UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
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: 000-50250
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 Purchase, NY |
10577 | |
(Address of principal executive offices) | (Zip Code) |
(914) 249-2000
(Registrants telephone number, including area code)
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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes ¨ No x
As of April 28, 2006, there were 99,977,799 shares of Class A redeemable common stock of MasterCard Incorporated issued and outstanding. The common stock of MasterCard Incorporated is not listed on any securities exchange or quoted on any automated quotation system. Accordingly, no aggregate market value of the voting and non-voting common equity securities held by non-affiliates of MasterCard Incorporated has been established.
1
MASTERCARD INCORPORATED
FORM 10-Q
Page
No. |
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PART I FINANCIAL INFORMATION | ||
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
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Consolidated Balance Sheets March 31, 2006 and December 31, 2005 |
3 | |
Consolidated Statements of Operations Three Months Ended March 31, 2006 and 2005 |
4 | |
Consolidated Statements of Cash Flows Three Months Ended March 31, 2006 and 2005 |
5 | |
Consolidated Statement of Changes in Stockholders Equity Three Months Ended March 31, 2006 |
6 | |
6 | ||
7 | ||
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
24 | |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
35 | |
36 | ||
37 | ||
PART II OTHER INFORMATION | ||
38 | ||
38 | ||
38 | ||
39 |
2
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, 2006 |
December 31, 2005 |
|||||||
(In thousands, except share data) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents |
$ | 494,792 | $ | 545,273 | ||||
Investment securities, at fair value: |
||||||||
Trading |
18,514 | 22,472 | ||||||
Available-for-sale |
793,670 | 714,147 | ||||||
Accounts receivable |
324,473 | 347,754 | ||||||
Settlement due from members |
196,356 | 211,775 | ||||||
Restricted security deposits held for members |
108,959 | 97,942 | ||||||
Prepaid expenses |
194,128 | 167,209 | ||||||
Other current assets |
115,177 | 121,326 | ||||||
Total Current Assets |
2,246,069 | 2,227,898 | ||||||
Property, plant and equipment, at cost (less accumulated depreciation of $382,212 and $373,319) |
226,764 | 230,614 | ||||||
Deferred income taxes |
217,111 | 225,034 | ||||||
Goodwill |
201,835 | 196,701 | ||||||
Other intangible assets (less accumulated amortization of $293,509 and $272,913) |
270,558 | 273,854 | ||||||
Municipal bonds held-to-maturity |
193,940 | 194,403 | ||||||
Prepaid expenses |
202,574 | 201,132 | ||||||
Other assets |
152,110 | 150,908 | ||||||
Total Assets |
$ | 3,710,961 | $ | 3,700,544 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Accounts payable |
$ | 173,271 | $ | 185,021 | ||||
Settlement due to members |
159,409 | 175,021 | ||||||
Restricted security deposits held for members |
108,959 | 97,942 | ||||||
Obligations under U.S. merchant lawsuit and other legal settlements current (Notes 8 and 9) |
189,380 | 189,380 | ||||||
Accrued expenses |
713,634 | 850,657 | ||||||
Other current liabilities |
73,582 | 58,682 | ||||||
Total Current Liabilities |
1,418,235 | 1,556,703 | ||||||
Deferred income taxes |
62,638 | 61,188 | ||||||
Obligations under U.S. merchant lawsuit and other legal settlements (Notes 8 and 9) |
426,002 | 415,620 | ||||||
Long-term debt |
229,551 | 229,489 | ||||||
Other liabilities |
262,208 | 263,776 | ||||||
Total Liabilities |
2,398,634 | 2,526,776 | ||||||
Commitments and Contingencies (Notes 7 and 9) |
||||||||
Minority interest |
4,620 | 4,620 | ||||||
Stockholders Equity |
||||||||
Class A redeemable common stock, $.01 par value; authorized 275,000,000 shares, 100,000,348 shares issued and outstanding |
1,000 | 1,000 | ||||||
Additional paid-in capital |
973,619 | 973,619 | ||||||
Retained earnings |
272,259 | 145,515 | ||||||
Accumulated other comprehensive income, net of tax: |
||||||||
Cumulative foreign currency translation adjustments |
67,742 | 50,818 | ||||||
Net unrealized loss on investment securities available-for-sale |
(5,197 | ) | (2,543 | ) | ||||
