1Recorded in gains (losses) on equity investments, net on the consolidated statement of operations.
2Includes transfers between equity investment categories due to changes to the existence of readily determinable fair values and translational impact of currency.

16 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the components of the Company’s Nonmarketable securities:
June 30,
2021 		December 31,
2020
(in millions)
Measurement alternative 1
$ 718  $ 539 
Equity method
216  157 
Total Nonmarketable securities $ 934  $ 696 
1    Cumulative impairments and downward fair value adjustments on measurement alternative investments were $15 million and cumulative upward fair value adjustments were $235 million as of June 30, 2021.
Note 7. Fair Value Measurements
The Company classifies its fair value measurements of financial instruments into a three-level hierarchy (the “Valuation Hierarchy”). Financial instruments are categorized for fair value measurement purposes as recurring or non-recurring in nature. Transfers made among the three levels in the Valuation Hierarchy for the three and six months ended June 30, 2021 were not material.

MASTERCARD JUNE 30, 2021 FORM 10-Q 17

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments - Recurring Measurements
The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy were as follows:
  June 30, 2021 December 31, 2020
  Quoted Prices
in Active
Markets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total Quoted Prices
in Active
Markets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total
(in millions)
Assets
Investment securities available for sale 1:
Municipal securities $ —  $ 6  $ —  $ 6  $ —  $ 10  $ —  $ 10 
Government and agency securities 41  92  —  133  26  38  —  64 
Corporate securities —  226  —  226  —  247  —  247 
Derivative instruments 2:
Foreign exchange contracts —  30  —  30  —  19  —  19 
Marketable securities 3:
Equity securities 661  —  —  661  476  —  —  476 
Deferred compensation plan 4:
Deferred compensation assets 85  —  —  85  78  —  —  78 
Liabilities
Derivative instruments 2:
Foreign exchange derivative liabilities $ —  $ (7) $ —  $ (7) $ —  $ (28) $ —  $ (28)
Deferred compensation plan 5:
Deferred compensation liabilities (84) —  —  (84) (81) —  —  (81)
1The Company’s U.S. government securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets. The fair value of the Company’s available-for-sale municipal securities, non-U.S. government and agency securities and corporate securities are based on observable inputs such as quoted prices, benchmark yields and issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.
2The Company’s foreign exchange derivative asset and liability contracts have been classified within Level 2 of the Valuation Hierarchy as the fair value is based on observable inputs such as broker quotes relating to foreign exchange for similar derivative instruments. See Note 17 (Derivative and Hedging Instruments) for further details.
3The Company’s Marketable securities are publicly held and classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices in their respective active markets.
4The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for these mutual funds, which are measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the consolidated balance sheet.
5The deferred compensation liabilities are measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants. These are included in other liabilities on the consolidated balance sheet.
Financial Instruments - Non-Recurring Measurements
Nonmarketable Securities
The Company’s Nonmarketable securities are recorded at fair value on a non-recurring basis in periods after initial recognition under the equity method or measurement alternative method. Nonmarketable securities are classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value that require management’s judgment. The Company uses discounted cash flows and market assumptions to estimate the fair value of its Nonmarketable securities when certain events or circumstances indicate that impairment may exist. See Note 6 (Investments) for further details.

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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt
The Company estimates the fair value of its long-term debt based on market quotes. These debt securities are classified as Level 2 of the Valuation Hierarchy as they are not traded in active markets. At June 30, 2021, the carrying value and fair value of total long-term debt (including the current portion) was $13.9 billion and $15.5 billion, respectively. At December 31, 2020, the carrying value and fair value of long-term debt (including the current portion) was $12.7 billion and $14.8 billion, respectively. See Note 10 (Debt) for further details.
Other Financial Instruments
Certain other financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash, time deposits, accounts receivable, settlement due from customers, restricted security deposits held for customers, accounts payable, settlement due to customers and other accrued liabilities.
Note 8. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consisted of the following:
June 30,
2021 		December 31,
2020
(in millions)
Customer and merchant incentives $ 1,225  $ 1,086 
Prepaid income taxes 152  78 
Other 840  719 
Total prepaid expenses and other current assets $ 2,217  $ 1,883 
Other assets consisted of the following:
June 30,
2021 		December 31,
2020
(in millions)
Customer and merchant incentives $ 3,609  $ 3,220 
Equity investments 1,595  1,172 
Income taxes receivable 563  553 
Other 498  420 
Total other assets $ 6,265  $ 5,365 
Customer and merchant incentives represent payments made to customers and merchants under business agreements. Costs directly related to entering into such an agreement are generally deferred and amortized over the life of the agreement.
Note 9. Accrued Expenses and Accrued Litigation
Accrued expenses consisted of the following:
June 30,
2021 		December 31,
2020
  (in millions)
Customer and merchant incentives $ 4,244  $ 3,998 
Personnel costs 614  727 
Income and other taxes 208  208 
Other 498  497 
Total accrued expenses $ 5,564  $ 5,430 
Customer and merchant incentives represent amounts to be paid to customers under business agreements. As of June 30, 2021 and December 31, 2020, the Company’s provision for litigation was $906 million and $842 million, respectively. These amounts are not included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet. See Note 15 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.

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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Debt
Long-term debt consisted of the following:
June 30,
2021 		December 31,
2020 		Effective
Interest Rate
(in millions)
2021 USD Notes 1.900  % Senior Notes due March 2031 $ 600  $ —  1.981  %
2.950  % Senior Notes due March 2051 700  —  3.013  %
2020 USD Notes 3.300  % Senior Notes due March 2027 1,000  1,000  3.420  %
3.350  % Senior Notes due March 2030 1,500  1,500  3.430  %
3.850  % Senior Notes due March 2050 1,500  1,500  3.896  %
2019 USD Notes 2.950  % Senior Notes due June 2029 1,000  1,000  3.030  %
3.650  % Senior Notes due June 2049 1,000  1,000  3.689  %
2.000  % Senior Notes due March 2025 750  750  2.147  %
2018 USD Notes 3.500  % Senior Notes due February 2028 500  500  3.598  %
3.950  % Senior Notes due February 2048 500  500  3.990  %
2016 USD Notes 2.000  % Senior Notes due November 2021 650  650  2.236  %
2.950  % Senior Notes due November 2026 750  750  3.044  %
3.800  % Senior Notes due November 2046 600  600  3.893  %
2015 EUR Notes 1
1.100  % Senior Notes due December 2022 833  859  1.265  %
2.100  % Senior Notes due December 2027 953  982  2.189  %
2.500  % Senior Notes due December 2030 178  184  2.562  %
2014 USD Notes 3.375  % Senior Notes due April 2024 1,000  1,000  3.484  %
14,014  12,775 
Less: Unamortized discount and debt issuance costs (115) (103)
Total debt outstanding 13,899  12,672 
Less: Current portion2
(649) (649)
Long-term debt $ 13,250  $ 12,023 
1€1.650 billion euro-denominated debt issued in December 2015.
22016 USD Notes due in November 2021 are classified on the consolidated balance sheet as current portion of long-term debt.
In March 2021, the Company issued $600 million principal amount of notes due March 2031 and $700 million principal amount of notes due March 2051 (collectively the “2021 USD Notes”). The net proceeds from the issuance of the 2021 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $1.282 billion.
The outstanding debt described above is not subject to any financial covenants and it may be redeemed in whole, or in part, at the Company’s option at any time for a specified make-whole amount. These notes are senior unsecured obligations and would rank equally with any future unsecured and unsubordinated indebtedness.
Note 11. Stockholders' Equity
The Company declared quarterly cash dividends on its Class A and Class B Common Stock during the three and six months ended June 30, 2021 and 2020 as summarized below: 
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in millions, except per share data)
Dividends declared per share $ 0.44  $ 0.40  $ 0.88  $ 0.80 
Total dividends declared $ 434  $ 402  $ 868  $ 804 

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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the changes in the Company’s outstanding Class A and Class B common stock for the six months ended June 30, 2021:
  Outstanding Shares
  Class A Class B
(in millions)
Balance at December 31, 2020 986.9  8.3 
Purchases of treasury stock (8.5) — 
Share-based payments 1.1  — 
Conversion of Class B to Class A common stock 0.3  (0.3)
Balance at June 30, 2021 979.8  8.0 
In December 2020 and 2019, the Company’s Board of Directors approved share repurchase programs authorizing the Company to repurchase up to $6.0 billion and $8.0 billion, respectively, of its Class A common stock under each plan. The program approved in 2020 will become effective after completion of the share repurchase program authorized in 2019. During the six months ended June 30, 2021, the Company repurchased 8.5 million shares of its common stock for $3.1 billion at an average price of $359.66. As of June 30, 2021 the remaining authorization was $6.8 billion.

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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Accumulated Other Comprehensive Income (Loss)
The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the six months ended June 30, 2021 and 2020 were as follows:
December 31, 2020 Increase / (Decrease) Reclassifications June 30, 2021
(in millions)
Foreign currency translation adjustments 1
$ (352) $ (31) $ —  $ (383)
Translation adjustments on net investment hedges 2
(175) 56  —  (119)
Cash flow hedges
Foreign exchange contracts 3
—  (1) 1  — 
Interest rate contracts 4
(133) —  2  (131)
Defined benefit pension and other postretirement plans (20) —  (1) (21)
Investment securities available-for-sale —  1  —  1 
Accumulated Other Comprehensive Income (Loss) $ (680) $ 25  $ 2  $ (653)
December 31, 2019 Increase / (Decrease) Reclassifications June 30, 2020
(in millions)
Foreign currency translation adjustments1
$ (638) $ (216) $ —  $ (854)
Translation adjustments on net investment hedges 2
(38) (7) —  (45)
Cash flow hedges
Interest rate contracts 4
11  (147) 1  (135)
Defined benefit pension and other postretirement plans (9) —  (1) (10)
Investment securities available-for-sale 1  (3) —  (2)
Accumulated Other Comprehensive Income (Loss) $ (673) $ (373) $ —  $ (1,046)
1.During the six months ended June 30, 2021, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro against the U.S. dollar. During the six months ended June 30, 2020, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the British pound and Brazilian real against the U.S. dollar, partially offset by the appreciation of the euro against the U.S. dollar.
2.During the six months ended June 30, 2021, the decrease in the accumulated other comprehensive loss related to the net investment hedges was driven by the depreciation of the euro against the U.S. dollar. During the six months ended June 30, 2020, the increase in the accumulated other comprehensive loss related to the net investment hedge was driven by the appreciation of the euro against the U.S. dollar. See Note 17 (Derivative and Hedging Instruments) for additional information.
3.Beginning in 2021, certain foreign exchange derivative contracts are designated as cash flow hedging instruments. Gains and losses resulting from changes in the fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings. See Note 17 (Derivative and Hedging Instruments) for additional information.
4.In 2019, the Company entered into treasury rate locks which are accounted for as cash flow hedges. In the first quarter of 2020, in connection with the issuance of the 2020 USD Notes, these contracts were settled for a loss of $175 million, or $136 million net of tax, recorded in accumulated other comprehensive income (loss). The cumulative loss will be reclassified as an adjustment to interest expense over the respective terms of the 2020 USD Notes. See Note 17 (Derivative and Hedging Instruments) for additional information.
Note 13. Share-Based Payments
During the six months ended June 30, 2021, the Company granted the following awards under the Mastercard Incorporated 2006 Long Term Incentive Plan, as amended and restated as of June 5, 2012 (the “LTIP”). The LTIP is a stockholder-approved plan that permits the grant of various types of equity awards to employees.
Grants in 2021 Weighted-Average
Grant-Date
Fair Value
(in millions) (per option/unit)
Non-qualified stock options 0.3 $ 92 
Restricted stock units 0.8 358 
Performance stock units 0.2 385 

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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company used the Black-Scholes option pricing model to determine the grant-date fair value of stock options and calculated the expected life and the expected volatility based on historical Mastercard information. The expected life of stock options granted in 2021 was estimated to be six years, while the expected volatility was determined to be 26.1%. Stock options generally vest in four equal annual installments beginning one year after the date of grant and expire ten years from the date of grant.
The fair value of restricted stock units (“RSUs”) is determined and fixed on the grant date based on the Company’s Class A common stock price, adjusted for the exclusion of dividend equivalents. The shares underlying the RSUs will generally vest in four equal annual installments beginning one year after the date of grant.
The Company used the Monte Carlo simulation valuation model to determine the grant-date fair value of performance stock units (“PSUs”) granted. Shares underlying the PSUs will vest after three years from the date of grant and are subject to a mandatory one-year deferral period, during which vested PSUs are eligible for dividend equivalents.
Compensation expense is recorded net of estimated forfeitures over the shorter of the vesting period or the date the individual becomes eligible to retire under the LTIP. The Company uses the straight-line method of attribution over the requisite service period for expensing equity awards.
Note 14. Income Taxes
The effective income tax rates were 16.6% and 16.0% for the three months ended June 30, 2021 and 2020, and 16.6% and 15.4% for the six months ended June 30, 2021 and 2020, respectively. The higher effective income tax rates for the three months ended June 30, 2021 and six months ended June 30, 2021, versus the comparable periods in 2020, were primarily due to a change in the Company’s geographic mix of earnings and a lower discrete tax benefit related to share-based payments, partially offset by a discrete tax benefit related to the remeasurement of the Company’s net deferred tax asset in the U.K. due to a recently enacted tax rate.
The Company is subject to tax in the United States, Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as state and local jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation. Within the next twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations are reasonably possible and that a change in estimate, reducing unrecognized tax benefits, may occur. While such a change may be significant, it is not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation expire. The Company has effectively settled its U.S. federal income tax obligations through 2011. With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2010.
Note 15. Legal and Regulatory Proceedings
Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business.  Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages.  Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established reserves for any of these proceedings. When the Company determines that a loss is both probable and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material. When a material loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Unless otherwise stated below with respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the following reasons: (1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings of multiple defendants or potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal issues presented. Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition or overall business. However, an adverse judgment or other outcome or settlement with respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to change its business practices. In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in significant damage awards. Any of these events could have a material adverse effect on Mastercard’s results of operations, financial condition and overall business.
Interchange Litigation and Regulatory Proceedings
Mastercard’s interchange fees and other practices are subject to regulatory, legal review and/or challenges in a number of jurisdictions, including the proceedings described below. When taken as a whole, the resulting decisions, regulations and legislation with respect to interchange fees and acceptance practices may have a material adverse effect on the Company’s prospects for future growth and its overall results of operations, financial position and cash flows.

MASTERCARD JUNE 30, 2021 FORM 10-Q 23

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States. In June 2005, the first of a series of complaints were filed on behalf of merchants (the majority of the complaints were styled as class actions, although a few complaints were filed on behalf of individual merchant plaintiffs) against Mastercard International, Visa U.S.A., Inc., Visa International Service Association and a number of financial institutions. Taken together, the claims in the complaints were generally brought under both Sections 1 and 2 of the Sherman Act, which prohibit monopolization and attempts or conspiracies to monopolize a particular industry, and some of these complaints contain unfair competition law claims under state law. The complaints allege, among other things, that Mastercard, Visa, and certain financial institutions conspired to set the price of interchange fees, enacted point of sale acceptance rules (including the no surcharge rule) in violation of antitrust laws and engaged in unlawful tying and bundling of certain products and services, resulting in merchants paying excessive costs for the acceptance of Mastercard and Visa credit and debit cards. The cases were consolidated for pre-trial proceedings in the U.S. District Court for the Eastern District of New York in MDL No. 1720. The plaintiffs filed a consolidated class action complaint that seeks treble damages.
In July 2006, the group of purported merchant class plaintiffs filed a supplemental complaint alleging that Mastercard’s initial public offering of its Class A Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between Mastercard and financial institutions in connection with the IPO: (1) violate U.S. antitrust laws and (2) constituted a fraudulent conveyance because the financial institutions allegedly attempted to release, without adequate consideration, Mastercard’s right to assess them for Mastercard’s litigation liabilities. The class plaintiffs sought treble damages and injunctive relief including, but not limited to, an order reversing and unwinding the IPO.
In February 2011, Mastercard and Mastercard International entered into each of: (1) an omnibus judgment sharing and settlement sharing agreement with Visa Inc., Visa U.S.A. Inc. and Visa International Service Association and a number of financial institutions; and (2) a Mastercard settlement and judgment sharing agreement with a number of financial institutions.  The agreements provide for the apportionment of certain costs and liabilities which Mastercard, the Visa parties and the financial institutions may incur, jointly and/or severally, in the event of an adverse judgment or settlement of one or all of the merchant litigation cases. Among a number of scenarios addressed by the agreements, in the event of a global settlement involving the Visa parties, the financial institutions and Mastercard, Mastercard would pay 12% of the monetary portion of the settlement. In the event of a settlement involving only Mastercard and the financial institutions with respect to their issuance of Mastercard cards, Mastercard would pay 36% of the monetary portion of such settlement. 
In October 2012, the parties entered into a definitive settlement agreement with respect to the merchant class litigation (including with respect to the claims related to the IPO) and the defendants separately entered into a settlement agreement with the individual merchant plaintiffs. The settlements included cash payments that were apportioned among the defendants pursuant to the omnibus judgment sharing and settlement sharing agreement described above. Mastercard also agreed to provide class members with a short-term reduction in default credit interchange rates and to modify certain of its business practices, including its “no surcharge” rule. The court granted final approval of the settlement in December 2013, and objectors to the settlement appealed that decision to the U.S. Court of Appeals for the Second Circuit. In June 2016, the court of appeals vacated the class action certification, reversed the settlement approval and sent the case back to the district court for further proceedings. The court of appeals’ ruling was based primarily on whether the merchants were adequately represented by counsel in the settlement. As a result of the appellate court ruling, the district court divided the merchants’ claims into two separate classes - monetary damages claims (the “Damages Class”) and claims seeking changes to business practices (the “Rules Relief Class”). The court appointed separate counsel for each class.
In September 2018, the parties to the Damages Class litigation entered into a class settlement agreement to resolve the Damages Class claims. The time period during which Damages Class members were permitted to opt out of the class settlement agreement ended in July 2019 with merchants representing slightly more than 25% of the Damages Class interchange volume choosing to opt out of the settlement. The district court granted final approval of the settlement in December 2019. The district court’s settlement approval order has been appealed and oral argument on the appeal is scheduled for October 2021. Mastercard has commenced settlement negotiations with a number of the opt-out merchants and has reached settlements and/or agreements in principle to settle a number of these claims. The Damages Class settlement agreement does not relate to the Rules Relief Class claims. Separate settlement negotiations with the Rules Relief Class are ongoing. In December 2020, the Rules Relief Class filed a motion for class certification. Briefing on summary judgment motions in the Rules Relief Class and opt-out merchant cases was completed in December 2020.
As of June 30, 2021 and December 31, 2020, Mastercard had accrued a liability of $783 million as a reserve for both the Damages Class litigation and the opt-out merchant cases. As of June 30, 2021 and December 31, 2020, Mastercard had $586 million in a qualified cash settlement fund related to the Damages Class litigation and classified as restricted cash on its consolidated balance sheet. The reserve as of June 30, 2021 for both the Damages Class litigation and the opt-out merchants represents Mastercard’s best estimate of its probable liabilities in these matters. The portion of the accrued liability relating to both the opt-out merchants and the Damages Class litigation settlement does not represent an estimate of a loss, if any, if the matters were litigated to a final outcome. Mastercard cannot estimate the potential liability if that were to occur.
Europe. Since May 2012, a number of United Kingdom (“U.K.”) merchants filed claims or threatened litigation against Mastercard seeking damages for excessive costs paid for acceptance of Mastercard credit and debit cards arising out of alleged anti-competitive conduct with respect to, among other things, Mastercard’s cross-border interchange fees and its U.K. and Ireland domestic interchange fees (the “U.K. Merchant claimants”). In addition, Mastercard, has faced similar filed or threatened litigation by merchants with respect to interchange

24 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rates in other countries in Europe (the “Pan-European Merchant claimants”). Mastercard has resolved over £2 billion (approximately $3 billion as of June 30, 2021) of these damages claims through settlement or judgment. Approximately £1 billion (approximately $1.5 billion as of June 30, 2021) of unresolved damages claims remain.
In January 2017, Mastercard received a liability judgment in its favor on all significant matters in a separate action brought by ten of the U.K. Merchant claimants. Three of the U.K. Merchant claimants appealed the judgment, and these appeals were combined with Mastercard’s appeal of a 2016 judgment in favor of one U.K. merchant. In July 2018, the U.K. appellate court heard the appeals of the four merchant and ruled against both Mastercard and Visa on two of the three legal issues being considered. The parties appealed the rulings to the U.K. Supreme Court. In June 2020, the U.K. Supreme Court ruled against Mastercard and Visa with respect to one of the liability issues being considered by the Court related to U.K. domestic interchange fees. Additionally, the U.K Supreme Court set out the legal standard that should be applied by lower trial courts with respect to determining whether interchange was exemptible under applicable law, and provided guidance to lower courts with regard to the legal standard that should be applied in assessing merchants’ damages claims. The U.K. Supreme Court sent one of the four merchant cases back to the trial court for a determination of liability and damages issues and sent the remaining three merchant cases back to the trial court for a determination of damages issues only. A hearing in one of these merchant cases on liability and damages issues is expected to be scheduled for the fourth quarter of 2021, while a trial on damages for the other three merchant claims is not expected to occur until 2023.
Mastercard continues to litigate with the remaining U.K. and Pan-European Merchant claimants and it has submitted statements of defense disputing liability and damages claims. The majority of these merchant claims generally had been stayed pending the decision of the U.K. Supreme Court, and a number of those matters are now progressing with motion practice and discovery. In one of the actions involving multiple merchant plaintiff claims, in May 2021 the court heard oral argument with respect to the plaintiffs’ motion for summary judgment on certain liability issues. For the three months ended June 30, 2021 Mastercard incurred charges of $67 million related to litigation settlements and estimated attorneys’ fees with a number of U.K. merchants. For the three months ended June 30, 2020, Mastercard incurred charges of $22 million to reflect both the estimated attorneys’ fees incurred by the four merchant claimants in the U.K. Supreme Court appeal, as well as settlements with a number of Pan-European merchants.
In September 2016, a proposed collective action was filed in the United Kingdom on behalf of U.K. consumers seeking damages for intra-EEA and domestic U.K. interchange fees that were allegedly passed on to consumers by merchants between 1992 and 2008. The complaint, which seeks to leverage the European Commission’s 2007 decision on intra-EEA interchange fees, claims damages in an amount that exceeds £14 billion (approximately $19 billion as of June 30, 2021). In July 2017, the trial court denied the plaintiffs’ application for the case to proceed as a collective action. In April 2019, the U.K. appellate court granted the plaintiffs’ appeal of the trial court’s decision and sent the case back to the trial court for a re-hearing on the plaintiffs’ collective action application. In December 2020, the U.K. Supreme Court rejected Mastercard’s appeal of this ruling. In March 2021, the trial court held a re-hearing on the plaintiffs’ collective action application, and had not issued a decision as of the filing date of this Report.
ATM Non-Discrimination Rule Surcharge Complaints
In October 2011, a trade association of independent Automated Teller Machine (“ATM”) operators and 13 independent ATM operators filed a complaint styled as a class action lawsuit in the U.S. District Court for the District of Columbia against both Mastercard and Visa (the “ATM Operators Complaint”).  Plaintiffs seek to represent a class of non-bank operators of ATM terminals that operate in the United States with the discretion to determine the price of the ATM access fee for the terminals they operate. Plaintiffs allege that Mastercard and Visa have violated Section 1 of the Sherman Act by imposing rules that require ATM operators to charge non-discriminatory ATM surcharges for transactions processed over Mastercard’s and Visa’s respective networks that are not greater than the surcharge for transactions over other networks accepted at the same ATM.  Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees. 
Subsequently, multiple related complaints were filed in the U.S. District Court for the District of Columbia alleging both federal antitrust and multiple state unfair competition, consumer protection and common law claims against Mastercard and Visa on behalf of putative classes of users of ATM services (the “ATM Consumer Complaints”). The claims in these actions largely mirror the allegations made in the ATM Operators Complaint, although these complaints seek damages on behalf of consumers of ATM services who pay allegedly inflated ATM fees at both bank and non-bank ATM operators as a result of the defendants’ ATM rules. Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees. 
In January 2012, the plaintiffs in the ATM Operators Complaint and the ATM Consumer Complaints filed amended class action complaints that largely mirror their prior complaints. In February 2013, the district court granted Mastercard’s motion to dismiss the complaints for failure to state a claim. On appeal, the Court of Appeals reversed the district court’s order in August 2015 and sent the case back for further proceedings. In September 2019, the plaintiffs filed their motions for class certification in which the plaintiffs, in aggregate, allege over $1 billion in damages against all of the defendants. Mastercard intends to vigorously defend against both the plaintiffs’ liability and damages claims and has opposed class certification. Briefing on class certification is complete.

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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Liability Shift Litigation
In March 2016, a proposed U.S. merchant class action complaint was filed in federal court in California alleging that Mastercard, Visa, American Express and Discover (the “Network Defendants”), EMVCo, and a number of issuing banks (the “Bank Defendants”) engaged in a conspiracy to shift fraud liability for card present transactions from issuing banks to merchants not yet in compliance with the standards for EMV chip cards in the United States (the “EMV Liability Shift”), in violation of the Sherman Act and California law. Plaintiffs allege damages equal to the value of all chargebacks for which class members became liable as a result of the EMV Liability Shift on October 1, 2015. The plaintiffs seek treble damages, attorney’s fees and costs and an injunction against future violations of governing law, and the defendants have filed a motion to dismiss. In September 2016, the district court denied the Network Defendants’ motion to dismiss the complaint, but granted such a motion for EMVCo and the Bank Defendants. In May 2017, the district court transferred the case to New York so that discovery could be coordinated with the U.S. merchant class interchange litigation described above. In August 2020, the district court issued an order granting the plaintiffs’ request for class certification. In January 2021, the Network Defendants’ request for permission to appeal the district court’s certification decision to the appellate court was denied. The plaintiffs’ have submitted expert reports that allege aggregate damages in excess of $1 billion against the four Network Defendants. The Network Defendants have submitted expert reports rebutting both liability and damages. Briefing on summary judgement is expected to occur in 2022.
Telephone Consumer Protection Class Action
Mastercard is a defendant in a Telephone Consumer Protection Act (“TCPA”) class action pending in Florida. The plaintiffs are individuals and businesses who allege that approximately 381,000 unsolicited faxes were sent to them advertising a Mastercard co-brand card issued by First Arkansas Bank (“FAB”). The TCPA provides for uncapped statutory damages of $500 per fax. Mastercard has asserted various defenses to the claims, and has notified FAB of an indemnity claim that it has (which FAB has disputed). In June 2018, the district court granted Mastercard’s motion to stay the proceedings until the Federal Communications Commission makes a decision on the application of the TCPA to online fax services. In December 2019, the FCC issued a declaratory ruling clarifying that the TCPA does not apply to faxes sent to online fax services that are received via e-mail. As a result of the ruling, the stay of the litigation was lifted in January 2020. In January 2021, the magistrate judge serving on the district court issued an opinion recommending that the district court judge deny plaintiffs’ class certification motion. In light of an appellate court decision, issued subsequent to the magistrate’s recommendation, the district court judge instructed the parties to re-brief the motion for class certification, and the motion has now been fully briefed.
U.S. Federal Trade Commission Investigation
In June 2020, the U.S. Federal Trade Commission’s Bureau of Competition (“FTC”) informed Mastercard that it has initiated a formal investigation into compliance with the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. In particular, the investigation focuses on Mastercard’s compliance with the debit routing provisions of the Durbin Amendment.  The FTC has issued a subpoena and Mastercard is cooperating with it in the investigation.
U.K. Prepaid Cards Matter
In 2019, Mastercard was informed by the U.K. Payment Systems Regulator (PSR) that Mastercard was a target of its confidential investigation into alleged anti-competitive conduct by public sector prepaid card program managers in the U.K. This matter focused exclusively on historic behavior. In March 2021, the PSR announced the resolution and settlement of this investigation. As part of the resolution, Mastercard has agreed to pay a maximum fine of £32 million. This matter has no prospective impact on Mastercard’s on-going business. In connection with this matter, in the fourth quarter of 2020, Mastercard recorded a litigation charge of $45 million.
Note 16. Settlement and Other Risk Management
Mastercard’s rules guarantee the settlement of many of the transactions between its customers (“settlement risk”). Settlement exposure is the settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment transaction date and subsequent settlement. While the term and amount of the guarantee are unlimited, the duration of settlement exposure is short term and typically limited to a few days.
Gross settlement exposure is estimated using the average daily payment volume during the three months prior to period end multiplied by the estimated number of days of exposure. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company’s settlement risk and exposure. In the event of a failed customer, Mastercard may pursue one or more remedies available under the Company’s rules to recover potential losses. Historically, the Company has experienced a low level of losses from customer failures.
As part of its policies, Mastercard requires certain customers that are not in compliance with the Company’s risk standards to enter into risk mitigation arrangements, including cash collateral and/or other forms of credit enhancement such as letters of credit and guarantees. This requirement is based on a review of the individual risk circumstances for each customer. Mastercard monitors its credit risk portfolio on a regular basis and the adequacy of its risk mitigation arrangements. Additionally, from time to time, the Company reviews its risk management methodology and standards. As such, the amounts of estimated settlement exposure are revised as necessary.

26 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s estimated settlement exposure was as follows:
June 30,
2021 		December 31,
2020
(in millions)
Gross settlement exposure
$ 59,303  $ 52,360 
Risk mitigation arrangements applied to settlement exposure
(6,739) (6,021)
Net settlement exposure
$ 52,564  $ 46,339 
Mastercard also provides guarantees to customers and certain other counterparties indemnifying them from losses stemming from failures of third parties to perform duties. This includes guarantees of Mastercard-branded travelers cheques issued, but not yet cashed of $367 million and $370 million at June 30, 2021 and December 31, 2020, respectively, of which the Company has risk mitigation arrangements for $292 million and $294 million at June 30, 2021 and December 31, 2020, respectively. In addition, the Company enters into agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. Certain indemnifications do not provide a stated maximum exposure. As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been material.
Note 17. Derivative and Hedging Instruments
The Company monitors and manages its foreign currency and interest rate exposures as part of its overall risk management program which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. A primary objective of the Company’s risk management strategies is to reduce the financial impact that may arise from volatility in foreign currency exchange rates principally through the use of both foreign exchange derivative contracts and foreign currency denominated debt. In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances.
Cash Flow Hedges
The Company may enter into foreign exchange derivative contracts, including forwards and options, to manage the impact of foreign currency variability on anticipated revenues and expenses, which fluctuate based on currencies other than the functional currency of the entity. The objective of these hedging activities is to reduce the effect of movement in foreign exchange rates for a portion of revenues and expenses forecasted to occur. As these contracts are designated as cash flow hedging instruments, gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings.
In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances, and designate such derivatives as hedging instruments in a cash flow hedging relationship. In 2019, the Company entered into treasury rate locks which are accounted for as cash flow hedges. In the first quarter of 2020, in connection with the issuance of the 2020 USD Notes, these contracts were settled at a loss of $136 million after tax, in accumulated other comprehensive income (loss). As of June 30, 2021, a cumulative loss of $131 million after tax, remains in accumulated other comprehensive income (loss) associated with these contracts and will be reclassified as an adjustment to interest expense over the respective terms of the 2020 USD Notes.
Net Investment Hedges
The Company may use foreign currency denominated debt and/or foreign exchange derivative contracts to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the net investment hedge is recorded as a currency translation adjustment in accumulated other comprehensive income (loss). Forward points are designated as an excluded component and recognized in general and administrative expenses on the consolidated statement of operations over the hedge period. The amounts recognized in earnings related to forward points for the three and six months ended June 30, 2021 were not material.
In 2015, the Company designated its €1.65 billion euro-denominated debt as a net investment hedge for a portion of its net investment in its European operations. For the three and six months ended June 30, 2021, the Company recorded a pre-tax net foreign currency loss of $27 million, and pre-tax net foreign currency gain of $60 million, respectively, in other comprehensive income (loss).
As of June 30, 2021, the Company had a net foreign currency loss of $119 million after tax, in accumulated other comprehensive income (loss) associated with this hedging activity.
Non-designated Derivatives
The Company may also enter into foreign exchange derivative contracts to serve as economic hedges, such as to offset possible changes in the value of monetary assets and liabilities due to foreign exchange fluctuations, without designating these derivative contracts as hedging

MASTERCARD JUNE 30, 2021 FORM 10-Q 27

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
instruments. In addition, the Company is subject to foreign exchange risk as part of its daily settlement activities. This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with customers. To manage this risk, the Company may enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position. The objective of these activities is to reduce the Company’s exposure to gains and losses resulting from fluctuations of foreign currencies against its functional currencies. Gains and losses resulting from changes in fair value of these contracts are recorded in general and administrative expenses on the consolidated statement of operations, net, along with the foreign currency gains and losses on monetary assets and liabilities.
The following table summarizes the fair value of the Company’s derivative financial instruments and the related notional amounts:
June 30, 2021 December 31, 2020
  Notional Fair Value Notional Fair Value
(in millions)
Derivative assets:
Derivatives designated as hedging instruments
Foreign exchange contracts in a cash flow hedge 1
$ 137  $ 2  $ —  $ — 
Foreign exchange contracts in a net investment hedge 1
1,923  25  —  — 
Derivatives not designated as hedging instruments
Foreign exchange contracts 1
314  3  483  19 
Total Derivative Assets $ 2,374  $ 30  $ 483  $ 19 
Derivative liabilities:
Derivatives designated as hedging instruments
Foreign exchange contracts in a cash flow hedge 2
$ 122  $ (2) $ —  $ — 
Derivatives not designated as hedging instruments
Foreign exchange contracts 2
449  (5) 1,016  (28)
Total Derivative Liabilities $ 571  $ (7) $ 1,016  $ (28)
1.Foreign exchange derivative assets are included within prepaid expenses and other current assets on the consolidated balance sheet
2.Foreign exchange derivative liabilities are included within other current liabilities on the consolidated balance sheet

28 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pre-tax gain (loss) related to the Company's derivative financial instruments designated as hedging instruments are as follows:
Gain (Loss)
Recognized in OCI 		Gain (Loss)
Reclassified from AOCI
Three Months Ended June 30, Location of Gain (Loss) Reclassified from AOCI into Earnings Three Months Ended June 30,
2021 2020 2021 2020
(in millions) (in millions)
Derivative financial instruments in a cash flow hedge relationship:
Foreign exchange contracts $ (4) $ —  Net revenue $ (1) $ — 
Interest rate contracts $ —  $ —  Interest expense $ (2) $ (1)
Derivative financial instruments in a net investment hedge relationship:
Foreign exchange contracts $ (34) $ — 
Gain (Loss)
Recognized in OCI 		Gain (Loss)
Reclassified from AOCI
Six Months Ended June 30, Location of Gain (Loss) Reclassified from AOCI into Earnings Six Months Ended June 30,
2021 2020 2021 2020
(in millions) (in millions)
Derivative financial instruments in a cash flow hedge relationship:
Foreign exchange contracts $ (1) $ —  Net revenue $ (1) $ — 
Interest rate contracts $ —  $ (189) Interest expense $ (3) $ (1)
Derivative financial instruments in a net investment hedge relationship:
Foreign exchange contracts $ 12  $ — 

The Company estimates that $7 million, pre-tax, of the net deferred loss on cash flow hedges recorded in accumulated other comprehensive income (loss) at June 30, 2021 will be reclassified into the consolidated statement of operations within the next 12 months. The term of the foreign exchange derivative contracts designated in hedging relationships are generally less than 18 months.
The amount of gain (loss) recognized on the consolidated statement of operations for non-designated derivative contracts is summarized below: 
  Three Months Ended June 30, Six Months Ended June 30,
Derivatives not designated as hedging instruments: 2021 2020 2021 2020
(in millions)
Foreign exchange derivative contracts
General and administrative $ (7) $ (24) $ (3) $ 83 
The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as foreign currency exchange rates, interest rates and other related variables. Counterparty credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual terms. The Company’s derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions. To mitigate counterparty credit risk, the Company enters into derivative contracts with a diversified group of selected financial institutions based upon their credit ratings and other factors. Generally, the Company does not obtain collateral related to derivatives because of the high credit ratings of the counterparties.