Net unrealized gain (loss) on derivatives accounted for as hedges |
(1,716 | ) | 739 | |||||
Total accumulated other comprehensive income, net of tax |
60,829 | 49,014 | ||||||
Total Stockholders Equity |
1,307,707 | 1,169,148 | ||||||
Total Liabilities and Stockholders Equity |
$ | 3,710,961 | $ | 3,700,544 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, |
||||||||
2006 | 2005 | |||||||
(In thousands, except per share data) | ||||||||
Revenues, net |
$ | 738,453 | $ | 658,238 | ||||
Operating Expenses |
||||||||
General and administrative |
347,837 | 306,616 | ||||||
Advertising and market development |
182,683 | 171,679 | ||||||
Depreciation |
10,650 | 12,194 | ||||||
Amortization |
14,570 | 16,236 | ||||||
Total operating expenses |
555,740 | 506,725 | ||||||
Operating income |
182,713 | 151,513 | ||||||
Other Income (Expense) |
||||||||
Investment income, net |
20,692 | 10,049 | ||||||
Interest expense |
(10,640 | ) | (16,856 | ) | ||||
Other income (expense), net |
152 | (511 | ) | |||||
Total other income (expense) |
10,204 | (7,318 | ) | |||||
Income before income taxes |
192,917 | 144,195 | ||||||
Income tax expense |
66,173 | 50,901 | ||||||
Net Income |
$ | 126,744 | $ | 93,294 | ||||
Net Income per Share (Basic and Diluted) |
$ | 1.27 | $ | .93 | ||||
Weighted average shares outstanding (Basic and Diluted) |
100,000 | 100,000 | ||||||
Unaudited Pro forma Net Income per Share (Basic and Diluted) assuming reclassification of shares prior to the initial public offering (Note 2) |
$ | .94 | $ | .69 | ||||
Unaudited Pro forma weighted average shares outstanding (Basic and Diluted) assuming reclassification of shares prior to the initial public offering (Note 2) |
134,969 | 134,969 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, |
||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Operating Activities |
||||||||
Net income |
$ | 126,744 | $ | 93,294 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Depreciation |
10,650 | 12,194 | ||||||
Amortization |
14,570 | 16,236 | ||||||
Impairment of assets |
988 | 143 | ||||||
Deferred income taxes |
6,723 | 6,555 | ||||||
Other |
2,150 | 1,690 | ||||||
Changes in operating assets and liabilities: |
||||||||
Trading securities |
3,958 | 4,268 | ||||||
Accounts receivable |
25,995 | (9,787 | ) | |||||
Settlement due from members |
20,682 | (66,866 | ) | |||||
Prepaid expenses |
(24,077 | ) | 7,891 | |||||
Other current assets |
8,909 | (564 | ) | |||||
Prepaid expenses, non-current |
(648 | ) | (7,097 | ) | ||||
Accounts payable |
(12,706 | ) | 14,930 | |||||
Settlement due to members |
(20,149 | ) | 29,137 | |||||
Legal settlement accruals, including accretion of imputed interest |
10,382 | (3,379 | ) | |||||
Accrued expenses |
(143,724 | ) | (118,272 | ) | ||||
Net change in other assets and liabilities |
10,189 | 5,421 | ||||||
Net cash provided by (used in) operating activities |
40,636 | (14,206 | ) | |||||
Investing Activities |
||||||||
Purchases of property, plant and equipment |
(5,625 | ) | (6,077 | ) | ||||
Capitalized software |
(6,852 | ) | (11,680 | ) | ||||
Purchases of investment securities available-for-sale |
(739,626 | ) | (583,682 | ) | ||||
Proceeds from sales and maturities of investment securities available-for-sale |
654,148 | 653,460 | ||||||
Other investing activities |
(37 | ) | 82 | |||||
Net cash provided by (used in) investing activities |
(97,992 | ) | 52,103 | |||||
Effect of exchange rate changes on cash and cash equivalents |
6,875 | (6,901 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
(50,481 | ) | 30,996 | |||||
Cash and cash equivalents beginning of period |
545,273 | 328,996 | ||||||
Cash and cash equivalents end of period |
$ | 494,792 | $ | 359,992 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
Total |
Retained Earnings |
Accumulated Other Comprehensive Income, Net of Tax |
Common Shares Class A |
Additional Paid-in Capital |
|||||||||||
(In thousands) | |||||||||||||||
Balance at January 1, 2006 |
$ | 1,169,148 | $ | 145,515 | $ | 49,014 | $ | 1,000 | $ | 973,619 | |||||
Net income |
126,744 | 126,744 | | | | ||||||||||
Other comprehensive income, net of tax |
11,815 | | 11,815 | | | ||||||||||
Balance at March 31, 2006 |
$ | 1,307,707 | $ | 272,259 | $ | 60,829 | $ | 1,000 | $ | 973,619 | |||||
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March 31, |
||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Net Income |
$ | 126,744 | $ | 93,294 | ||||
Other comprehensive income (loss), net of tax: |
||||||||
Foreign currency translation adjustments |
16,924 | (27,176 | ) | |||||
Net unrealized gain (loss) and reclassification adjustment for realized gain (loss) on investment securities available-for-sale |
(2,654 | ) | (5,310 | ) | ||||
Net unrealized gain (loss) and reclassification adjustment for realized gain (loss) on derivatives accounted for as hedges |
(2,455 | ) | 2,367 | |||||
Other comprehensive income (loss), net of tax |
11,815 | (30,119 | ) | |||||
Comprehensive Income |
$ | 138,559 | $ | 63,175 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share and percent data)
Note 1. Summary of Significant Accounting Policies
Organization MasterCard Incorporated and its consolidated subsidiaries, including MasterCard International Incorporated (MasterCard International), MasterCard Europe sprl (MasterCard Europe) (together, MasterCard or the Company), provide transaction processing and related services to customers principally in support of their credit, deposit access (debit), electronic cash and Automated Teller Machine (ATM) payment card programs, and travelers cheque programs.
The common stock of MasterCard Incorporated is privately owned by certain customers of the Company. As more fully described in Note 2, MasterCard is pursuing a new ownership and governance structure, which will involve a new class of the Companys common stock being traded on a public exchange. MasterCard enters into transactions with its customers in the normal course of business and operates a system for payment processing among its customers.
Consolidation and basis of presentation The consolidated financial statements include the accounts of MasterCard and its majority-owned and controlled entities, including the Companys variable interest entity. The Companys variable interest entity was established for the purpose of constructing the Companys global technology and operations center; it is not an operating entity and has no employees. Intercompany transactions and balances are eliminated in consolidation. The Company follows accounting principles generally accepted in the United States of America. Certain prior period amounts have been reclassified to conform to 2006 classifications.
The balance sheet as of December 31, 2005 was derived from the audited consolidated financial statements as of December 31, 2005. The consolidated financial statements for the three months ended March 31, 2006 and 2005 and as of March 31, 2006 are unaudited, and in the opinion of management include all normal recurring adjustments that are necessary to present fairly the results for interim periods. Due to seasonal fluctuations and other factors, the results of operations for the three months ended March 31, 2006 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 requirements of Quarterly Reports on Form 10-Q and, consequently, do not include all of the disclosures required by accounting principles generally accepted in the United States of America. Reference should be made to MasterCard Incorporateds 2005 Annual Report on Form 10-K for additional disclosures, including a summary of the Companys significant accounting policies.
Note 2. Proposed New Ownership and Governance Structure
MasterCard is pursuing a plan for a new ownership and governance structure that will include the appointment of a new board of directors comprised of a majority of independent directors, the establishment of a private charitable foundation and the transition to being a publicly traded company.
Under the proposed ownership and governance structure, MasterCards current stockholders are expected to retain a 41% equity interest in the company through ownership of a new non-voting Class B common stock that existing stockholders will receive in the reclassification described below. In addition, existing stockholders are expected to receive a new Class M common stock that will have no economic rights but will provide them with certain rights, including the right to approve specified significant corporate actions and entitle them to elect up to three of MasterCards directors (but not more than one quarter of the total number of directors) and are otherwise non-voting.