MASTERCARD JUNE 30, 2021 FORM 10-Q 29

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s discussion and analysis of financial condition and results of operations
The following supplements management's discussion and analysis of Mastercard Incorporated for the year ended December 31, 2020 as contained in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 12, 2021. It also should be read in conjunction with the consolidated financial statements and notes of Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (together, “Mastercard” or the “Company”), included elsewhere in this Report. Percentage changes provided throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” were calculated on amounts rounded to the nearest thousand.
COVID-19
While the coronavirus (“COVID-19”) outbreak continues to affect our performance to date, growth rates for our key metrics continue to improve. In the second quarter of 2021, our growth rates, which are at various stages of recovery, increased significantly as compared to the respective year-ago periods as we lap the initial effects of the pandemic. The following table provides a summary of trends in our quarterly key metrics since early 2020 as compared to the respective year-ago periods to provide context of the effects of the pandemic:
2020 Quarter Ended 2021 Quarter Ended
March 31 June 30 September 30
December 31
March 31 June 30
Increase/(Decrease)
Gross dollar volume (local currency basis) 8  % (10) % 1  % 1  % 8  % 33  %
Cross-border volume (local currency basis) (1) % (45) % (36) % (29) % (17) % 58  %
Switched transactions 13  % (10) % 5  % 4  % 9  % 41  %
The COVID-19 pandemic continues to have negative effects on the global economy. This outbreak has affected business activity, adversely impacting consumers, our customers, suppliers and business partners, as well as our workforce. We continue to monitor the effects of the pandemic and actions taken by governments as they relate to travel restrictions, social distancing measures and restrictions on business operations, as well as the continued impact of these actions on consumers and businesses. While these governmental measures have eased in jurisdictions primarily where vaccination levels are rising, the extent to which current measures are removed or new measures are put in place will depend upon how the pandemic evolves, including the impact of COVID-19 variants and the resulting resurgence of infections, as well as the progress of the ongoing global administration of vaccines.
The full extent to which the pandemic, and measures taken in response, affect our business, results of operations and financial condition will depend on future developments, including the duration of the pandemic and its impact on the global economy, which are uncertain, and cannot be predicted at this time.
Financial Results Overview
The following table provides a summary of our key GAAP operating results, as reported:
Three Months Ended June 30, Increase/(Decrease) Six Months Ended June 30, Increase/(Decrease)
2021 2020 2021 2020
($ in millions, except per share data)
Net revenue $ 4,528  $ 3,335  36% $ 8,683  $ 7,344  18%
Operating expenses $ 2,187  $ 1,628  34% $ 4,145  $ 3,426  21%
Operating income $ 2,341  $ 1,707  37% $ 4,538  $ 3,918  16%
Operating margin 51.7  % 51.2  % 0.5 ppt 52.3  % 53.3  % (1.1) ppt
Income tax expense $ 412  $ 270  52% $ 774  $ 564  37%
Effective income tax rate 16.6  % 16.0  % 0.6 ppt 16.6  % 15.4  % 1.2 ppt
Net income $ 2,066  $ 1,420  46% $ 3,894  $ 3,113  25%
Diluted earnings per share $ 2.08  $ 1.41  48% $ 3.91  $ 3.08  27%
Diluted weighted-average shares outstanding 994  1,008  (1)% 996  1,009  (1)%

30 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a summary of our key non-GAAP operating results1, adjusted to exclude the impact of gains and losses on our equity investments, special items (which represent litigation judgments and settlements and certain one-time items) and the related tax impacts on our non-GAAP adjustments. In addition, we have presented growth rates, adjusted for the impact of currency:
Three Months Ended June 30, Increase/(Decrease) Six Months Ended June 30, Increase/(Decrease)
2021 2020 As adjusted Currency-neutral 2021 2020 As adjusted Currency-neutral
($ in millions, except per share data)
Net revenue $ 4,528  $ 3,335  36% 31% $ 8,683  $ 7,344  18% 16%
Adjusted operating expenses $ 2,121  $ 1,606  32% 28% $ 4,079  $ 3,398  20% 17%
Adjusted operating margin 53.2  % 51.8  % 1.3 ppt 1.0 ppt 53.0  % 53.7  % (0.7) ppt (0.6) ppt
Adjusted effective income tax rate 15.9  % 16.3  % (0.4) ppt (0.6) ppt 16.4  % 15.5  % 0.9 ppt 0.8 ppt
Adjusted net income $ 1,937  $ 1,370  41% 36% $ 3,678  $ 3,214  14% 12%
Adjusted diluted earnings per share $ 1.95  $ 1.36  43% 37% $ 3.69  $ 3.19  16% 14%
Note: Tables may not sum due to rounding.
1    See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

Key highlights for the three and six months ended June 30, 2021, versus the comparable periods in 2020, were as follows:
Net revenue
Three Months Ended June 30, 2021 For the three months ended June 30, 2021, net revenue increased 31% on a currency-neutral basis, and includes a 3 percentage point benefit from acquisitions. The primary drivers were:
GAAP
Non-GAAP
(currency-neutral)
up 36% up 31%      - Gross dollar volume growth of 33% on a local currency basis
     - Cross-border volume growth of 58% on a local currency basis
     - Switched transactions growth of 41%
     - Other revenues increased 37%. On a currency-neutral basis, other revenues
increased 32%, which includes 9 percentage points of growth due to acquisitions.
The remaining growth was driven primarily by our Cyber & Intelligence and Data &
Services solutions.
These increases to net revenue were partially offset by:
     - Rebates and incentives growth of 53%, or 49% on a currency-neutral basis primarily
     due to increased volumes and transactions and new and renewed deals
Six Months Ended June 30, 2021 For the six months ended June 30, 2021, net revenue increased 16% on a currency-neutral basis, and includes a 2 percentage point benefit from acquisitions. The primary drivers of net revenue were:
GAAP Non-GAAP
(currency-neutral)
up 18% up 16%
     - Gross dollar volume growth of 19% on a local currency basis
     - Cross-border volume growth of 11% on a local currency basis
     - Switched transactions growth of 24%
     - Other revenues increased 32%. On a currency-neutral basis, other revenues
increased 29%, which includes 6 percentage points of growth due to acquisitions.
The remaining growth was driven primarily by our Cyber & Intelligence and Data &
Services solutions.
These increases to net revenue were partially offset by:
     - Rebates and incentives growth of 27%, or 24% on a currency-neutral basis primarily
     due to increased volumes and transactions and new and renewed deals

MASTERCARD JUNE 30, 2021 FORM 10-Q 31

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating expenses Adjusted
operating expenses
Three Months Ended June 30, 2021 For the three months ended June 30, 2021, adjusted operating expenses increased 28% on a currency-neutral basis, which included an 8 percentage point increase due to acquisitions. The remaining increase was primarily due to higher personnel costs, increased spending on advertising and marketing and increased data processing costs.
GAAP
Non-GAAP
(currency-neutral)
up 34% up 28%
Six Months Ended June 30, 2021 For the six months ended June 30, 2021, adjusted operating expenses increased 17% on a currency-neutral basis, which included a 6 percentage point increase due to acquisitions. The remaining increase was primarily due to higher personnel costs, increased spending on advertising and marketing and the lapping of a favorable hedging gain in the prior year.
GAAP
Non-GAAP
(currency-neutral)
up 21% up 17%
Effective income
tax rate
Adjusted effective
income tax rate
Three Months Ended June 30, 2021 For the three months ended June 30, 2021, the adjusted effective income tax rate of 15.9% was lower than prior year, primarily due to a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate, partially offset by a change in our geographic mix of earnings.
GAAP
Non-GAAP
(currency-neutral)
16.6% 15.9%
Six Months Ended June 30, 2021 For the six months ended June 30, 2021, the adjusted effective income tax rate of 16.4% was higher than prior year, primarily due to a lower discrete tax benefit related to share-based payments and a change in our geographic mix of earnings, partially offset by a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate.
GAAP Non-GAAP
(currency-neutral)
16.6% 16.4%
Other financial highlights for the six months ended June 30, 2021 were as follows:
•We generated net cash flows from operations of $3.7 billion.
•We completed the acquisitions of businesses for total consideration of $4.4 billion.
•We repurchased 8.5 million shares of our common stock for $3.1 billion and paid dividends of $0.9 billion.
•We completed a debt offering for an aggregate principal amount of $1.3 billion.
Non-GAAP Financial Information
Non-GAAP financial information is defined as a numerical measure of a company’s performance that excludes or includes amounts so as to be different than the most comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Our non-GAAP financial measures exclude the impact of gains and losses on our equity investments which primarily includes mark-to-market fair value adjustments, impairments and gains and losses upon disposition, as well as the related tax impacts. Our non-GAAP financial measures also exclude the impact of special items, where applicable, which represent litigation judgments and settlements and certain one-time items, as well as the related tax impacts (“Special Items”). Our non-GAAP financial measures for the comparable periods exclude the impact of the following:
Gains and Losses on Equity Investments
•In the three and six months ended June 30, 2021, we recorded pre-tax net gains of $243 million ($182 million after tax, or $0.18 per diluted share) and $337 million ($269 million after tax, or $0.27 per diluted share), respectively, primarily related to unrealized fair market value adjustments on marketable and non-marketable equity securities.
•In the three and six months ended June 30, 2020, we recorded pre-tax net gains of $75 million ($67 million after tax, or $0.07 per diluted share) and pre-tax net losses of $99 million ($80 million after tax, or $0.08 per diluted share), respectively, primarily related to unrealized fair market value adjustments on marketable and non-marketable equity securities.
Special Items
Litigation provisions
•In the second quarter of 2021, we recorded pre-tax charges of $67 million ($52 million after tax, or $0.05 per diluted share) related to litigation settlements and estimated attorneys’ fees with U.K. merchants.

32 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
•In the second quarter of 2020, we recorded pre-tax charges of $22 million ($17 million after tax, or $0.02 per diluted share) related to estimated attorneys’ fees and litigation settlements with U.K. and Pan-European merchants.
•In the first quarter of 2020, we recorded pre-tax charges of $6 million ($5 million after tax, and an immaterial impact per diluted share) related to litigation settlements with U.K. merchants.
See Note 6 (Investments) and Note 15 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 for further discussion. We excluded these items because management evaluates the underlying operations and performance of the Company separately from these recurring and nonrecurring items.
We believe that the non-GAAP financial measures presented facilitate an understanding of our operating performance and provide a meaningful comparison of our results between periods. We use non-GAAP financial measures to, among other things, evaluate our ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of performance-based compensation.
Currency-neutral Growth Rates
We present growth rates adjusted for the impact of currency which is a non-GAAP financial measure. Currency-neutral growth rates are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the translational and transactional impacts on operating results as well as removing the related impact of our designated foreign exchange derivative contracts related to our cash flow hedging activities. The impact of currency translation represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The impact of the transactional currency represents the effect of converting revenue and expenses occurring in a currency other than the functional currency of the entity. The impact of the related realized gains and losses resulting from our foreign exchange derivative contracts designated as cash flow hedging instruments is recognized in the respective financial statement line item on the statement of operations when the underlying forecasted transactions impact earnings. We believe the presentation of currency-neutral growth rates provides relevant information to facilitate an understanding of our operating results.
The translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments (“Currency impact”) has been excluded from our currency-neutral growth rates and has been identified in our drivers of change impact tables. See “Foreign Currency - Currency Impact” for further information on our currency impacts and “Financial Results - Revenue and Operating Expenses” for our drivers of change impact tables.
Net revenue, operating expenses, operating margin, other income (expense), effective income tax rate, net income and diluted earnings per share adjusted for the impact of gains and losses on our equity investments, Special Items and/or the impact of currency, are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with GAAP.

MASTERCARD JUNE 30, 2021 FORM 10-Q 33

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables reconcile our reported financial measures calculated in accordance with GAAP to the respective non-GAAP adjusted financial measures:
Three Months Ended June 30, 2021
 Operating expenses Operating margin Other income (expense) Effective income tax rate  Net income  Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP $ 2,187  51.7  % $ 137  16.6  % $ 2,066  $ 2.08 
(Gains) losses on equity investments ** ** (243) (0.9) % (182) $ (0.18)
Litigation provisions (67) 1.5  % ** 0.2  % 52  0.05 
Non-GAAP $ 2,121  53.2  % $ (106) 15.9  % $ 1,937  $ 1.95 

Six Months Ended June 30, 2021
 Operating expenses Operating margin Other income (expense) Effective income tax rate  Net income  Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP $ 4,145  52.3  % $ 130  16.6  % $ 3,894  $ 3.91 
(Gains) losses on equity investments ** ** (337) (0.3) % (269) (0.27)
Litigation provisions (67) 0.8  %  ** 0.1  % 52  0.05 
Non-GAAP $ 4,079  53.0  % $ (207) 16.4  % $ 3,678  $ 3.69 

Three Months Ended June 30, 2020
 Operating expenses Operating margin Other income (expense) Effective income tax rate  Net income  Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP $ 1,628  51.2  % $ (17) 16.0  % $ 1,420  $ 1.41 
(Gains) losses on equity investments **  ** (75) 0.2  % (67) $ (0.07)
Litigation provisions $ (22) 0.7  % ** 0.1  % 17  0.02 
Non-GAAP $ 1,606  51.8  % $ (92) 16.3  % $ 1,370  $ 1.36 
Six Months Ended June 30, 2020
 Operating expenses Operating margin Other income (expense) Effective income tax rate  Net income  Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP $ 3,426  53.3  % $ (241) 15.4  % $ 3,113  $ 3.08 
(Gains) losses on equity investments  **  ** 99  0.1  % 80  0.08 
Litigation provisions (28) 0.4  % ** —  % 22  0.02 
Non-GAAP $ 3,398  53.7  % $ (142) 15.5  % $ 3,214  $ 3.19 
Note: Tables may not sum due to rounding.
**    Not applicable

34 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables represent the reconciliation of our growth rates reported under GAAP to our non-GAAP growth rates:
Three Months Ended June 30, 2021 as compared to the Three Months Ended June 30, 2020
Increase/(Decrease)
Net revenue  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
Reported - GAAP 36% 34% 0.5 ppt 0.6 ppt 46% 48%
(Gains) losses on equity investments ** ** ** (1.1) ppt (6)% (6)%
Litigation provisions ** (2)% 0.8 ppt 0.1 ppt 2% 1%
Non-GAAP 36% 32% 1.3 ppt (0.4) ppt 41% 43%
Currency impact 1
(4.5)% (4)% (0.3) ppt (0.2) ppt (6)% (6)%
Non-GAAP - currency-neutral 31% 28% 1.0 ppt (0.6) ppt 36% 37%
Six Months Ended June 30, 2021 as compared to the Six Months Ended June 30, 2020
Increase/(Decrease)
Net revenue  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
Reported - GAAP 18% 21% (1.1) ppt 1.2 ppt 25% 27%
(Gains) losses on equity investments ** ** ** (0.4) ppt (11)% (12)%
Litigation provisions  ** (1)% 0.4 ppt — ppt 1% —%
Non-GAAP 18% 20% (0.7) ppt 0.9 ppt 14% 16%
Currency impact 1
(3)% (3)% 0.1 ppt (0.1) ppt (2)% (2)%
Non-GAAP - currency-neutral 16% 17% (0.6) ppt 0.8 ppt 12% 14%
Note: Tables may not sum due to rounding.
**    Not applicable
1    See “Non-GAAP Financial Information” for further information on Currency impact.
Key Metrics
In addition to the financial measures described above in “Financial Results Overview”, we review the following metrics to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions. We believe that the key metrics presented facilitate an understanding of our operating and financial performance and provide a meaningful comparison of our results between periods. 
Gross Dollar Volume (“GDV”)1 measures dollar volume of activity on cards carrying our brands during the period, on a local currency basis and U.S. dollar-converted basis. GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with Mastercard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements and includes the impact of balance transfers and convenience checks obtained with Mastercard-branded cards for the relevant period. Information denominated in U.S. dollars relating to GDV is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which Mastercard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter.  Mastercard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of currencies against the U.S. dollar in calculating such rates of change.
Cross-border Volume2 measures cross-border dollar volume initiated and switched through our network during the period, on a local currency basis and U.S. dollar-converted basis, for all Mastercard-branded programs.
Switched Transactions2 measures the number of transactions switched by Mastercard, which is defined as the number of transactions initiated and switched through our network during the period.
Operating Margin measures how much profit we make on each dollar of sales after our operating costs but before other income (expense) and income tax expense. Operating margin is calculated by dividing our operating income by net revenue.
1    Data used in the calculation of GDV is provided by Mastercard customers and is subject to verification by Mastercard and partial cross-checking against information provided by Mastercard’s transaction switching systems. All data is subject to revision and amendment by Mastercard or Mastercard’s customers.
2    Normalized to eliminate the effects of differing switching and carryover days between periods. Carryover days are those where transactions and volumes from days where the company does not clear and settle are processed.

MASTERCARD JUNE 30, 2021 FORM 10-Q 35

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Foreign Currency
Currency Impact
Our primary revenue functional currencies are the U.S. dollar, euro, Brazilian real and the British pound. Our overall operating results are impacted by currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency.
Our operating results are also impacted by transactional currency. The impact of the transactional currency represents the effect of converting revenue and expense transactions occurring in a currency other than the functional currency. Changes in currency exchange rates directly impact the calculation of gross dollar volume (“GDV”) and gross euro volume (“GEV”), which are used in the calculation of our domestic assessments, cross-border volume fees and certain volume-related rebates and incentives. In most non-European regions, GDV is calculated based on local currency spending volume converted to U.S. dollars using average exchange rates for the period. In Europe, GEV is calculated based on local currency spending volume converted to euros using average exchange rates for the period. As a result, certain of our domestic assessments, cross-border volume fees and volume-related rebates and incentives are impacted by the strengthening or weakening of the U.S. dollar versus non-European local currencies and the strengthening or weakening of the euro versus other European local currencies. For example, our billing in Australia is in the U.S. dollar, however, consumer spend in Australia is in the Australian dollar. The currency transactional impact of converting Australian dollars to our U.S. dollar billing currency will have an impact on the revenue generated. The strengthening or weakening of the U.S. dollar is evident when GDV growth on a U.S. dollar-converted basis is compared to GDV growth on a local currency basis. For the three and six months ended June 30, 2021, GDV on a U.S. dollar-converted basis increased 38% and 23%, respectively, while GDV on a local currency basis increased 33% and 19%, respectively, versus the comparable periods in 2020. Further, the impact from transactional currency occurs in transaction processing revenue, other revenue and operating expenses when the local currency of these items is different than the functional currency of the entity.
Through December 31, 2020, our approach to manage our transactional currency exposure consisted of hedging a portion of anticipated revenues impacted by transactional currencies by entering into foreign exchange derivative contracts, and recording the related changes in fair value in general and administrative expenses on the consolidated statement of operations. During the first quarter of 2021, we started to formally designate certain newly-executed foreign exchange derivative contracts, which meet the established accounting criteria, as cash flow hedges. Gains and losses resulting from changes in fair value of these designated contracts will be deferred in accumulated other comprehensive income (loss) and subsequently recognized in the respective financial statement line item on the statement of operations when the underlying forecasted transactions impact earnings.
Foreign Exchange Activity
We incur foreign currency gains and losses from remeasuring monetary assets and liabilities, including settlement receivables and payables with our customers, that are denominated in a currency other than the functional currency of the entity. To manage this foreign exchange risk, we may enter into foreign exchange derivative contracts to economically hedge the foreign currency exposure of a portion of our nonfunctional monetary assets and liabilities. The gains or losses resulting from the changes in fair value of these contracts are intended to reduce the potential effect of the underlying hedged exposure and are recorded net within general and administrative expenses on the consolidated statement of operations. The impact of this foreign exchange activity, including the related hedging activities, has not been eliminated in our currency-neutral results.
Our foreign exchange risk management activities are discussed further in Note 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.
Risk of Currency Devaluation
We are exposed to currency devaluation in certain countries. In addition, we are subject to exchange control regulations that restrict the conversion of financial assets into U.S. dollars. While these revenues and assets are not material to us on a consolidated basis, we can be negatively impacted should there be a continued and sustained devaluation of local currencies relative to the U.S. dollar and/or a continued and sustained deterioration of economic conditions in these countries.

36 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Results
Revenue
Primary drivers of net revenue, versus the comparable periods in 2020, were as follows:
For the three months ended June 30, 2021, gross revenue increased 42%, or 37% on a currency-neutral basis, which includes growth of 2 percentage points from acquisitions. The remaining increase was primarily driven by transaction and volume growth and an increase in our value-added products and services. Rebates and incentives increased 53%, or 49% on a currency-neutral basis, primarily due to increased volumes and transactions and new and renewed deals. Net revenue increased 36%, or 31% on a currency-neutral basis, and includes 3 percentage points of growth from our acquisitions.
For the six months ended June 30, 2021, gross revenue increased 21%, or 19% on a currency-neutral basis, which includes growth of 1 percentage point from acquisitions. The remaining increase was primarily driven by transaction and volume growth and an increase in our value-added products and services. Rebates and incentives increased 27%, or 24% on a currency-neutral basis, primarily due to increased volumes and transactions and new and renewed deals. Net revenue increased 18%, or 16% on a currency-neutral basis, and includes 2 percentage points of growth from our acquisitions.

MASTERCARD JUNE 30, 2021 FORM 10-Q 37

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The components of net revenue were as follows:
Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase/ (Decrease)
2021 2020 2021 2020
($ in millions)
Domestic assessments $ 2,056  $ 1,474  39% $ 3,854  $ 3,157  22%
Cross-border volume fees 1,076  637  69% 2,008  1,854  8%
Transaction processing 2,612  1,901  37% 4,963  4,101  21%
Other revenues 1,475  1,081  37% 2,822  2,143  32%
Gross revenue 7,219  5,093  42% 13,647  11,255  21%
Rebates and incentives (contra-revenue) (2,691) (1,758) 53% (4,964) (3,911) 27%
Net revenue $ 4,528  $ 3,335  36% $ 8,683  $ 7,344  18%
The following table summarizes the drivers of change in net revenue:
Three Months Ended June 30, 2021
Operational Acquisitions
Currency Impact 3
Total
Domestic assessments 36  % 1 —  % 3  % 39  %
Cross-border volume fees 60  % 1 —  % 9  % 69  %
Transaction processing 33  % 1 —  % 4  % 37  %
Other revenues 23  % 2 9  % 4  % 37  %
Rebates and incentives (contra-revenue) 49  % —  % 4  % 53  %
Net revenue 29  % 3  % 4.5  % 36  %
Six Months Ended June 30, 2021
Operational Acquisitions
Currency Impact 3
Total
Domestic assessments 21  % 1 —  % 1  % 22  %
Cross-border volume fees 4  % 1 —  % 4  % 8  %
Transaction processing 18  % 1 —  % 3  % 21  %
Other revenues 23  % 2 6  % 2  % 32  %
Rebates and incentives (contra-revenue) 24  % —  % 2  % 27  %
Net revenue 14  % 2  % 3  % 18  %
Note: Tables may not sum due to rounding.
1    Includes impacts from our key metrics, other non-volume based fees, pricing and mix.
2    Includes impacts from cyber and intelligence fees, data analytics and consulting fees and other payment-related products and services.
3    Includes the translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments.



38 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables provide a summary of the trend in volumes and transactions:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Increase/(Decrease) Increase/(Decrease)
USD Local USD Local USD Local USD Local
Mastercard-branded GDV 1
38% 33% (14)% (10)% 23% 19% (4)% (1)%
Asia Pacific/Middle East/Africa 30% 22% (15)% (12)% 19% 13% (6)% (3)%
Canada 39% 24% (16)% (12)% 24% 13% (7)% (5)%
Europe 50% 42% (17)% (13)% 27% 22% (5)% (1)%
Latin America 51% 43% (33)% (17)% 19% 22% (16)% (2)%
United States 34% 34% (5)% (5)% 23% 23% —% —%
Cross-border volume 1
70% 58% (47)% (45)% 18% 11% (26)% (24)%
1    Excludes volume generated by Maestro and Cirrus cards.
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Increase/(Decrease) Increase/(Decrease)
Switched transactions 41% (10)% 24% 1%

Operating Expenses
For the three months ended June 30, 2021, operating expenses increased 34% versus the comparable period in 2020. Adjusted operating expenses increased 32% or 28% on a currency-neutral basis, versus the comparable period in 2020, which includes an 8 percentage point increase from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives, increased spending on advertising and marketing and increased data processing costs.
For the six months ended June 30, 2021, operating expenses increased 21% versus the comparable period in 2020. Adjusted operating expenses increased 20% or 17% on a currency-neutral basis, versus the comparable period in 2020, which includes a 6 percentage point increase from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives, increased spending on advertising and marketing and the lapping of a favorable hedging gain in the prior year.
The components of operating expenses were as follows:
Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase/ (Decrease)
2021 2020 2021 2020
($ in millions)
General and administrative $ 1,718  $ 1,368  26% $ 3,394  $ 2,862  19%
Advertising and marketing 216  93  132% 335  247  36%
Depreciation and amortization 186  145  29% 349  289  21%
Provision for litigation 67  22  ** 67  28  **
Total operating expenses 2,187  1,628  34% 4,145  3,426  21%
Special Items 1
(67) (22) ** (67) (28) **
Adjusted total operating expenses (excluding Special Items 1)
$ 2,121  $ 1,606  32% $ 4,079  $ 3,398  20%
Note: Table may not sum due to rounding
**    Not meaningful.
1    See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

MASTERCARD JUNE 30, 2021 FORM 10-Q 39

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table summarizes the drivers of changes in operating expenses:
Three Months Ended June 30, 2021
Operational
Special
Items 1
Acquisitions
Currency Impact 2
Total
General and administrative 16% ** 7% 3% 26%
Advertising and marketing 124% ** 2% 6% 132%
Depreciation and amortization 1% ** 23% 4% 29%
Provision for litigation ** ** ** ** **
Total operating expenses 21% 2% 8% 4% 34%
Six Months Ended June 30, 2021
Operational
Special
Items 1
Acquisitions
Currency Impact 2
Total
General and administrative 11% ** 5% 3% 19%
Advertising and marketing 31% ** 1% 3% 36%
Depreciation and amortization 2% ** 16% 3% 21%
Provision for litigation ** ** ** ** **
Total operating expenses 11% 1% 6% 3% 21%
Note: Tables may not sum due to rounding.
**    Not meaningful.
1    See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
2    Includes translational and transactional impact of currency.
General and Administrative
For the three months ended June 30, 2021, general and administrative expenses increased 26%, or 22% on a currency-neutral basis, versus the comparable period in 2020. Current period results include growth of 7 percentage points from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives and increased data processing costs.
For the six months ended June 30, 2021, general and administrative expenses increased 19%, or 16% on a currency-neutral basis, versus the comparable period in 2020. Current period results include growth of 5 percentage points from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives, increased data processing costs and an increase due to the lapping of a favorable hedging gain in the prior year.
The components of general and administrative expenses were as follows:
Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase/(Decrease)
  2021 2020 2021 2020
  ($ in millions)
Personnel $ 1,130  $ 915  24% $ 2,234  $ 1,877  19%
Professional fees 106  84  27% 203  177  15%
Data processing and telecommunications 215  177  21% 415  356  16%
Foreign exchange activity 1
8  19  (61)% 16  (33) **
Other 259  173  50% 526  485  9%
Total general and administrative expenses $ 1,718  $ 1,368  26% $ 3,394  $ 2,862  19%
Note: Table may not sum due to rounding.
**    Not meaningful.
1    Foreign exchange activity includes gains and losses on foreign exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. See Note 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1 for further discussion.

40 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Advertising and Marketing
For the three and six months ended June 30, 2021, advertising and marketing expenses increased 132% and 36%, or 126% and 33% on a currency-neutral basis, respectively, versus the comparable periods in 2020, primarily due to an increase in advertising and sponsorship spend driven by the reinstatement of sponsored events as economies start to open up and recover from the impact of the pandemic.
Depreciation and Amortization
For the three and six months ended June 30, 2021, depreciation and amortization expenses increased 29% and 21%, or 25% and 18% on a currency-neutral basis, respectively, versus the comparable periods in 2020, which includes growth of 23 and 16 percentage points from acquisitions, respectively.
Provision for Litigation
We recorded litigation provisions of $67 million during both the three and six months ended June 30, 2021, as well as $22 million and $28 million during the three and six months ended June 30, 2020, respectively, related to various litigation settlements and legal costs. See “Non-GAAP Financial Information” in this section for further discussion.
Other Income (Expense)
For the three months ended June 30, 2021, other income (expense) was favorable, versus the comparable periods in 2020, primarily due to higher net gains in the current period versus the prior period related to unrealized fair market value adjustments on marketable and non-marketable equity securities.
For the six months ended June 30, 2021, other income (expense) was favorable, versus the comparable periods in 2020, primarily due to net gains in the current period versus net losses in the prior period related to unrealized fair market value adjustments on marketable and non-marketable equity securities, partially offset by increased interest expense related to our recent debt issuances and a decrease in our investment income.
The components of our other income (expense) were as follows:
Three Months Ended June 30, Increase (Decrease) Six Months Ended June 30, Increase/ (Decrease)
  2021 2020 2021 2020
  ($ in millions)
Investment income $ 3  $ 8  (63)% $ 4  $ 24  (83)%
Gains (losses) on equity investments, net 243  75  ** 337  (99) **
Interest expense (106) (101) 5% (213) (170) 25%
Other income (expense), net (3) 1  ** 2  4  (50)%
Total other income (expense) $ 137  $ (17) ** $ 130  $ (241) **
Note: Table may not sum due to rounding.
**    Not meaningful.
Income Taxes
For the three months ended June 30, 2021, the effective income tax rate was 16.6% versus 16.0% for the comparable period in 2020, primarily due to a change in our geographic mix of earnings and a lower discrete tax benefit related to share-based payments, partially offset by a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate. The adjusted effective income tax rate was 15.9% versus 16.3% for the comparable period in 2020 primarily due to a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate, partially offset by a change in our geographic mix of earnings.
For the six months ended June 30, 2021, the effective income tax rate was 16.6% versus 15.4%, and the adjusted effective income tax rate was 16.4% versus 15.5%, for the comparable period in 2020. Both the as reported and as adjusted effective income tax rates were higher primarily due to a lower discrete tax benefit related to share-based payments and a change in our geographic mix of earnings, partially offset by a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate.

MASTERCARD JUNE 30, 2021 FORM 10-Q 41

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
We rely on existing liquidity, cash generated from operations and access to capital to fund our global operations, capital expenditures, investments in our business and current and potential obligations. The following table summarizes the cash, cash equivalents, investments and credit available to us:
June 30,
2021 		December 31,
2020
(in billions)
Cash, cash equivalents and investments 1
$ 6.8  $ 10.6 
Unused line of credit 6.0  6.0 
1    Investments include available-for-sale securities and held-to-maturity securities. This amount excludes restricted cash and restricted cash equivalents of $2.4 billion and $2.3 billion at June 30, 2021 and December 31, 2020, respectively.
We believe that our existing cash, cash equivalents and investment securities balances, our cash flow generating capabilities, and our access to capital resources are sufficient to satisfy our future operating cash needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations and potential obligations which include litigation provisions and credit and settlement exposure.
Our liquidity and access to capital could be negatively impacted by global credit market conditions. We guarantee the settlement of many of the transactions between our customers. Historically, payments under these guarantees have not been significant; however, historical trends may not be an indication of potential future losses. The risk of loss on these guarantees is specific to individual customers, but may also be driven by regional or global economic conditions, including, but not limited to the health of the financial institutions in a country or region. See Note 16 (Settlement and Other Risk Management) to the consolidated financial statements in Part I, Item 1 for a description of these guarantees.
Our liquidity and access to capital could also be negatively impacted by the outcome of any of the legal or regulatory proceedings to which we are a party. For additional discussion of these and other risks facing our business, see Part I, Item 1A - Risk Factors and Part II, Item 7 (Business Environment) of our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 15 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1.
Cash Flow
The table below shows a summary of the cash flows from operating, investing and financing activities:
Six Months Ended June 30,
  2021 2020
  (in millions)
Net cash provided by operating activities $ 3,731  $ 3,317 
Net cash used in investing activities (4,702) (626)
Net cash (used in) provided by financing activities (2,801) 1,691 
Net cash provided by operating activities increased $414 million for the six months ended June 30, 2021, versus the comparable period in 2020, primarily due to higher net income adjusted for non-cash items, partially offset by timing of settlement with customers.
Net cash used in investing activities increased $4,076 million for the six months ended June 30, 2021, versus the comparable period in 2020, primarily due to increased acquisition activity in the current year.
During the six months ended June 30, 2021 we had a net use of cash for financing activities, versus the comparable period in 2020, when we had net cash provided by financing activities. This change was primarily due to lower net debt proceeds and higher repurchases of our Class A common stock in the current period.
Debt and Credit Availability
In March 2021, we issued $600 million principal amount of notes due March 2031 and $700 million principal amount of notes due March 2051 (collectively the “2021 USD Notes”). Our total debt outstanding was $13.9 billion and $12.7 billion at June 30, 2021 and December 31, 2020, respectively, with the earliest maturity of $650 million of principal occurring in November 2021. The proceeds of the 2021 USD Notes due March 2031 are to be used to fund eligible green and social projects, examples of which are described in the Use of Proceeds section of the Prospectus Supplement filed on March 4, 2021. All other notes are to be used for general corporate purposes.

42 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of June 30, 2021, we have a commercial paper program (the “Commercial Paper Program”), under which we are authorized to issue up to $6 billion in outstanding notes, with maturities up to 397 days from the date of issuance. In conjunction with the Commercial Paper Program, we have a committed unsecured $6 billion revolving credit facility (the “Credit Facility”) which expires in November 2025.
Borrowings under the Commercial Paper Program and the Credit Facility are to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by our customers. In addition, we may borrow and repay amounts under these facilities for business continuity purposes. We had no borrowings outstanding under the Commercial Paper Program or the Credit Facility at June 30, 2021 and December 31, 2020.
See Note 10 (Debt) to the consolidated financial statements included in Part I, Item 1 for further discussion on our debt and Note 15 (Debt) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020 for further discussion on our debt, the Commercial Paper Program and the Credit Facility.
Dividends and Share Repurchases
We have historically paid quarterly dividends on our outstanding Class A common stock and Class B common stock. Subject to legally available funds, we intend to continue to pay a quarterly cash dividend. The declaration and payment of future dividends is at the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, available cash and current and anticipated cash needs.
Aggregate payments for quarterly dividends totaled $873 million for the six months ended June 30, 2021.
On December 8, 2020, our Board of Directors declared a quarterly cash dividend of $0.44 per share paid on February 9, 2021 to holders of record on January 8, 2021 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $439 million.
On February 8, 2021, our Board of Directors declared a quarterly cash dividend of $0.44 per share payable on May 7, 2021 to holders of record on April 9, 2021 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $434 million.
On June 21, 2021, our Board of Directors declared a quarterly cash dividend of $0.44 per share payable on August 9, 2021 to holders of record on July 9, 2021 of our Class A common stock and Class B common stock. The aggregate amount of this dividend is estimated to be $434 million.
Repurchased shares of our common stock are considered treasury stock. In December 2020 and 2019, our Board of Directors approved share repurchase programs authorizing us to repurchase up to $6.0 billion and $8.0 billion, respectively, of our Class A common stock under each plan. The program approved in 2020 will become effective after completion of the share repurchase program authorized in 2019. The timing and actual number of additional shares repurchased will depend on a variety of factors, including cash requirements to meet the operating needs of the business, legal requirements, as well as the share price and economic and market conditions. The following table summarizes our share repurchase authorizations and repurchase activity of our Class A common stock through June 30, 2021:
(in millions, except average price data)
Remaining authorization at December 31, 2020 $ 9,831 
Dollar value of shares repurchased during the six months ended June 30, 2021 $ 3,067 
Remaining authorization at June 30, 2021 $ 6,764 
Shares repurchased during the six months ended June 30, 2021 8.5 
Average price paid per share during the six months ended June 30, 2021 $ 359.66 
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, if any, and the potential impact of these pronouncements refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part I, Item 1.
Item 3. Quantitative and qualitative disclosures about market risk
Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in factors such as interest rates and foreign currency exchange rates. Our exposure to market risk from changes in interest rates and foreign exchange rates is limited. Management monitors risk exposures on an ongoing basis and establishes and oversees the implementation of policies governing our funding, investments and use of derivative financial instruments to manage these risks.
Foreign currency and interest rate exposures are managed through our risk management activities, which is discussed further in Note 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.

MASTERCARD JUNE 30, 2021 FORM 10-Q 43

PART I
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
We enter into foreign exchange derivative contracts to manage currency exposure associated with anticipated receipts and disbursements occurring in a currency other than the functional currency of the entity. We may also enter into foreign currency derivative contracts to offset possible changes in value of assets and liabilities due to foreign exchange fluctuations. The objective of these activities is to reduce our exposure to transaction gains and losses resulting from fluctuations of foreign currencies against our functional and reporting currencies, principally the U.S. dollar and euro. The effect of a hypothetical 10% adverse change in the value of the functional currencies could result in a fair value loss of approximately $70 million and $58 million on our foreign exchange derivative contracts outstanding at June 30, 2021 and December 31, 2020, respectively, before considering the offsetting effect of the underlying hedged activity.
We are also subject to foreign exchange risk as part of our daily settlement activities. To manage this risk, we enter into short duration foreign exchange contracts based upon anticipated receipts and disbursements for the respective currency position. This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with our customers. The effect of a hypothetical 10% adverse change in the value of the functional currencies could result in a fair value loss of approximately $1 million and $23 million on our short duration foreign exchange derivative contracts outstanding at June 30, 2021 and December 31, 2020, respectively.
We are further exposed to foreign exchange rate risk related to translation of our foreign operating results where the functional currency is different than our U.S. dollar reporting currency. To manage this risk, we may enter into foreign exchange derivative contracts to hedge a portion of our net investment in foreign subsidiaries. The effect of a hypothetical 10% adverse change in the value of the U.S. dollar could result in a fair value loss of approximately $211 million on our foreign exchange derivative contracts designated as a net investment hedge at June 30, 2021, before considering the offsetting effect of the underlying hedged activity. The Company did not have similar foreign exchange derivative contracts outstanding as of December 31, 2020.
Interest Rate Risk
Our available-for-sale debt investments include fixed and variable rate securities that are sensitive to interest rate fluctuations. Our policy is to invest in high quality securities, while providing adequate liquidity and maintaining diversification to avoid significant exposure. A hypothetical 100 basis point adverse change in interest rates would not have a material impact to the fair value of our investments at June 30, 2021 and December 31, 2020.
Item 4. Controls and procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information that is required to be disclosed in the reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There was no change in Mastercard’s internal control over financial reporting that occurred during the three months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, Mastercard's internal control over financial reporting.

44 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART II


PART II
ITEM 1. LEGAL PROCEEDINGS
Item 1. Legal proceedings
Refer to Note 15 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1.
Item 1A. Risk factors
For a discussion of our risk factors, see Part I, Item 1A - Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered sales of equity securities and use of proceeds
Issuer Purchases of Equity Securities
During the second quarter of 2021, we repurchased 4.6 million shares for $1.7 billion at an average price of $370.83 per share of Class A common stock. The following table presents our repurchase activity on a cash basis during the second quarter of 2021:
Period Total Number
of Shares
Purchased 		Average Price
Paid per Share
(including
commission cost) 		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs 1, 2
April 1 - 30 1,360,096  $ 377.46  1,360,096  $ 7,961,751,045 
May 1 - 31 1,580,594  $ 369.14  1,580,594  $ 7,378,297,503 
June 1 - 30 1,674,449  $ 367.03  1,674,449  $ 6,763,717,318 
Total 4,615,139  $ 370.83  4,615,139 
1    Dollar value of shares that may yet be purchased under the repurchase programs is as of the end of the period.
2 In December 2020 and 2019, our Board of Directors approved share repurchase programs authorizing us to repurchase up to $6.0 billion and $8.0 billion, respectively, of our Class A common stock under each plan.
Item 5. Other information
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, we hereby incorporate by reference herein the disclosure contained in Exhibit 99.1.
Item 6. Exhibits
Refer to the Exhibit Index included herein.