MasterCard also intends to issue shares of a new voting Class A common stock to public investors through an initial public offering. Upon successful completion of the offering, these public investors are expected to hold shares representing an expected 49% of the Companys equity and 83% of its general voting power. Additional shares of new Class A common stock, representing approximately 10% of the Companys equity and 17% of its voting rights,
7
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
are expected to be issued as a donation to The MasterCard Foundation, a private charitable foundation incorporated in Canada.
MasterCard intends to use all but $650,000 of the net proceeds from the initial public offering (including any proceeds received pursuant to the underwriters option to purchase additional shares) to redeem a number of shares of Class B common stock from the Companys existing stockholders that is equal to the aggregate number of shares of Class A common stock that the Company issues to investors in the initial public offering (including any shares sold pursuant to the underwriters option to purchase additional shares) and to the Foundation. MasterCard intends to use the remaining proceeds to increase its capital, defend itself against legal and regulatory challenges, expand its role in targeted geographies and higher growth segments of the global payments industry and for other general corporate purposes. However, the Company has not determined the amounts of such remaining proceeds that are to be allocated to these purposes. The value of the shares of Class A common stock donated to The MasterCard Foundation will be determined based on the initial public offering price per share of Class A common stock less a 25% marketability discount.
Prior to the initial public offering, the Company will reclassify all of the Companys approximately 100,000 outstanding shares of existing Class A redeemable common stock so that the Companys existing stockholders will receive 1.35 shares of the Companys new Class B common stock for each share of Class A redeemable common stock that they hold and a single share of the new Class M common stock. Accordingly, shares and per share data will be retroactively restated in the financial statements subsequent to the common stock reclassification to reflect the reclassification as if it was effective at the start of the first period being presented in the financial statements. Pro forma amounts give effect to the reclassification.
Implementation of the new ownership and governance structure is subject to various approvals, including requisite regulatory filings. At a special
Note 3. Prepaid Expenses
Prepaid expenses consist of the following:
March 31,
2006 |
December 31,
2005 |
|||||||
Customer and merchant incentives |
$ | 235,844 | $ | 229,318 | ||||
Advertising |
91,373 | 69,756 | ||||||
Pension |
32,048 | 35,280 | ||||||
Other |
37,437 | 33,987 | ||||||
Total prepaid expenses |
396,702 | 368,341 | ||||||
Prepaid expenses, current |
(194,128 | ) | (167,209 | ) | ||||
Prepaid expenses, long-term |
$ | 202,574 | $ | 201,132 | ||||
Prepaid customer and merchant incentives represent payments made to customers and merchants under business agreements.
8
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Note 4. Pension Plans
The Company maintains a noncontributory defined benefit pension plan with a cash balance feature covering substantially all of its U.S. employees. Additionally, the Company has an unfunded nonqualified supplemental executive retirement plan that provides certain key employees with supplemental retirement benefits in excess of limits imposed on qualified plans by U.S. tax laws. For both plans, net periodic pension cost is as follows:
The funded status of the qualified plan exceeds minimum funding requirements. In 2005, the Company
made voluntary contributions of $40,000 to its qualified pension plan. During 2006, the Company may make additional voluntary contributions to its qualified pension plan of up to $30,000. No contributions were made during the three months ended
Note 5. Postretirement Health and Life Insurance Benefits
The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S. employees and retirees. Net periodic postretirement benefit cost is as follows:
Three Months Ended March 31, |
||||||
2006 | 2005 | |||||
Service cost |
$ | 792 | $ | 797 | ||
Interest cost |
905 | 858 | ||||
Amortization of prior service cost |
17 | 17 | ||||
Amortization of transition obligation |
145 | 145 | ||||
Recognized actuarial loss |
53 | 65 | ||||
Net periodic postretirement benefit cost |
$ | 1,912 | $ | 1,882 | ||
The Company funds its postretirement benefits as payments are required through cash flows from
Note 6. Accrued Expenses
Accrued expenses consist of the following:
March 31,
2006 |
December 31,
2005 |
|||||
Customer and merchant incentives |
$ | 294,820 | $ | 303,899 | ||
Personnel costs |
138,827 | 243,859 | ||||
Advertising |
111,525 | 162,661 | ||||
Taxes |
90,674 | 58,610 | ||||
Other |
77,788 | 81,628 | ||||
$ | 713,634 | $ | 850,657 | |||
9
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Note 7. Commitments and Contingent Liabilities
The future minimum payments under non-cancelable leases for office buildings and equipment, sponsorships, licensing and other agreements at March 31, 2006 are as follows:
Total |
Capital Leases |
Operating Leases |
Sponsorship, Licensing and Other |
|||||||||
The remainder of 2006 |
$ | 304,677 | $ | 3,813 | $ | 25,037 | $ | 275,827 | ||||
2007 |
215,888 | 4,101 | 27,464 | 184,323 | ||||||||
2008 |
150,913 | 2,424 | 20,529 | 127,960 | ||||||||
2009 |
83,891 | 1,861 | 13,883 | 68,147 | ||||||||
2010 |
52,545 | 1,819 | 3,282 | 47,444 | ||||||||
Thereafter |
155,633 | 40,475 | 7,799 | 107,359 | ||||||||
Total |
$ | 963,547 | $ | 54,493 | $ | 97,994 | $ | 811,060 | ||||
The table above excludes obligations from performance based agreements with our customers and merchants due to their contingent nature. Included in the table above are capital leases with imputed interest expense of $13,269 and a net present value of minimum lease payments of $41,224. At March 31, 2006, $50,007 of the future minimum payments in the table above for leases, sponsorship, licensing and other agreements was included in accounts payable or accrued expenses. Consolidated rental expense for the Companys office space was approximately $7,966 and $7,805 for the three months ended March 31, 2006 and 2005, respectively. Consolidated lease expense for automobiles, computer equipment and office equipment was $3,118 and $1,987 for the three months ended March 31, 2006 and 2005, respectively. In addition, the table above includes approximately $180,000 relating to a sponsorship agreement which the Company has sought to enforce through legal proceedings. Should the Company not succeed it would not be obligated to make payment.
MasterCard licenses certain software to its customers. The license agreements contain guarantees under which the Company indemnifies licensees from any adverse judgments arising from claims of intellectual property infringement by third parties. The terms of the guarantees are equal to the terms of the license to which they relate. The amount of the guarantees are limited to damages, losses, costs, expenses or other liabilities incurred by the licensee as a result of any intellectual property rights claims. The Company does not generate significant revenues from software licensing. The fair value of the guarantees is estimated to be negligible.
Note 8. U.S. Merchant Lawsuit and Other Legal Settlements
In 2003, MasterCard settled the U.S. merchant lawsuit described under the caption U.S. Merchant Opt Out and Consumer Litigations in Note 9 herein and contract disputes with certain customers. On June 4, 2003, MasterCard International and plaintiffs in the U.S. merchant lawsuit signed a settlement agreement (the Settlement Agreement) which required the Company to pay $125,000 in 2003 and $100,000 annually each December from 2004 through 2012. In addition, in 2003, several other lawsuits were initiated by merchants who opted not to participate in the plaintiff class in the U.S. merchant lawsuit. The opt-out merchant lawsuits were not covered by the terms of the Settlement Agreement, however, all have been individually settled. As more fully described in Note 9 herein, MasterCard is also a party to a number of currency conversion litigations. Based upon litigation developments and settlement negotiations in these currency conversion cases and pursuant to Statement of Financial Standards No. 5, Accounting for Contingencies, MasterCard may need to revise its reserve of $89,270 based on future developments. During the three months ended March 31, 2006, total liabilities for the U.S. merchant lawsuit and other legal settlements changed as follows:
Balance as of December 31, 2005 |
$ | 605,000 | |
Interest accretion |
10,382 | ||
Payments |
| ||
Balance as of March 31, 2006 |
$ | 615,382 | |
10
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Note 9. 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 involve complex claims that are subject to substantial uncertainties and unspecified damages, therefore, the probability of loss and an estimation of damages is not possible to ascertain at present. Accordingly, MasterCard has not established reserves for any of these proceedings other than for the currency conversion litigations. Except for those matters described below, MasterCard does not believe that any legal or regulatory proceedings to which it is a party would have a material impact on its results of operations, financial position, or cash flows. Although MasterCard believes that it has strong defenses for the litigations and regulatory proceedings described below, it could in the future incur judgments or fines or enter into settlements of claims that could have a material adverse effect on its results of operations, financial position or cash flows. Notwithstanding MasterCards belief, in the event it may be found liable in a large class-action lawsuit or on the basis of a claim entitling the plaintiff to treble damages or under which it was jointly and severally liable, charges it may be required to record could be significant and could materially and adversely affect its results of operations, cash flow and financial condition, or, in certain circumstances, even cause MasterCard to become insolvent. Moreover, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in damage awards in amounts that could be significant and could materially and adversely affect its results of operations, cash flow and financial condition.