46 MASTERCARD JUNE 30, 2021 FORM 10-Q

PART II
EXHIBIT INDEX
Exhibit index
Exhibit
Number 		Exhibit Description
3.1
3.2
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
+    Management contracts or compensatory plans or arrangements.
*    Filed or furnished herewith.
The agreements and other documents filed as exhibits to this Report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and should not be relied upon for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

MASTERCARD JUNE 30, 2021 FORM 10-Q 47

SIGNATURES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MASTERCARD INCORPORATED
(Registrant)
Date: July 29, 2021 By:
/S/ MICHAEL MIEBACH
Michael Miebach
President and Chief Executive Officer
(Principal Executive Officer)
Date: July 29, 2021 By: /S/ SACHIN MEHRA
Sachin Mehra
Chief Financial Officer
(Principal Financial Officer)
Date: July 29, 2021 By:
/S/ SANDRA ARKELL
Sandra Arkell
Corporate Controller
(Principal Accounting Officer)

48 MASTERCARD JUNE 30, 2021 FORM 10-Q

EXHIBIT 10.1


MASTERCARD INCORPORATED
___________________________________

2006 LONG TERM INCENTIVE PLAN
Amended and Restated Effective June 22, 2021



TABLE OF CONTENTS
ARTICLE I ESTABLISHMENT AND PURPOSE
1.1 Establishment.
1.2 Purposes.
ARTICLE II DEFINITIONS
2.1 “Affiliated Employer”
2.2 “Agreement” or “Award Agreement”
2.3 “Award”
2.4 “Board of Directors” or “Board”
2.5 “Cause”
2.6 “Change in Control”
2.7 “Code”
2.8 “Commission”
2.9 “Committee”
2.10 “Common Shares”
2.11 “Company”
2.12 “Director”
2.13 “Disability”
2.14 “Effective Date”
2.15 “Exchange Act”
2.16 “Exercise Price”
2.17 “Fair Market Value”
2.18 “Good Reason”
2.19 “Grant Date”
2.20 “Incentive Stock Option” or “ISO”
2.21 “Non-Employee Director”
2.22 “Non-Qualified Stock Option” or “NQSO”
2.24 “Option”
2.25 “Option Period”
2.26 “Other Stock-Based Award”
2.27 “Participant”
2.28 “Performance Period”
2.29 “Performance Unit”
2.30 “Plan”
2.31 “Restricted Stock”
2.32 “Restricted Stock Unit”
2.33 “Restriction Period”
2.34 “Retirement”
2.35 “Securities Act”
2.36 “Share Reserve Reduction”
2.37 “Stock Appreciation Right” or “SAR”
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2.38 “Stock Option”
2.39 “Termination of Employment”
ARTICLE III ADMINISTRATION
3.1 Committee Authority.
3.2 Delegation of Authority.
3.3 Committee Determinations and Decisions.
ARTICLE IV SHARES SUBJECT TO PLAN
4.1 Number of Shares.
4.2 Release of Shares.
4.3 Restrictions on Shares.
4.4 ISO Restriction.
4.5 Stockholder Rights.
4.6 Adjustment Provision.
ARTICLE V ELIGIBILITY AND VESTING
5.1 Eligibility.
5.2 Vesting.
ARTICLE VI STOCK OPTIONS
6.1 General.
6.2 Grant.
6.3 Required Terms and Conditions.
6.4 Termination.
6.5 Notice of Disposition of Common Shares Prior to the Expiration of Specified ISO Holding Periods.
ARTICLE VII STOCK APPRECIATION RIGHTS
7.1 General.
7.2 Grant.
7.3 Required Terms and Conditions.
7.4 Termination.
ARTICLE VIII RESTRICTED STOCK
8.1 General.
8.2 Grant, Awards and Certificates.
8.3 Required Terms and Conditions.
8.4 Termination.
8.5 Price.
8.6 Section 83(b) Election.
ARTICLE IX RESTRICTED STOCK UNITS
9.1 General.
9.2 Grant.
9.3 Required Terms and Conditions.
9.4 Termination.
ARTICLE X PERFORMANCE UNITS
10.1 General.
10.2 Earning Performance Unit Awards.
10.3 Performance Period and Vesting in Performance Unit Award.
10.4 Termination of Employment.
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ARTICLE XI OTHER STOCK-BASED AWARDS
11.1 Other Stock-Based Awards.
ARTICLE XII NON-COMPETITION, NON-SOLICITATION, AND RECOUPMENT
12.1 Non-Competition and Non-Solicitation.
12.2 Recoupment Provisions.
ARTICLE XIII CHANGE IN CONTROL
13.1 Impact of Event.
13.2 Additional Discretion.
ARTICLE XIV PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN
14.1 No Company Obligation.
ARTICLE XV MISCELLANEOUS
15.1 Amendments and Termination.
15.2 Form of Awards; Dividends and Dividend Equivalents.
15.3 No Reload Rights.
15.4 Unfunded Status of Plan.
15.5 Individual Award Limitations.
15.6 Additional Compensation Arrangements.
15.7 Withholding.
15.8 Controlling Law.
15.9 Offset.
15.10 Nontransferability.
15.11 No Rights with Respect to Continuance of Employment.
15.12 Awards in Substitution for Awards Granted by Other Corporations.
15.13 Delivery of Stock Certificate.
15.14 Indemnification.
15.15 No Guarantee of Tax Consequences.
15.16 Foreign Employees and Foreign Law Consideration.
15.17 Section 409A Savings Clause.
15.18 No Fractional Shares.
15.19 Severability.
15.20 Successors and Assigns.
15.21 Entire Agreement.
15.22 Term.
15.23 Gender and Number.
15.24 Outstanding Qualified Performance-Based Awards.
15.25 Headings.


iii

ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment.
The Mastercard Incorporated 2006 Long Term Incentive Plan, as amended (“Plan”) was established by Mastercard Incorporated (the “Company”), effective as of its approval by the Company’s stockholders on November 28, 2005 (the “Effective Date”). The Plan, as amended and restated to increase the number of shares that may be issued under the Plan and to extend the term of the Plan, and to make other clarifying changes, was approved by the Company’s Board on April 5, 2007, effective upon approval of the amended and restated plan by stockholders. The Plan, as amended and restated to extend the term of the Plan and make other clarifying changes, was approved by the Human Resources and Compensation Committee of the Company’s Board of Directors on April 2, 2012, effective upon approval of the amended and restated plan by stockholders on June 5, 2012. The Plan, as further amended and restated, including to extend the term of the Plan and to effectuate the Share Reserve Reduction, was approved by the Company’s Board of Directors on April 12, 2021, effective upon approval of the amended and restated plan by stockholders on June 22, 2021 (the “2021 Amendment Date”).
1.2 Purposes.
The purpose of the Plan is to foster and promote the long-term financial success of the Company and materially increase stockholder value by motivating performance through incentive compensation. The Plan also is intended to encourage Participant ownership in the Company, attract and retain talent, and enable Participants to participate in the long-term growth and financial success of the Company.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth below:
2.1     “Affiliated Employer” means all persons with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code, except that, for purposes of determining whether there is a controlled group or common control the language “at least 50 percent” is used instead of “at least 80 percent” or, where legitimate business criteria exist, the language “at least 20 percent” may be used instead of “at least 80 percent.”
2.2     “Agreement” or “Award Agreement” means any agreement entered into pursuant to the Plan by which an Award is granted to a Participant.
2.3     “Award” means any Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit, or Other Stock-Based Award granted to a Participant under the Plan. Awards shall be subject to the terms and conditions of the Plan and shall be evidenced by an Agreement containing such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.
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2.4     “Board of Directors” or “Board” means the Board of Directors of the Company.
2.5     “Cause” means, unless otherwise specifically provided in any applicable Award Agreement or in any other written agreement entered into between the Company and a Participant, (1) the willful failure by the Participant to perform his or her duties or responsibilities (other than due to Disability), (2) the Participant’s engaging in serious misconduct that is injurious to the Company or an Affiliated Employer including, but not limited to, damage to its reputation or standing in its industry; (3) the Participant’s having been convicted of, or entered a plea of guilty or nolo contendere to, a crime that constitutes a felony, or a crime that constitutes a misdemeanor involving moral turpitude, (4) the material breach by the Participant of any written covenant or agreement with the Company or an Affiliated Employer not to disclose any information pertaining to the Company and/or its Affiliated Employers, or (5) the breach by the Participant of the Company’s Code of Conduct, or any material provision of the following Company policies: non-discrimination, substance abuse, workplace violence, nepotism, travel and entertainment, corporation information security, antitrust/competition law, anti-corruption, enterprise risk management, accounting, contracts, purchasing, communications, investor relations, immigration, privacy, insider trading, financial process and reporting procedures, financial approval authority, whistleblower and similar policies, whether currently in effect or later adopted.
2.6    “Change in Control” means the occurrence of any of the following events:
(1)The acquisition by any individual entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of equity securities of the Company representing more than 30 percent of the voting power of the then outstanding equity securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”), provided, however, that for purposes of this subsection (1) the following acquisitions shall not constitute a Change of Control: (A) any acquisition by the Company, (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, and (C) an acquisition pursuant to a transaction which complies with clauses (A), (B), and (C) of subsection (3); or
(2)A change in the composition of the Board as of the Effective Date (the “Incumbent Board”) that causes less than a majority of the directors of the Company then in office to be members of the Incumbent Board, provided, however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or
(3)Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the purchase of assets or stock of another entity (a “Business Combination”), in each case, unless immediately following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company
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Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 50 percent of the then outstanding combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or equivalent governing body, if applicable) of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all of substantially all of the Company’s assets directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, (B) no person (excluding any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) will beneficially own, directly or indirectly, more than a majority of the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership of the Company existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or equivalent governing body, if applicable) of the entity resulting from such Business Combination will have been members of the Incumbent Board at the time of the initial agreement, or action of the Board, providing for such Business Combination; or
(4)Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
To the extent required under Code Section 409A in order to make payment of an Award upon a Change in Control or upon Termination of Employment in connection with a Change in Control, the transaction or event described above in this Section 2.6 must qualify as a change in the ownership or effective control of the Company or as a change in the ownership of a substantial portion of the assets of the Company pursuant to Section 409A(a)(2)(A)(v) of the Code, and if it does not, then unless otherwise specified in the applicable Award Agreement, payment of such Award will be made on the Award’s original payment schedule or, if earlier, upon the death of the Participant.
2.7    “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor, along with related rules, regulations and interpretations.
2.8    “Commission” means the Securities and Exchange Commission or any successor thereto.
2.9    “Committee”means the Human Resources and Compensation Committee of the Board of Directors of the Company, or such other committee, or subcommittee of the Committee designated by the Board to administer the Plan, provided that the Committee shall be composed of not less than two directors each of whom is a Non-Employee Director and an independent director as required by the rules of the national securities exchange on which the Company’s Common Shares are listed. Notwithstanding the foregoing, the mere fact that a Committee member shall fail to qualify under any of the foregoing requirements shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan.
2.10    “Common Shares” means shares of the Company’s Class A Common Shares, $0.0001 par value (as such par value may be amended from time to time), whether presently or hereafter issued, and any other stock or security resulting from adjustment thereof as described hereinafter, or the Common Shares of any successor to the Company which is designated for the purpose of the Plan.
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2.11    “Company” means Mastercard Incorporated, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed or consolidated; any corporation for whose securities the securities of the Company shall be exchanged; and any assignee of or successor to substantially all of the assets of the Company.
2.12    “Director” means a member of the Board.
2.13    “Disability” means disability in accordance with the Company’s or an Affiliated Employer’s long-term disability plan, as determined by the Committee.
2.14    “Effective Date” has the meaning set forth in Section 1.1 of the Plan.
2.15    “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.
2.16    “Exercise Price” means the price at which the Common Shares may be purchased under an Option or may be obtained under a Stock Appreciation Right. In no event may the Exercise Price per share of Common Shares covered by an Option, or the Exercise Price of a Stock Appreciation Right, be reduced through “repricing,” as defined in Section 15.1.
2.17    “Fair Market Value” means, as of any given date, the value of a Common Share determined as follows: (1) if the Common Shares are listed on a national securities exchange, the closing sales price for the Common Shares on the principal exchange on which the shares are traded for that date, or if there is no closing sales price for a Common Share on the date in question, the closing sales price for a Common Share on the last preceding date for which such quotation exists, all as reported by such source as the Committee may select; or (2) if the Common Shares are not listed on a national securities exchange, Fair Market Value shall be determined by the Committee in its good faith discretion.
2.18    “Good Reason” to the extent provided for in an Award Agreement - shall mean the occurrence of one of the following events without the Participant’s prior written consent: (1) assignment to a position for which the Participant is not qualified or a lesser position than the position held by the Participant (although duties may differ without giving rise to a termination by the Participant for Good Reason), (2) a material reduction in the Participant’s annual base salary, except, in the case of a Participant whose employment agreement so provides, a ten (10) percent reduction in the aggregate over the term of such employment agreement shall not be treated as a material reduction; (3) the relocation of the Participant’s principal place of employment to a location more than fifty (50) miles from the Participant’s principal place of employment (unless such relocation does not increase the Participant’s commute by more than twenty (20) miles), except for required travel on the Company’s business to an extent substantially consistent with the Participant’s business travel obligations as of such day; or (4) the failure by the Company to obtain an agreement from any successor to the Company to assume and agree to perform any employment agreement between Participant and the Company or any Affiliated Employer. The Participant is required to give notice to the Company of the occurrence of an event constituting Good Reason within sixty (60) days after such event occurs, failing which the Participant shall be deemed to have waived the Participant’s rights regarding such event. The Company shall be provided a period of ninety (90) days after its receipt of
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notice from the Participant during which it may remedy the grounds for Good Reason given in the notice.
2.19    “Grant Date” means the date as of which an Award is determined to be effective and designated in a resolution by the Committee and is granted pursuant to the Plan. The Grant Date shall not be earlier than the date of the resolution and action thereon by the Committee.
2.20    “Incentive Stock Option” or “ISO” means any Option intended to be and designated as an “incentive stock option,” which qualifies as an “incentive stock option” within the meaning of Section 422 of the Code.
2.21    “Non-Employee Director” shall have the meaning provided for in Rule 16b-3(b)(3) under the Exchange Act, 17 CFR §240.16b-3(b)(3), as amended.
2.22    “Non-Qualified Stock Option” or “NQSO” means an Option that is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.
2.24    “Option” means a right to purchase Common Shares granted to a Participant in accordance with Article VI. An Option may be either an ISO or NQSO.
2.25    “Option Period” means the period during which the Option shall be exercisable in accordance with an Agreement and Article VI.
2.26    “Other Stock-Based Award” means a right granted under Article XI.
2.27    “Participant” means a person who satisfies the eligibility conditions of Article V and to whom an Award has been granted by the Committee under the Plan.
2.28    “Performance Period” shall mean that period established by the Committee, during which any performance goals specified by the Committee with respect to such Awards are to be measured.
2.29    “Performance Unit” means a right granted under Article X.
2.30    “Plan” means the Mastercard Incorporated 2006 Long Term Incentive Plan, as herein set forth and as may be amended from time to time.
2.31    “Restricted Stock” means Common Shares granted to a Participant subject to terms and conditions, including a risk of forfeiture, established by the Committee pursuant to Article VIII of this Plan and evidenced by an Award Agreement.
2.32    “Restricted Stock Unit” means a right granted under Article IX.
2.33    “Restriction Period” means the period of time during which restrictions established by the Committee shall apply to an Award.
2.34    “Retirement” means Termination of Employment by a Participant occurring on or after the earliest of: (1) attaining age 65 while in service and completing two (2) years of service, (2) attaining age 60 while in service and completing five (5) years of service, and (3) attaining age 55 while in service and completing ten (10) years of service.
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2.35    “Securities Act” means the Securities Act of 1933, as amended, and the regulations promulgated thereunder.
2.36    “Share Reserve Reduction” means the Board’s decrease in the number of Common Shares available for future issuance under the Plan as of the 2021 Amendment Date, such that an aggregate of 25,000,000 Common Shares shall be reserved for the grant of Awards on or after the 2021 Amendment Date.
2.37    “Stock Appreciation Right” or “SAR” means a right granted under Article VII.
2.38    “Stock Option” means an Option.
2.39    “Termination of Employment” means a “separation from service” as defined in Code Section 409A(a)(2)(A)(i), except that a reduction in the level of services performed by a Participant to a level equal to 21 percent or less of the average level of services performed by the Participant during the immediately preceding 36 months (or such shorter period as the Participant shall have performed services for the Company or an Affiliated Company), shall be presumed to be a Termination of Employment. Notwithstanding the foregoing, in the case of an Award that is not subject to Section 409A of the Code, the Committee shall have discretion to treat the date a Participant ceases to provide services to the Company or an Affiliated Employer as a Termination of Employment.
In addition, certain other terms used herein have definitions given to them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Authority.
The Plan shall be administered by the Committee. Subject to applicable law, the Company’s certificate of incorporation and by-laws, and the terms of the Plan, and consistent with the Committee’s Charter, the Committee shall have the discretionary authority:
(1)to determine eligibility and to select those persons to whom Awards may be granted from time to time, including to limit eligibility to persons who execute a non-competition and/or non-solicitation agreement pursuant to Section 12.1;
(2)to determine the nature, amount, terms and conditions of each Award granted hereunder, based on such factors as the Committee shall determine, including terms conditioning vesting, payment, or any other benefit under the Plan on execution and compliance with a non-competition and/or non-solicitation agreement pursuant to Section 12.1; provided that the Exercise Price of any Option or Stock Appreciation Right shall not be less than the Fair Market Value per share as of the Grant Date other than as permitted under Section 15.12;
(3)to determine whether, to what extent, and under what circumstances Awards may be settled in cash, Common Shares, or other property, either at the time of grant or thereafter,
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(4)to modify, amend, or adjust the terms and conditions (including performance goals or criteria), at any time or from time to time, of any Award, subject to the limitations of Section 15.1;
(5)to cancel, with the consent of the Participant or as otherwise provided in the Plan or an Agreement, outstanding Awards;
(6)to provide for the forms of Agreement to be utilized in connection with this Plan;
(7)to determine the permissible methods of Award exercise and payment within the terms and conditions of the Plan and the particular Agreement;
(8)to determine what legal requirements are applicable to the Plan, Awards, and the issuance of Common Shares, and to require of a Participant that appropriate action be taken with respect to such requirements;
(9)to establish any “blackout” period that the Committee in its sole discretion deems necessary or advisable;
(10)to determine the restrictions or limitations on the transfer of Common Shares;
(11)to supply any omission, reconcile any inconsistency in the Plan or any Award, determine whether any Award is to be adjusted, modified or purchased, or is to become fully exercisable, under the Plan or the terms of an Agreement;
(12)to adopt, amend and rescind such administrative rules, guidelines, and practices as, in its opinion, may be advisable in the administration of this Plan;
(13)to appoint and compensate agents, counsel, auditors or other specialists to aid it in the discharge of its duties; and
(14)to interpret this Plan and any instrument or agreement under the Plan, and undertake such actions and make such determinations and decisions as it deems necessary and advisable to administer the Plan intent.
The Committee shall have discretionary authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Agreement) and to otherwise supervise the administration of the Plan. The Committee’s policies and procedures may differ with respect to Awards granted at different times and may differ with respect to a Participant from time to time, or with respect to different Participants at the same or different times.
3.2 Delegation of Authority.
The Board or Committee may from time to time delegate to a committee of one or more Directors or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article III; provided, however, that in no event shall an officer of the Company be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (1)
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individuals who are subject to Section 16 of the Exchange Act, or (2) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided, further, that any delegation of administrative authority shall only be permitted to the extent it is consistent with applicable law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegate. At all times, the delegate appointed under this Section 3.2 shall serve in such capacity at the pleasure of the Board or the Committee, as applicable, and the Board or the Committee may abolish any committee at any time and re-vest in itself any previously delegated authority. To the extent that authority is delegated to any party pursuant to this Section 3.2, references to the Committee in the Plan or an Agreement shall include such party.
3.3 Committee Determinations and Decisions.
Any determination made by the Committee pursuant to the provisions of the Plan shall be made in its sole discretion, and in the case of any determination relating to an Award may be made at the time of the grant of the Award or, unless in contravention of any express term of the Plan or an Agreement, at any time thereafter. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Participants. Any determination shall not be subject to de novo review if challenged in court. Neither the Company nor any member of the Committee shall be liable for any action or determination made in good faith by the Committee with respect to the Plan or any Award thereunder.

ARTICLE IV
SHARES SUBJECT TO PLAN
4.1 Number of Shares.
Subject to adjustment under Section 4.6 and the Share Reserve Reduction, the total number of Common Shares reserved and available for distribution pursuant to Awards under the Plan shall be 115,500,000 Class A Common Shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares.
Subject to Section 4.1, the Committee shall have full authority to determine the number of Common Shares available for Awards. In its discretion the Committee may include as available for distribution, (1) Common Shares subject to any Award that have been previously forfeited; (2) Common Shares under an Award that otherwise terminates, expires, or lapses without issuance of Common Shares being made to a Participant; (3) Common Shares subject to any Award that settles in cash, (4) Common Shares subject to an Award that is converted to an award over shares of another entity in connection with a recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event, or (5) Common Shares that are received, retained, or not issued by the Company in
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connection with the settlement or exercise of an Award, including the satisfaction of any tax liability or tax withholding obligation. Any Common Shares that are available immediately prior to the termination of the Plan, or any Common Shares returned to the Company for any reason subsequent to the termination of the Plan, may be transferred to a successor plan.
4.3 Restrictions on Shares.
Common Shares issued upon exercise or settlement of an Award shall be subject to the terms and conditions specified herein and to such other terms, conditions and restrictions as the Committee in its discretion may determine or provide in the Award Agreement. The Company shall not be required to issue or deliver any certificates for Common Shares, cash or other property prior to (1) the completion of any registration or qualification of such shares under federal, state or other law, or any ruling or regulation of any government body which the Committee determines to be necessary or advisable; and (2) the satisfaction of any applicable withholding obligation. The Company may cause any certificate (or other representation of title) for any Common Shares to be delivered to be properly marked with a legend or other notation reflecting the limitations on transfer of such Common Shares as provided in this Plan or as the Committee may otherwise require. The Committee may require any person exercising or vesting in an Award to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the Common Shares in compliance with applicable law or otherwise.
4.4 ISO Restriction.
Solely for purposes of determining whether shares are available for the issuance of ISOs, and notwithstanding anything in this Section to the contrary, the maximum aggregate number of shares that may be issued through ISOs under this Plan shall be 5,000,000. The terms of Section 4.2 shall apply equally for purposes of the number of shares available under this Section 4.4 for issuance through ISOs, except that no Common Shares may again be optioned, granted or awarded if such action would cause an ISO to fail to qualify as an incentive stock option under Section 422 of the Code.
4.5 Stockholder Rights.
No person shall have any rights of a stockholder as to Common Shares subject to an Award until, after proper transfer of the Common Shares subject to the Award or other action required, such shares shall have been recorded on the Company’s official stockholder records as having been issued and transferred. Upon grant of Restricted Stock, or exercise of an Option or a SAR, or payment of any other Award or any portion thereof, the Company will have a reasonable period in which to issue and transfer the shares, and the Participant will not be treated as a stockholder for any purpose whatsoever prior to such issuance and transfer, except as otherwise provided in an Agreement. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date such shares are recorded as issued and transferred in the Company’s official stockholder records, except as provided herein or in an Agreement.
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4.6 Adjustment Provision.
(1)Adjustment. In the event of any Company share dividend, share split, combination or exchange of shares, recapitalization or other change in the capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash dividend), reorganization, rights offering, a partial or complete liquidation, or any other corporate transaction, Company securities offering or event involving the Company and having an effect similar to any of the foregoing, then the Committee shall make appropriate adjustments or substitutions as described below in this Section. The adjustments or substitutions may relate to the number, type or class of Common Shares available for Awards under the Plan, the number, type or class of Common Shares covered by outstanding Awards, the ISO limit as set forth in Section 4.4, the individual award limitations as set forth in Section 15.5(1), the exercise price per share of outstanding Awards, and any other characteristics or terms of the Awards (including performance goals or criteria) as the Committee may deem necessary or appropriate to reflect equitably the effects of such changes to the Participants. Notwithstanding the foregoing, unless otherwise determined by the Committee, any fractional shares resulting from such adjustment shall be eliminated by rounding to the next lower whole number of shares with appropriate payment for such fractional share as shall reasonably be determined by the Committee.
(2)Section 409A. Any adjustments or substitutions made pursuant to Section 4.6(1) to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A. Any adjustments or substitutions made pursuant to Section 4.6(1) to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such manner as to ensure that after such adjustment or substitution, the Awards either continue not to be subject to Section 409A of the Code or comply with the requirements of Section 409A of the Code.
ARTICLE V
ELIGIBILITY AND VESTING
5.1 Eligibility.
Any employee of the Company or an Affiliated Employer, and any individual covered by Section 15.12, shall be eligible to be designated, in the discretion of the Committee, a Participant of this Plan; provided, however, that for this purpose, the definition of “Affiliated Employer” in Section 2.1 of the Plan shall not include any entity in which the Company has less than a 50 percent ownership interest. The Committee may require that, in order to be eligible to be designated a Participant, an employee must execute, in a form prescribed by the Company, a non-competition and/or non-solicitation agreement. Only an employee of the Company, or any parent corporation or subsidiary of the Company (as such terms are defined in Section 424 of the Code) on the Grant Date shall be eligible to be granted an Incentive Stock Option.
5.2 Vesting.
No Award denominated in Common Shares granted under the Plan on or after the 2021 Amendment Date may vest in less than one (1) year from its Grant Date.
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Notwithstanding the foregoing, (1) Awards with respect to up to five percent (5%) of the available Common Shares authorized for issuance under the Plan as of the 2021 Amendment Date may vest (in full or in part) in less than one (1) year from their Grant Date; and (2) nothing in this Section 5.2 shall limit the Company’s ability to grant Awards that contain rights to accelerated or continued vesting on a Termination of Employment or limit any rights to accelerated vesting in connection with a Change of Control or otherwise and shall not limit the adjustment provisions of Section 4.6(1). For avoidance of doubt, the minimum vesting provisions of this Section 5.2 shall not apply to substitute awards granted under Section 15.12.
ARTICLE VI
STOCK OPTIONS
6.1 General.
The Committee shall have authority to grant Options under the Plan at any time or from time to time. An Option shall entitle the Participant to receive Common Shares upon exercise of such Option, subject to the Participant’s satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or an Agreement (the terms and provisions of which may differ from other Agreements) including, without limitation, payment of the Option Price. The Committee may provide for grant or vesting of Options conditioned upon the performance of services, the achievement of performance goals, or the execution of, and/or compliance with, a non-competition or non-solicitation agreement, or any combination of the above. Options may be granted alone or in addition to other Awards granted under the Plan.
6.2 Grant.
The grant of an Option shall occur as of the Grant Date determined by the Committee provided that the Grant Date shall not be earlier than the date of the resolution and action thereon by the Committee. An Award of Options shall be evidenced by, and subject to the terms of, an Agreement. To the extent that any Option is not designated as an Incentive Stock Option or is so designated, but does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
6.3 Required Terms and Conditions.
Options shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable:
(1)Exercise Price. The Exercise Price per share for an Award shall not be less than the Fair Market Value per share as of the Grant Date. If an Option which is intended to qualify as an Incentive Stock Option is granted to an individual (a “10% Owner”) who owns or who is deemed to own shares possessing more than ten percent (10%) of the combined voting power of all classes of shares of the Company, a corporation which is a parent corporation of the Company, or any subsidiary of the Company (each as defined in Section 424 of the Code), the Exercise Price per share shall not be less than one hundred ten percent (110%) of such Fair Market Value per share as of the Grant Date.
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(2)Option Period. The Option Period fixed by the Committee for any Award shall be no longer than ten (10) years from the Option’s Grant Date. In the case of an Incentive Stock Option granted to a 10% Owner, the Option Period shall not exceed five (5) years. No Option which is intended to be an Incentive Stock Option shall be granted more than ten (10) years from the date the Plan is adopted by the Company or the date the Plan is approved by the stockholders of the Company, whichever is earlier.
(3)Exercisability. Except as set forth in Section 5.2 above, in no event shall an Option be exercisable earlier than one (1) year after the Grant Date or later than ten (10) years from the Grant Date. The Committee may provide in an Option Agreement or thereafter for an accelerated exercisability of all or part of an Option upon such events or standards that it may determine, including one or more performance measures. If the Committee intends that an Option be able to qualify as an Incentive Stock Option, the aggregate Fair Market Value (determined at the Option’s Grant Date) of the Common Shares as to which such Incentive Stock Option is exercisable for the first time during any calendar year shall not exceed $100,000.
(4)Method of Exercise. Subject to the provisions of this Article VI and the Agreement, a Participant may exercise Options, in whole or in part, during the Option Period by giving a written or electronic notice of exercise, complying with any applicable rules established by the Committee, to the Company, the stock plan administrator of the Company or such other person or entity designated by the Company, specifying the number of whole shares of Common Shares subject to the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price. Payment of the purchase price shall be by (i) delivery of cash or certified check, (ii) delivery of Common Shares already owned by the Participant (for any minimum period required by the Committee) having a total value equal to the Exercise Price, (iii) by means of delivery of cash by a broker-dealer as a “cashless” exercise, (iv) any combination of the foregoing, or (v) any other method approved by the Committee.
(5)Form of Settlement. The Committee may provide, at the time of grant, that the shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities.
(6)Conditions for Issuance of Shares. No Common Shares shall be issued until full payment therefor has been made. A Participant shall have all of the rights of a stockholder of the Company holding the class of shares that is subject to such Option (including, if applicable, the right to vote the shares and the right to receive dividends) when the Participant has given written notice of exercise, has paid in full for such shares, and such shares have been recorded on the Company’s official stockholder records as having been issued and transferred.
(7)No Deferral Features. To the extent necessary to comply with Code Section 409A, no Option Agreement shall include any features allowing the Participant to defer recognition of income past the date on which taxation occurs under section 83 of the Code.
6.4 Termination.
Unless otherwise provided in an Agreement or determined by the Committee, and except as is otherwise provided in this Section 6.4 below, Options that are not otherwise exercisable on the date of Termination of Employment shall be forfeited
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upon a Participant’s Termination of Employment. A Participant shall have the right to exercise Options that were otherwise exercisable on Termination of Employment only during a period not exceeding one hundred and twenty (120) days, or such other period specified in the Agreement, after the date of such Termination of Employment (but no later than the end of the Option Period).
(1)Termination by Death. Unless otherwise provided in an Agreement or determined by the Committee, on a Participant’s Termination of Employment due to death during the Option Period, Options held by the Participant shall become immediately exercisable and shall thereafter be fully exercisable throughout the original Option Period.
(2)Termination by Disability or Retirement. Unless otherwise provided in an Agreement or determined by the Committee, and subject to Article XII below, on a Participant’s Termination of Employment due to Disability or Retirement more than seven (7) months after the Grant Date (unless circumstances exist at the time of termination that would constitute Cause under Section 2.5), any Option held by the Participant shall continue to be exercisable by the Participant as if there was no Termination of Employment.
(3)Termination for Cause. Unless otherwise provided in an Agreement or determined by the Committee, on a Participant’s Termination of Employment for Cause, the Participant shall forfeit all Options whether those Options are otherwise exercisable as of the date of Termination of Employment or otherwise would not be exercisable on the date of Termination of Employment.
6.5 Notice of Disposition of Common Shares Prior to the Expiration of Specified ISO Holding Periods.
The Company may require that a Participant exercising an ISO give a written representation to the Company, satisfactory in form and substance, upon which the Company may rely, that the Participant will report to the Company any disposition of shares acquired via an ISO exercise prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General.
The Committee shall have authority to grant Stock Appreciation Rights (SARs) under the Plan at any time or from time to time. A SAR shall entitle the Participant to receive Common Shares upon exercise of such SAR, subject to the Participant’s satisfaction in full of any conditions, restrictions, or limitations imposed in accordance with the Plan or any Agreement. The Committee may provide for grant or vesting of SARs conditioned upon the performance of services, the achievement of performance goals, or the execution of, and/or compliance with, a non-competition or non-solicitation agreement, or any combination of the above. SARs may be granted alone or in addition to other Awards granted under the Plan.

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7.2 Grant.
The grant of a SAR shall occur as of the Grant Date determined by the Committee provided that the Grant Date shall not be earlier than the date of the resolution and action thereon by the Committee. A SAR entitles a Participant to receive Common Shares or cash as described in Section 7.3(5). An Award of SARs shall be evidenced by, and subject to the terms of an Agreement.
7.3 Required Terms and Conditions.
SARs shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.
(1)Exercise Price. The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value per share of Common Shares on the Grant Date.
(2)Term. The term of a SAR shall be no longer than ten (10) years from the Grant Date.
(3)Exercisability. Except as set forth in Section 5.2 above, in no event shall a SAR be exercisable earlier than one (1) year after the Grant Date or later than ten (10) years from the Grant Date. The Committee may provide in a SAR Agreement or thereafter for an accelerated exercise of all or part of a SAR upon such events or standards that it may determine, including one or more performance measures.
(4)Method of Exercise. SARs shall be exercised by the Participant’s giving a written or electronic notice of exercise, complying with any applicable rules established by the Committee, to the Company, the stock plan administrator of the Company or such other person or entity designated by the Company, specifying in whole shares the portion of the SAR to be exercised.
(5)Amount. Upon the exercise of a SAR, a Participant shall be entitled to receive an amount in Common Shares or cash equal in value to the excess of the value per share of Common Shares over the Exercise Price per share of Common Shares specified in the related Agreement, multiplied by the number of shares in respect of which the SAR is exercised, less any amount retained or not issued to cover tax withholdings, if necessary. The value per share of Common Shares shall be determined as of the date of exercise of such SAR.
(6)No Deferral Features. To the extent necessary to comply with Code Section 409A, the SAR Agreement shall not include any features allowing the Participant to defer recognition of income past the date of exercise.
7.4 Termination.
Unless otherwise provided in an Agreement or determined by the Committee, a Stock Appreciation Right shall be forfeited or terminated under the same circumstances, as set forth in Section 6.4, as Options would be forfeited or terminated under the Plan.