Department of Justice Antitrust Litigation and Related Private Litigation
In October 1998, the U.S. Department of Justice (DOJ) filed suit against MasterCard International, Visa U.S.A., Inc. and Visa International Corp. in the U.S. District Court for the Southern District of New York alleging that both MasterCards and Visas governance structure and policies violated U.S. federal antitrust laws. First, the DOJ claimed that dual governancethe situation where a financial institution has a representative on the board of directors of MasterCard or Visa while a portion of its card portfolio is issued under the brand of the other associationwas anti-competitive and acted to limit innovation within the payment card industry. Second, the DOJ challenged MasterCards Competitive Programs Policy (CPP) and a Visa bylaw provision that prohibited financial institutions participating in the respective associations from issuing competing proprietary payment cards (such as American Express or Discover). The DOJ alleged that MasterCards CPP and Visas bylaw provision acted to restrain competition.
On October 9, 2001, the District Court judge issued an opinion upholding the legality and pro-competitive nature of dual governance. However, the judge also held that MasterCards CPP and the Visa bylaw constituted unlawful restraints of trade under the federal antitrust laws.
On November 26, 2001, the judge issued a final judgment that ordered MasterCard to repeal the CPP insofar as it applies to issuers and enjoined MasterCard from enacting or enforcing any bylaw, rule, policy or practice that prohibits its issuers from issuing general purpose credit or debit cards in the United States on any other general purpose card network. The final judgment also provides that from the effective date of the final judgment (October 15, 2004) until October 15, 2006, MasterCard is required to permit any issuer with which it entered into such an agreement prior to the effective date of the final judgment to terminate that agreement without penalty, provided that the reason for the termination is to permit the issuer to enter into an agreement with American Express or Discover. The final judgment imposes parallel requirements on Visa.
MasterCard appealed the judges ruling with respect to the CPP. On September 17, 2003, a three-judge panel of the Second Circuit issued its decision upholding the District Courts decision. On October 4, 2004, the Supreme Court denied MasterCards petition for certiorari, thereby exhausting all avenues for further appeal in this case. Thereafter, the parties agreed that October 15, 2004 would serve as the effective date of the final judgment.