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ARTICLE VIII
RESTRICTED STOCK
8.1 General.
The Committee shall have authority to grant Restricted Stock under the Plan at any time or from time to time. The Committee shall determine the number of shares of Restricted Stock to be awarded to any Participant, the Restriction Period within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards including without limitation providing for either grant or vesting conditioned upon the achievement of performance goals or the execution of, and/or compliance with, a non-competition or non-solicitation agreement, or both. Each Award shall be confirmed by, and be subject to the terms of, an Agreement containing the applicable terms and conditions of the Award, including the Restriction Period. The Committee may provide in an Agreement or thereafter for an accelerated lapse of the Restriction Period upon such events or standards that it may determine, including the achievement of one or more performance goals. Restricted Stock may be granted alone or in addition to other Awards granted under the Plan.
8.2 Grant, Awards and Certificates.
The grant of an Award of Restricted Stock shall occur as of the Grant Date determined by the Committee. Notwithstanding the limitations on issuance of Common Shares otherwise provided in the Plan, each Participant receiving an Award of Restricted Stock shall be issued a certificate (or other representation of title, such as book entry registration) in respect of such Restricted Stock. Such certificate shall be registered in the name of such Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award as determined by the Committee. The Committee may require that the certificates evidencing such shares be held in custody by the Company until the Restriction Period shall have lapsed and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a share power, endorsed in blank, relating to the Common Shares covered by such Award.
8.3 Required Terms and Conditions.
Restricted Stock shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable:
(1)Restriction Period. Restricted Stock shall be subject to restrictions for a period set forth in the Agreement, which Restriction Period generally shall be a minimum of one (1) year from the Grant Date, except as set forth in Section 5.2 above.
(2)Restrictions. The Committee may condition the grant or vesting of the Restricted Stock on the performance of services for the Company or an Affiliated Company, the attainment of performance goals, the execution of and/or compliance with a non-competition and/or non-solicitation agreement, or any combination of the aforementioned items.
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(3)Delivery. If a share certificate is issued in respect of Restricted Stock, the certificate shall be registered in the name of the Participant but may be held by the Company for the account of the Participant until the end of the Restriction Period. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unlegended certificates (or other representation of title) for such shares shall be delivered to the Participant.
8.4 Termination.
Unless otherwise provided in an Agreement or determined by the Committee, and except as is otherwise provided in this Section 8.4 below, Restricted Stock shall be forfeited upon a Participant’s Termination of Employment.
(1)Termination by Death. Unless otherwise provided in an Agreement or determined by the Committee, Restricted Stock shall vest upon a Participant’s Termination of Employment by reason of death during the Restriction Period.
(2)Termination by Disability or Retirement. Unless otherwise provided in an Agreement or determined by the Committee, and subject to Article XII below, on a Participant’s Termination of Employment due to Disability or Retirement more than seven (7) months following the Grant Date (unless circumstances exist at the time of termination that would constitute Cause under Section 2.5), any Restricted Stock held by the Participant shall continue to vest as if there was no Termination of Employment.
8.5 Price.
The Committee may require a Participant to pay a stipulated purchase price for each share of Restricted Stock.
8.6 Section 83(b) Election.
The Committee may prohibit a Participant from making an election under Section 83(b) of the Code. If the Committee has not prohibited such election, and if the Participant elects to include in such Participant’s gross income in the year of transfer the amounts specified in Section 83(b) of the Code, the Participant shall notify the Company (or an Affiliated Employer) of such election within 10 days of filing notice of the election with the Internal Revenue Service, and will provide the required withholding pursuant to Section 15.7, in addition to any filing and notification required pursuant to regulations issued under the authority of Section 83(b) of the Code.
ARTICLE IX
RESTRICTED STOCK UNITS
9.1 General.
The Committee shall have authority to grant Restricted Stock Units under the Plan at any time or from time to time. A Restricted Stock Unit Award is denominated in Common Shares that will be settled either by delivery of Common Shares or the payment of cash based upon the value of a specified number of Common Shares. The Committee shall determine the number of Restricted Stock Units to be awarded to any Participant, the Restriction Period within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards including without
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limitation providing for either grant or vesting conditioned upon the achievement of performance goals, or the execution of, and/or compliance with, a non-competition or non-solicitation agreement, or both. Each Award shall be confirmed by, and be subject to the terms of, an Agreement which contain the applicable terms and conditions of the Award, including the Restriction Period. The Committee may provide in an Agreement or thereafter for an accelerated lapse of the Restriction Period upon such events or standards that it may determine, including the achievement of one or more performance goals. Restricted Stock Units may be granted alone or in addition to other Awards granted under the Plan.
9.2 Grant.
The grant of a Restricted Stock Unit shall occur as of the Grant Date determined by the Committee. An Award of Restricted Stock Units shall be evidenced by, and subject to the terms of an Agreement.
9.3 Required Terms and Conditions.
Restricted Stock Units shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable:
(1)Restriction Period. Restricted Stock Units shall be subject to restrictions for a period set forth in the Agreement, which Restriction Period generally shall be a minimum of one (1) year from the Grant Date, except as set forth in Section 5.2 above.
(2)Restrictions. The Committee may condition the grant or vesting of the Restricted Stock Units on the performance of services for the Company or an Affiliated Company, the attainment of performance goals, the execution of, and/or compliance with, a non-competition and/or non-solicitation agreement, or any combination of the aforementioned items.
(3)Dividend Equivalent Rights. The Committee shall be entitled to specify in a Restricted Stock Unit Agreement the extent to which and on what terms and conditions the applicable Participant shall be entitled to receive payments corresponding to the dividends payable on the Common Shares; provided, however, that all such dividend equivalents shall be subject to Section 15.2(2) of the Plan.
9.4 Termination.
Unless otherwise provided in an Agreement or determined by the Committee, a Restricted Stock Unit shall be forfeited under the same circumstances, as set forth in Section 8.4, as Restricted Stock would be forfeited under the Plan.
ARTICLE X
PERFORMANCE UNITS
10.1 General.
The Committee shall have authority to grant Performance Units denominated in Common Shares or in cash under the Plan at any time or from time to time. A Performance Unit may be settled either by delivery of Common Shares or the payment
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of cash, as provided in the particular Award Agreement, upon achievement of a performance goal or goals (as the case may be). The Committee may condition grant or vesting of Performance Units upon the performance of services, the execution of, and/or compliance with, a non-competition or non-solicitation agreement, or both. The Committee shall have complete discretion to determine the number of Performance Units granted to each Participant. Each Performance Unit Award shall be evidenced by, and be subject to the terms of, an Agreement. The Performance Unit Award shall be earned in accordance with the Agreement over a Performance Period. Performance Units may be granted alone or in addition to other Awards granted under the Plan.
10.2 Earning Performance Unit Awards.
Unless expressly waived in the Award Agreement, vesting of Performance Unit Awards must be contingent on the attainment of one or more performance goals and in such case shall be subject to the terms and conditions set forth therein. The performance criteria that may be used to establish performance goals include, but are not limited to, one or any combination of the following criteria, each determined in accordance with generally accepted accounting principles or similar objective standards (and/or each as may appear in the annual report to stockholders, Form 10-K, or Form 10-Q) or as otherwise determined by the Committee:
(1)revenue;
(2)earnings (including earnings before interest, taxes, depreciation, and amortization, earnings before interest and taxes, and earnings before or after taxes);
(3)operating income;
(4)net income;
(5)operating or profit margins;
(6)earnings per share;
(7)return on assets;
(8)return on equity;
(9)return on invested capital;
(10) economic value-added;
(11) stock price;
(12) gross dollar volume;
(13) total stockholder return;
(14) market share;
(15) book value;
(16) expense management;
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(17) cash flow; and
(18) customer satisfaction.
The foregoing criteria may relate to the Company, one or more of its Affiliated Employers or subsidiaries or one or more of its divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine. The Committee in its sole discretion in setting the goals/targets may provide for the making of equitable adjustments (singularly or in combination) to the goals/targets in recognition of unusual or non-recurring events for the following qualifying objective items or such other items determined appropriate by the Committee:
a)asset impairments under Statement of Financial Accounting Standards No. 144, as amended or superseded;
b)acquisition-related charges;
c)accruals for restructuring and/or reorganization program charges;
d)merger integration costs;
e)any profit or loss attributable to the business operations of any entity or entities acquired during the period of service to which the performance goal relates;
f)tax settlements;
g)any unusual or infrequently occurring items described in the Financial Accounting Standards Board’s Accounting Standards Update No. 2015-01, or its successor;
h)any extraordinary, unusual in nature, infrequent in occurrence, or other non-recurring items (not otherwise listed) in management's discussion and analysis of financial condition results of operations, selected financial data, financial statements and/or in the footnotes each as appearing in the annual report to stockholders, Form 10-K, or Form 10-Q;
i)unrealized gains or losses on investments;
j)charges related to derivative transactions contemplated by Statement of Financial Accounting Standards No. 133, as amended or superseded;
k)compensation charges related to FASB Accounting Standards Codification Topic 718 – Stock Compensation, or its successor.
In determining whether performance goals have been attained, the Committee may, in its discretion, reduce or eliminate the amount of any Award payable to any Participant, based on such factors as the Committee may deem relevant.
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10.3 Performance Period and Vesting in Performance Unit Award.
Unless otherwise provided in an Agreement or determined by the Committee in a manner consistent with Section 5.2 above, the Performance Period shall be a three (3) year period and the Performance Unit Awards shall be subject to restrictions for a minimum of three (3) years from the Grant Date. In the discretion of the Committee, and subject to Section 5.2 above, Performance Units may be scheduled to vest either in full at the end of the Restriction Period or in installments over the Restriction Period.
10.4 Termination of Employment.
Unless otherwise provided in an Agreement or determined by the Committee, and except as is otherwise provided in this Section 10.4 below, unvested Performance Units shall be forfeited upon a Participant’s Termination of Employment.
(1)Termination by Death. Unless otherwise provided in an Agreement or determined by the Committee, in the event of a Termination of Employment during a Performance Period due to Death, Performance Units for the Performance Period shall immediately vest and be paid out at a target level of performance.
(2)Termination by Disability or Retirement. Unless otherwise provided in an Agreement or determined by the Committee, and subject to Article XII below, in the event of a Termination of Employment due to Disability or Retirement during a Performance Period and more than seven (7) months following the Grant Date (unless circumstances exist at the time of termination that would constitute Cause under Section 2.5), Performance Units shall continue to vest as if there had been no Termination of Employment and shall be payable based on achievement of performance goals. Distribution of earned Performance Units may be made at the same time payments are made to Participants who did not incur a Termination of Employment during the applicable Performance Period.
ARTICLE XI
OTHER STOCK-BASED AWARDS
11.1 Other Stock-Based Awards.
Other Awards of Common Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based upon or settled in, Common Shares, may be granted under the Plan either alone or in addition to other Awards under the Plan. Subject to Section 5.2 above, the Committee shall have authority to grant such Other Stock-Based Awards under terms and conditions determined by the Committee.
ARTICLE XII
NON-COMPETITION, NON-SOLICITATION, AND RECOUPMENT
12.1 Non-Competition and Non-Solicitation.
The Committee, in its discretion, may condition eligibility to be designated a Participant in the Plan and receipt of benefits specified in the Agreement, such as vesting, settlement, and exercisability of Awards, on the Participant’s execution of, compliance with, and/or certification of compliance with a non-competition and/or
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non-solicitation agreement in a form prescribed by the Company, which form of agreement may include provisions for the Participant repaying to the Company stock (or the value of stock) previously received pursuant to an Award in the event the Participant violates the non-competition and/or non-solicitation agreement.
12.2 Recoupment Provisions.
In the event of a restatement of materially inaccurate financial results, the Committee has the discretion to recover Common Shares or cash that were issued or paid pursuant to an Award under the Plan to a Participant with respect to the period covered by the restatement as set forth herein. If the issuance of Common Shares or payment of cash would have been lower had the achievement of applicable financial performance targets been calculated based on such restated financial results, the Committee may, if it determines appropriate in its sole discretion, to the extent permitted by law, recover from the Participant the portion of the Common Shares issued or cash paid in excess of the amount that would have been made based on the restated financial results. Unless otherwise required by applicable laws or stock exchange listing standards, the Company will not seek to recover Awards issued or paid based on materially inaccurate financial results that are restated more than three years after the date the Company filed the original report with the Securities and Exchange Commission that contained such financial results. This Section 12.2 is in addition to, and not in lieu of, any requirements under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other applicable law, regulation, rule or stock exchange listing standard and shall apply notwithstanding anything to the contrary in the Plan. The Committee, in its discretion, may include in any Agreement additional recoupment provisions that provide for the Participant’s repayment of stock (or the value of stock) received under an Award.
ARTICLE XIII
CHANGE IN CONTROL
13.1 Impact of Event.
Notwithstanding any other provision of the Plan to the contrary, but subject to Section 13.2, and unless otherwise specifically provided in an Agreement, in the event of a Participant’s Termination of Employment by the Company without Cause (or in such other circumstances as provided for in an Agreement) within six months preceding or two years following a Change in Control:
(1)any Stock Options and Stock Appreciation Rights outstanding as of the date of such Change in Control and not then exercisable shall become fully exercisable to the full extent of the original grant;
(2)the restrictions applicable to any Restricted Stock Awards shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant;
(3)the restrictions applicable to any Restricted Stock Unit Awards shall lapse, and such Restricted Stock Units shall be settled; and
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(4)any Performance Goal or other condition with respect to any Performance Units or any other Awards shall be deemed to have been satisfied in full at the target performance level, and such Awards shall be fully distributable six months following Termination of Employment.
13.2 Additional Discretion.
The Committee shall have full discretion, notwithstanding anything herein or in an Agreement to the contrary, with respect to an outstanding Award upon a Change in Control to provide that the securities of another entity be substituted hereunder for the Common Shares and to make equitable adjustment with respect thereto. Further, in the event that, upon a Change in Control, outstanding Awards are not substituted or assumed by the successor corporation (or parent thereof) or replaced with a comparable award (as determined by the Committee) for shares of the capital stock of such successor corporation (or parent thereof), then the Committee shall have full discretion to provide for the vesting of any or all outstanding Awards in the manner set forth in Section 13.1 above, effective immediately prior to the Change in Control. In addition, if all or substantially all of the Company’s outstanding Common Shares are transferred in exchange for cash, shares or other property or consideration in connection with such Change in Control, the Committee may cancel all or any portion of outstanding Awards for fair value (in the form of cash, Common Shares, other property or any combination thereof) as determined in the sole discretion of the Committee; provided, however, that, in the case of Stock Options and Stock Appreciation Rights, the fair value may equal the excess, if any, of the value or amount of the consideration to be paid in the Change in Control transaction to holders of Common Shares (or, if no such consideration is paid, Fair Market Value of the Common Shares) over the aggregate exercise or base price, as applicable, with respect to such Awards or portion thereof being canceled, or if no such excess, zero, subject in all cases to Section 15.1 of the Plan.
ARTICLE XIV
PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN
14.1 No Company Obligation.
Except to the extent required by applicable securities laws, none of the Company, an Affiliated Employer or the Committee shall have any duty or obligation to affirmatively disclose material information to a record or beneficial holder of Common Shares or an Award, and such holder shall have no right to be advised of any material information regarding the Company or an Affiliated Employer at any time prior to, upon, or in connection with receipt or the exercise or distribution of an Award. The Company makes no representation or warranty as to the future value of the Common Shares issued or acquired in accordance with the provisions of the Plan.

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ARTICLE XV
MISCELLANEOUS
15.1 Amendments and Termination.
The Committee may amend, alter, or discontinue the Plan, or the terms of any Award Agreement under the Plan, at any time, but no amendment, alteration or discontinuation shall be made which would impair the rights of a Participant under an Award theretofore granted without the Participant’s consent, unless such an amendment is made to comply with applicable law (including Code Section 409A), stock exchange rules, or accounting rules. Repricing of Options or Stock Appreciation Rights shall not be permitted. For this purpose, a “repricing” means any of the following (or any action that has the same effect as any of the following): (1) changing the terms of an Option or Stock Appreciation Right to lower its Exercise Price; (2) any other action that is treated as a “repricing” under generally accepted accounting principles; and (3) repurchasing for cash or cancelling an Option or Stock Appreciation Right at a time when its Exercise Price is greater than the fair market value of the underlying stock in exchange for another Award, unless the cancellation and exchange occurs in connection with an event set forth in Section 4.6. A cancellation and exchange described in this Section 15.1 shall be considered a “repricing” regardless of whether it is treated as a “repricing” under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Participant. Notwithstanding the foregoing, any material amendments to the Plan shall require stockholder approval to the extent required by the rules of the New York Stock Exchange or other national securities exchange or market that regulates the securities of the Company.
15.2 Form of Awards; Dividends and Dividend Equivalents.
(1)All Awards shall be subject to the terms, conditions, restrictions and limitations of the Plan. The Committee may subject any Award to such other terms, conditions, restrictions and/or limitations (including without limitation the time and conditions of exercise, vesting or payment of an Award and restrictions on transferability of any Common Shares issued or delivered pursuant to an Award), provided they are not inconsistent with the terms of the Plan. Awards under a particular Article of the Plan need not be uniform, and Awards under more than one Article of the Plan may be combined in a single Award Agreement. Any combination of Awards may be granted at one time and on more than one occasion to the same Participant. An Award Agreement for Restricted Stock Units or Performance Units may provide that a Participant may elect to defer receipt of income attributable to the Award.
(2)Dividend Equivalents may be granted by the Committee, either alone or in tandem with another Award, based on dividends declared on the Common Shares to be credited as of dividend payment dates during the period between the date the dividend equivalents are granted to a Participant and the date such dividend equivalents terminate or expire, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Common Shares by such formula and at such time and subject to such restrictions and limitations as may be determined by the Committee. Dividend equivalents with respect to an Award that are based on dividends paid prior to the vesting of such Award shall be paid out to the Participant only to the extent that the vesting conditions are subsequently satisfied and the Award vests and
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in no event may any Award provide for a Participant’s receipt of dividend equivalents or any other dividends prior to the vesting of such Award. Notwithstanding the foregoing, no dividend equivalents shall be payable with respect to Options or Stock Appreciation Rights.
15.3 No Reload Rights.
Options shall not contain any provisions entitling the Participant to an automatic grant of additional Options in connection with any exercise of the original Option.
15.4 Unfunded Status of Plan.
It is intended that the Plan be an “unfunded” plan for incentive compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Shares or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.
15.5 Individual Award Limitations.
(1)During any fiscal year, the maximum number of Common Shares for which Options, Stock Appreciation Rights, Restricted Stock Units, Restricted Stock, Performance Units denominated in stock, and Other Stock-Based Compensation in the aggregate, may be granted to any one Participant shall not exceed 1,000,000 shares.
(2)For cash-denominated Performance Unit Awards, the maximum payment for all awards payable to any Participant for any three-year performance period, at a target level of performance shall be $10,000,000. In the case of higher levels of performance, the maximum payment for all awards for a three-year Performance Period shall be twice that amount. In the case of a longer or shorter Performance Period, correlative adjustments shall be made to the maximum payment. If, after amounts have been earned with respect to Performance Unit Awards, the payment of such amounts is deferred, any additional amounts attributable to earnings during the deferral period shall be disregarded for purposes of this limit.
(3)The limitations on Awards under this Section are subject to adjustment as provided in Section 4.6.
15.6 Additional Compensation Arrangements.
Nothing contained in the Plan shall prevent the Company or an Affiliated Employer from adopting other or additional compensation or benefit arrangements for its employees.
15.7 Withholding.
No later than the date as of which an amount first becomes includible in the gross income of the Participant for income tax purposes with respect to any Award, or becomes subject to employment taxes, the Participant shall pay to the Company (or other entity identified by the Committee), or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or non-U.S. taxes of any kind (including any employment taxes or social insurance contributions) required by law
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to be withheld with respect to such income. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliated Employers shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. Subject to approval by the Committee or to such other provisions as set forth in an Award Agreement, the Company may require or a Participant may elect to have such tax withholding obligation satisfied, in whole or in part, by (1) the Participant’s delivery of cash or a certified check, (2) the Participant authorizing the Company to withhold from Common Shares to be issued pursuant to any Award a number of shares with an aggregate value that does not exceed the amount required to be withheld, calculated using maximum applicable tax rates or such other rates as may be required under applicable accounting rules, (3) the Participant transferring to the Company Common Shares owned by the Participant with an aggregate value sufficient to satisfy the Company’s withholding obligation, or (4) in the case of Options, by means of delivery of cash by a broker-dealer as a “cashless exercise.”
15.8 Controlling Law.
The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of New York (other than its law respecting choice of law).
15.9 Offset.
Any amounts owed to the Company or an Affiliated Employer by the Participant of whatever nature may be offset by the Company from the value of any Award to be transferred to the Participant, and no Common Shares, cash or other thing of value under this Plan or an Agreement shall be transferred unless and until all disputes between the Company and the Participant have been fully and finally resolved and the Participant has waived all claims to such against the Company or an Affiliate. To the extent that any offset under this section of the Plan causes the Participant to become subject to taxes under Section 409A of the Code, the responsibility for payment of such taxes lies solely with the Participant.
15.10 Nontransferability.
No Award or Common Shares subject to an Award shall be assignable or transferable other than (1) by will, by the laws of descent and distribution, (2) pursuant to a qualified domestic relations order, or (3) as expressly permitted by the Committee, pursuant to a transfer to the Participant’s family member. Awards shall be exercisable during the Participant’s lifetime only by the Participant, by the Participant’s legal representatives in the event of the Participant’s incapacity, or by a permitted transferee of the Award. No Award or Common Shares subject to an Award shall be subject to the debts of a Participant or subject to attachment or execution or process in any court action or proceeding unless otherwise provided in this Plan. Any Award held by the Participant at the time of death shall be transferred as provided in his or her will or by the laws of descent and distribution.
15.11 No Rights with Respect to Continuance of Employment.
The Plan shall not constitute a contract of employment, and adoption of the Plan shall not confer upon any employee any right to continued employment, nor shall it
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interfere in any way with the right of the Company or an Affiliated Employer to terminate the employment of any employee at any time.
15.12 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under the Plan from time to time in substitution for awards held by employees, directors or service providers of other corporations who are about to become officers or employees of the Company or an Affiliated Employer as the result of a merger or consolidation of the employing corporation with the Company or an Affiliated Employer, or the acquisition by the Company or an Affiliated Employer of the assets of the employing corporation, or the acquisition by the Company or Affiliated Employer of the shares of the employing corporation, as the result of which it becomes an Affiliated Employer under the Plan. The Grant Date of such an Award shall be no earlier than the date the employee, director, or service provider becomes an employee, director, or service provider of the Company or an Affiliated Employer. The terms and conditions of the Awards so granted may vary from the terms and conditions set forth in this Plan at the time of such grant as the majority of the members of the Committee may deem appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted. Any substitutions or exchanges shall be accomplished in a manner that complies with the limitations on exchanges of such Awards imposed under Section 409A of the Code.
15.13 Delivery of Stock Certificate.
To the extent the Company uses certificates to represent Common Shares, certificates to be delivered to Participants under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the Participant, at the Participant’s last known address on file with the Company. Any reference in this Section or elsewhere in the Plan or an Agreement to actual stock certificates and/or the delivery of actual stock certificates shall be deemed satisfied by the electronic record-keeping and electronic delivery of Common Shares or other mechanism then utilized by the Company and its agents for reflecting ownership of such shares.
15.14 Indemnification.
To the maximum extent permitted under the Company’s Articles of Incorporation and by-laws, each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from (1) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan or any Award Agreement, and (2) from any and all amounts paid by him or her in settlement thereof, with the Company’s prior written approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided, however, that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or by-laws, by contract, as a
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matter of law or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
15.15 No Guarantee of Tax Consequences.
No person connected with the Plan in any capacity makes any representation, commitment or guarantee that any tax treatment, including without limitation federal, state and local income, excise, estate, and gift tax treatment, will be applicable with respect to any Awards or payments thereunder made to or for the benefit of a Participant under the Plan or that such tax treatment will apply to or be available to a Participant on account of participation in the Plan.
15.16 Foreign Employees and Foreign Law Consideration.
The Committee may grant Awards to Participants who are foreign nationals, who are located outside the United States or who are not compensated from a payroll managed in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.
15.17 Section 409A Savings Clause.
(1)To the extent applicable, it is intended that the Plan and all Awards hereunder comply with, or be exempt from, the requirements of Section 409A of the Code, and that the Plan and all Agreements shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. In the event that any (i) provision of the Plan or an Agreement, (ii) Award, payment, transaction or (iii) other action or arrangement contemplated by the provisions of the Plan is determined by the Committee to not comply with the applicable requirements of Section 409A of the Code, the Committee shall have the authority, but not the obligation, to take such actions and to make such changes to the Plan or an Agreement as the Committee deems necessary to comply with such requirements.
(2)No payment that constitutes deferred compensation under Section 409A of the Code that would otherwise be made under the Plan or an Agreement upon a Termination of Employment will be made or provided unless and until such termination is also a “separation from service,” as determined in accordance with Section 409A of the Code. Notwithstanding the foregoing or anything elsewhere in the Plan or an Agreement to the contrary, if a Participant is a “specified employee” as defined in Section 409A of the Code at the time of Termination of Employment with respect to an Award, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A of the Code, the commencement of any payments or benefits under the Award shall be delayed to the extent required by Code Section 409A(a)(2)(B)(i). In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.
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(3)The terms and conditions governing any Awards that the Committee determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or Common Shares pursuant thereto and any rules regarding treatment of such Awards in the event of a Change in Control, shall be set forth in the applicable Award Agreement, and shall comply in all respects with Section 409A of the Code.
(4)Following a Change in Control, no action shall be taken under the Plan that will cause any Award that the Committee has previously determined is subject to Section 409A of the Code to fail to comply in any respect with Section 409A of the Code without the written consent of the Participant.
15.18 No Fractional Shares.
Unless otherwise determined by the Committee, no fractional shares shall be issued or delivered under the Plan or any Award granted hereunder, provided that the Committee in its sole discretion may round fractional shares down to the nearest whole share or settle fractional shares in cash.
15.19 Severability.
If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereby, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.
15.20 Successors and Assigns.
This Plan shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.
15.21 Entire Agreement.
This Plan and the Agreement constitute the entire agreement with respect to the subject matter hereof and thereof, provided that in the event of any inconsistency between the Plan and the Agreement, the terms and conditions of this Plan shall control.
15.22 Term.
No Award shall be granted under the Plan after June 22, 2031, except that no Incentive Stock Option may be granted on or after April 11, 2031.
15.23 Gender and Number.
Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

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15.24 Outstanding Qualified Performance-Based Awards.
All provisions of the Plan governing Outstanding Qualified Performance-Based Awards that were in effect prior to the 2021 Amendment Date shall continue in effect with respect to Outstanding Qualified Performance-Based Awards, notwithstanding the elimination of such provisions from the Plan as of the 2021 Amendment Date. Further, no amendment or restatement of the Plan shall affect the terms and conditions of any Outstanding Qualified Performance-Based Award or any other award that the Company intends to qualify for grandfathering under P.L. 115-97, Section 13601(e)(2), to the extent that it would result in a material modification of such award within the meaning of such Section 13601(e)(2). For purposes of this Section 15.24, “Outstanding Qualified Performance-Based Award” means any award granted prior to the 2021 Amendment Date that is outstanding as of the 2021 Amendment Date and that is intended to constitute “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code, as in effect prior to its amendment by the Tax Cuts and Jobs Act, P.L. 115-97.
15.25 Headings.
The headings of the Articles and their subparts contained in this Plan are for the convenience of reading and reference purposes only and shall not affect the meaning, interpretation or be meant to be of substantive significance of this Plan.
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EXHIBIT 10.2

Schedule of Non-Employee Directors’ Annual Compensation

Effective June 22, 2021

Annual compensation for Board service
Role
Cash
Equity
Non-employee directors
$100,000
$235,000
Non-executive Chairman of the Board
$ --
$ --
Lead Independent Director
$50,000
$0
Additional compensation for committee service
Committee
Chair
Member
Audit
$35,000
$17,500
HRCC
$30,000
$15,000
NCG
$25,000
$12,500
Risk Subcommittee
$25,000*
$12,500*
**Compensation for the Risk Subcommittee is effective as of July 1, 2021.

Cash compensation is paid in advance in January for the first half of the year and in arrears in December for the second half of the year. The annual retainer and any committee retainer fees are prorated for partial year Board or committee service. Under the Mastercard Incorporated Deferral Plan, US non-employee directors are eligible to defer all or part of their cash compensation into a non-qualified deferred compensation arrangement. Directors who elect to defer cash compensation receive earnings on their deferrals based on investment elections. None of the investment options provides returns considered to be above-market or preferential.

Annual stock grants are awarded upon a director's election on the date of the annual meeting of stockholders, are immediately vested with a four-year transfer restriction, and are in the form of restricted stock or deferred stock units. Each director selects the form of his or her award during an annual election process. Directors elected to the board outside of the annual meeting of stockholders are granted a prorated equity award.

Non-employee directors are eligible to have Mastercard make matching gift contributions of up to $15,000 annually to eligible charities in the name of the director. In addition, non-employee directors are eligible to have Mastercard make contributions up to $5,000 to a charity of their choice to match director contributions to Mastercard’s Political Action Committee. Directors are reimbursed for expenses related to attending Board and committee meetings.


EXHIBIT 10.3

MASTERCARD INCORPORATED
___________________________________

2006 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
Amended and Restated Effective as of June 22, 2021


































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ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment.
The Mastercard Incorporated 2006 Non-Employee Director Equity Compensation Plan, as amended and restated by Mastercard Incorporated’s (the “Company’s”) Board of Directors on April 12, 2021 (the “Plan”), will become effective upon its approval by the stockholders of the Company on June 22, 2021.
1.2 Purposes.
The purpose of the Plan is to enable the Company to attract and retain outstanding individuals to serve as non-employee directors of the Company and to further align the interests of non-employee directors with the interests of the Company's stockholders.
ARTICLE II
DEFINITIONS
“Alternative Award” means an Award other than a Deferred Stock Unit Award.
“Award” means a Deferred Stock Unit Award or an Alternative Award pursuant to Article VI.
“Board” or “Board of Directors” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor, along with related rules, regulations and interpretations.
“Committee” means the Human Resources and Compensation Committee of the Board of Directors of the Company.
“Common Stock” means shares of the Company’s Class A or Class B Common Stock, $0.0001 par value (as such par value may be amended from time to time), whether presently or hereafter issued, and any other stock or security resulting from adjustment thereof as described hereinafter, or the Common Stock of any successor to the Company which is designated for the purpose of the Plan.
“Company” means Mastercard Incorporated.
“Director” means a member of the Board of Directors of the Company.
“Participant” means a Director who has an outstanding Award under the Plan.

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“Plan” means the Mastercard Incorporated 2006 Non-Employee Director Equity Compensation Plan as amended and restated Effective as of June 22, 2021, as herein set forth and as may be amended from time to time.
“Settlement Time Election” means the election by a Director under Section 6.2(b) to defer the time of settlement of a Deferred Stock Unit Award.
“Subsequent Deferral Election” means the election by a Director under Section 6.2(c) to further defer the time of settlement of a Deferred Stock Unit Award.
“Termination from Service” means a separation from service in connection with this Plan pursuant to the definition of separation from service in Code section 409A(a)(2)(A)(i). Notwithstanding the foregoing, in the case of an Award that is not subject to section 409A of the Code, the Committee shall have discretion to treat the date a Participant ceases to provide services to the Company as a Termination from Service.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum at any meeting. The Plan shall be construed, interpreted, and administered by the Committee, which shall have the authority to determine the nature, amount and other terms of Awards, subject to (i) ratification of the material terms of the Awards by the Board of Directors, and (ii) the other constraints set forth in this Plan. The Committee’s action, constructions, and interpretations thereunder, as ratified by the Board, where required, shall be binding and conclusive on all persons for all purposes. The Committee may delegate its responsibilities and duties under the Plan. Neither the members of the Committee nor any delegee shall be liable to any person for any action taken or any omission in connection with the interpretation and administration of this Plan except for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares.
The total number of newly issued shares of Common Stock reserved and available for distribution pursuant to Awards under the Plan shall be 1,000,000 shares of Class A Common Stock, subject to adjustment as provided in Section 4.2. Such shares may consist, in whole or part, of authorized and unissued shares or treasury shares. Shares subject to an Award that is forfeited, terminates, expires, lapses without the issuance of shares, including by cash settlement, or is converted to an award over shares of another entity in connection with a recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event, and shares that are retained, or not issued in connection with the settlement or
3

exercise of an Award, including by reason of the satisfaction of any tax liability or tax withholding obligation, shall be available for distribution pursuant to further Awards.
4.2 Adjustment.
In the event of any Company share dividend, share split, combination or exchange of shares, recapitalization or other change in the capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash dividend), reorganization, rights offering, a partial or complete liquidation, or any other corporate transaction, Company securities offering or event involving the Company and having an effect similar to any of the foregoing, then the Committee shall make appropriate adjustments or substitutions as described below in this Section 4.2. The adjustments or substitutions may relate to the number, type or class of shares of Common Stock available for Awards under the Plan, the number, type or class of shares of Common Stock covered by outstanding Awards, and any other characteristics or terms of the Awards as the Committee may deem necessary or appropriate to reflect equitably the effects of such changes to the Participants. Notwithstanding the foregoing, any fractional shares resulting from such adjustment shall be eliminated by rounding to the next lower whole number of shares with appropriate payment for such fractional share. Any adjustments or substitutions made pursuant to this Section 4.2 shall be made in compliance with the requirements of Code section 409A, where applicable.
4.3 Limit on Non-Employee Director Compensation
Notwithstanding any provision to the contrary in the Plan or in any policy of the Company regarding compensation payable to a Director who is not an employee of the Company or any of its subsidiaries, the sum of the grant date fair value (determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all Awards granted under the Plan to an individual who is not an employee as compensation for services as a Director, together with cash compensation paid to such Director in the form of Board and committee retainer, meeting or similar fees, during any fiscal year of the Company shall not exceed $1,000,000. For avoidance of doubt, compensation shall count towards this limit for the fiscal year in which it was granted or earned, and not later when distributed, in the event it is deferred. The foregoing limit may not be increased without the approval of the stockholders of the Company.
ARTICLE V
ELIGIBILITY
Each Director who is not a current employee of the Company or any of its subsidiaries shall be eligible to receive an Award in accordance with Article VI.

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ARTICLE VI
AWARDS
6.1 Standard Deferred Stock Unit Award.
Unless the Committee chooses to grant an Alternative Award under Section 6.3, the Committee shall, on the date of the Company’s Annual Meeting of Stockholders in each year for so long as the Plan remains in effect, award to each non-employee Director who is elected as a director at such meeting, or whose term of office shall continue after the date of such meeting, such number of Deferred Stock Units as it shall determine in its discretion; provided, however, that each non-employee Director other than the Chair of the Board shall receive the same number of Deferred Stock Units at the Annual Meeting of Stockholders. The Committee may award to any non-employee Director who joins the Board at a time other than the Annual Meeting of stockholders a number of Deferred Stock Units to correspond to the portion of the period from Annual Meeting to Annual Meeting that the non-employee Director serves on the Board.
6.2 Terms and Settlement of Standard Deferred Stock Unit Award.
(a) Unless otherwise determined by the Committee in the Award document, and absent an election by the Director under this Section 6.2, a Deferred Stock Unit Award shall be settled in Common Stock upon the fourth anniversary of the date of grant of the Deferred Stock Unit Award; provided, however, that, if a Director has a Termination from Service before the fourth anniversary of the date of grant, the Deferred Stock Unit Award shall be settled within 60 days of the Director’s Termination from Service.
(b) A Director may elect, at a time and in a form prescribed by the Company, to defer settlement of the Deferred Stock Unit Award until a specified anniversary of the date of grant later than the fourth anniversary or until the Director’s Termination from Service after the fourth anniversary of the date of grant (a “Settlement Time Election”). Notwithstanding any such Settlement Time Election, in the event of the Director’s Termination from Service, the Deferred Stock Unit Award shall be settled within 60 days of the Director’s Termination from Service. In order to be effective, any such Settlement Time Election must be made no later than December 31 of the year prior to the Annual Meeting of Stockholders at which the Award is made. Once the December 31 deadline for electing has passed, a Settlement Time Election is irrevocable and may not be changed, except as otherwise provided in Section 6.2(c).
(c) If a Director’s Deferred Stock Unit Award is scheduled to be settled on a specified anniversary of its date of grant under Section 6.2(a) or Section 6.2(b), the Director may make an election to change the time of settlement of the applicable Deferred Stock Unit Award under rules prescribed by the Company (a “Subsequent Deferral Election”). Any such Subsequent Deferral Election may change the time of settlement of the Deferred Stock Unit Award only to a subsequent anniversary of the date of grant of the Deferred Stock Unit Award, that is not less than five years after the originally scheduled settlement date. No such Subsequent Deferral Election will be effective with respect to any of the Director’s Deferred Stock Unit Awards until twelve months following the date of the Subsequent Deferral Election. The Subsequent
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Deferral Election must be made no less than twelve months prior to the anniversary of the date of grant of the Deferred Stock Unit Award on which the Award is scheduled to be settled. Notwithstanding any such Subsequent Deferral Election, in the event of the Director’s Termination from Service, all Deferred Stock Unit Awards shall be settled within 60 days of the Director’s Termination from Service.
(d) In the event that an Award under this Plan is subject to section 409A of the Code and a Director is a specified employee for purposes of Code section 409A(a)(2)(B)(i) at the time of his or her Termination from Service, any payment required to be made on Termination from Service shall be made on the first day of the seventh month following Termination from Service.
6.3 Alternative Award.
In lieu of all or part of the standard Deferred Stock Unit Award set forth in Sections 6.1 and 6.2, the Committee is authorized to grant an alternative form of Award under the Plan, as long as such form of Award is provided for in the Company’s 2006 Long Term Incentive Plan, or a successor plan that has been approved by the stockholders of the Company. The Committee is authorized to mandate the form of Award for a grant, or to make the choice as to form of Award in whole or part elective on the part of the Director, and is authorized to limit such elections in any manner it chooses. Any such elections shall be made in a manner compliant with Code section 409A(a)(4), where applicable.
6.4 Dividend Equivalents.
The Committee shall have the authority to specify in the Deferred Stock Unit Award or Alternative Award document whether or not the Directors shall be entitled to receive current or deferred payments corresponding to the dividends payable on the Common Stock underlying the Award.
6.5 Beneficiary.
The Participant’s Beneficiary to receive any Award held by the Participant at the time of the Participant’s death or to be assigned any Award outstanding at the time of the Participant’s death shall be the person designated to receive benefits on account of the Participant’s death on a form provided by the Committee. If no Beneficiary has been named, any Award held by the Participant at the time of death shall be transferred as provided in his or her will or by the laws of descent and distribution.

ARTICLE VII
MISCELLANEOUS
7.1 Unfunded Status of Plan.
It is intended that the Plan be an “unfunded” plan. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the
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Plan to deliver Common Stock; provided that the existence of such trusts or other arrangements shall not cause the Plan to be funded.
7.2 Income Reporting and Tax Withholding
Awards hereunder shall be subject to all applicable information reporting and tax withholding required by law.
7.3 Nontransferability.
No Award or Common Stock subject to an Award shall be assignable or transferable other than (i) by will, by the laws of descent and distribution, or pursuant to a beneficiary designation, (ii) pursuant to a qualified domestic relations order, or (iii) as expressly permitted by the Committee, pursuant to a transfer to the Participant’s family member.
7.4 Controlling Law.
The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of New York (without regard to its choice of law provisions).
7.5 Severability.
If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereby, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.
7.6 Successors and Assigns.
This Plan shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.
7.7 Section 409A Savings Clause.
It is the intention of the Company that Awards under this Plan that are “deferred compensation” subject to section 409A of the Code shall comply with section 409A of the Code, and the Plan and the terms and conditions of all Awards shall be interpreted accordingly.
7.9 Term.
No Award shall be granted under the Plan after June 22, 2031.

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7.10 Gender and Number.
Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
7.11 Headings.
The headings of the Articles and their subparts contained in this Plan are for the convenience of reading and reference purposes only and shall not affect the meaning, interpretation or be meant to be of substantive significance of this Plan.
ARTICLE VIII
AMENDMENT OF THE PLAN
The Board of Directors may amend, alter, or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made which would impair an outstanding Award under the Plan. Notwithstanding the foregoing, stockholder approval of an amendment to the Plan shall be required to the extent required by law or by applicable listing or exchange requirements. Nothing in this Article VIII shall permit the Board to distribute Awards on discontinuance of the Plan if such a distribution would result in taxation under Code section 409A.
ARTICLE IX
STOCKHOLDER APPROVAL
The Plan is conditional upon stockholder approval of the Plan and the Plan shall be null and void if the Plan is not so approved by the Company’s stockholders.

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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002


I, Michael Miebach, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Mastercard Incorporated for the three months ended June 30, 2021;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2021
By: /s/ Michael Miebach
Michael Miebach
President and Chief Executive Officer




EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002


I, Sachin Mehra, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Mastercard Incorporated for the three months ended June 30, 2021;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2021
By: /s/ Sachin Mehra
Sachin Mehra
Chief Financial Officer



EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002


In connection with the quarterly report of Mastercard Incorporated (the "Company") on Form 10-Q for the three month period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Miebach, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
July 29, 2021
/s/ Michael Miebach
Michael Miebach
President and Chief Executive Officer




EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002


In connection with the quarterly report of Mastercard Incorporated (the "Company") on Form 10-Q for the three month period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sachin Mehra, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
July 29, 2021
/s/ Sachin Mehra
Sachin Mehra
Chief Financial Officer


EXHIBIT 99.1
Section 13(r) Disclosure

Mastercard Incorporated ("Mastercard") has established a risk-based compliance program designed to prevent us from having business dealings with Iran, as well as other prohibited countries, regions, individuals or entities. This includes obligating issuers and acquirers to screen account holders and merchants, respectively, against the U.S. Office of Foreign Assets Control’s (“OFAC”) sanctions lists, including the List of Specially Designated Nationals (“SDN list”).
We identified through our compliance program that for the period covered by this Report, Mastercard processed transactions resulting from one acquirer located in the Europe region having acquired transactions for an Iranian airline, which accepted Mastercard cards in this region.
OFAC regulations and other legal authorities provide exemptions for certain activities involving dealings with Iran. However, Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 requires us to disclose whether we, or any of our affiliates, have knowingly engaged in certain transactions or dealings involving the Government of Iran or with certain persons or entities found on the SDN list, regardless of whether these dealings constitute a violation of OFAC regulations.
We do not calculate net revenues or net profits associated with specific merchants (our customers’ customers). However, we used our fee schedule and the aggregate number and amount of transactions involving the Iranian airline to estimate the net revenue and net profit we obtained during the three months ended June 30, 2021.  Both the number of transactions and our estimated net revenue and net profits for this period are de minimis.