In addition, on September 18, 2003, MasterCard filed a motion before the District Court judge in this case seeking to enjoin Visa, pending completion of the appellate process, from enforcing a newly-enacted bylaw requiring Visas 100 largest issuers of debit cards in the United States to pay a so-called settlement service fee if
11
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
they reduce their Visa debit volume by more than 10%. This bylaw was later modified to clarify that the settlement service fee would only be imposed if an issuer shifted its portfolio of debit cards to MasterCard. Visa implemented this bylaw provision following the settlement of the U.S. merchant lawsuit described under the heading U.S. Merchant Opt Out and Consumer Litigations below. MasterCard believes that this bylaw is punitive and violates the final judgment in the DOJ litigation, which enjoins Visa and MasterCard from enacting, maintaining, or enforcing any bylaw or policy that prohibits issuers from issuing general purpose cards or debit cards in the United States on any other general purpose card network. On December 8, 2003, the District Court ruled that it lacked jurisdiction to issue an injunction while the appellate process in the DOJ litigation was pending. In light of the Supreme Courts denial of certiorari on October 4, 2004, jurisdiction was again vested with the District Court. On January 10, 2005, MasterCard renewed its challenge to the bylaw in the District Court, seeking to enjoin Visa from maintaining or enforcing the bylaw and requiring Visa to offer its top 100 offline issuers a right to rescind any debit card agreements entered into with Visa while the settlement service fee was in effect. The motion was fully briefed on June 3, 2005. On August 18, 2005, the Court issued an order appointing a special master to conduct an evidentiary hearing and then issue a report and recommendation as to whether the settlement service fee violates the Courts final judgment. The hearing on MasterCards motion was completed on December 9, 2005 and post-hearing briefing by the parties was completed on February 10, 2006. Having heard oral arguments, the special master is currently preparing his report and recommendations to the Court. If MasterCard is unsuccessful and Visa is permitted to impose this settlement service fee on issuers of debit cards according to this bylaw, it could inhibit the growth of our debit business. At this time it is not possible to determine the ultimate resolution of this matter.
On October 4, 2004, Discover Financial Services, Inc. filed a complaint against MasterCard, Visa U.S.A. Inc. and Visa International Services Association. The complaint was filed in the U.S. District Court for the Southern District of New York and was designated as a related case to the DOJ litigation, and was assigned to the same judge who issued the DOJ decision described above. The complaint alleges that the implementation and enforcement of MasterCards CPP and Visas bylaw provision as well as MasterCards Honor All Cards rule (and a similar Visa rule), which require merchants who accept MasterCard cards to accept for payment every validly presented MasterCard card, violated Sections 1 and 2 of the Sherman Act as well as Californias Unfair Competition Act in an alleged market for general purpose card network services and an alleged market for debit card network services. The complaint also challenged MasterCards no surcharge rule (and a similar Visa rule) under the same statutes. On December 10, 2004, MasterCard moved to dismiss the complaint in its entirety for failure to state a claim. In lieu of filing its opposition papers to MasterCards motion, Discover filed an amended complaint on January 7, 2005. In the amended complaint, Discover dropped some of its claims, including its challenge against the no surcharge rule and its claims under Californias Unfair Competition Act, but continued to allege that the implementation and enforcement of MasterCards CPP, Visas bylaw provision and the Honor All Cards rule violated Sections 1 and 2 of the Sherman Act. Specifically, Discover claimed that MasterCards CPP unreasonably restrained trade by prohibiting financial institutions who were members of MasterCard from issuing payment cards on the Discover network. Discover requested that the District Court apply collateral estoppel with respect to its final judgment in the DOJ litigation and enter an order that the CPP and Visas bylaw provision have injured competition and caused injury to Discover. Discover seeks treble damages in an amount to be proved at trial along with attorneys fees and costs. On February 7, 2005, MasterCard moved to dismiss Discovers amended complaint in its entirety for failure to state a claim. On April 14, 2005, the District Court denied, at this stage in the litigation, Discovers request to give collateral estoppel effect to the findings in the DOJ litigation. However, the District Court indicated that Discover may refile a motion for collateral estoppel after discovery. Under the doctrine of collateral estoppel, a court has the discretion to preclude one or more issues from being relitigated in a subsequent action but only if (1) those issues are identical to issues actually litigated and determined in the prior action, (2) proof of those issues were necessary to reach the prior judgment, and (3) the party to be estopped had a full and fair opportunity to litigate those issues in the prior action. Accordingly, if the District Court were to give effect to collateral estoppel on one or more issues in the future, then significant elements of plaintiffs claims would be established, thereby making it more likely that we would be found liable and making the possibility of an award of damages that much more likely. In the event all issues are subsequently decided against MasterCard in dispositive motions during the course of the litigation then there is the possibility that the sole issue remaining will be whether a damage award is appropriate and, if so, what the amount of damages should be. In addition, that same day and in subsequent rulings, with respect to the market for general purpose card network services, the District Court denied MasterCards motion to dismiss Discovers Section 1 conspiracy to restrain trade and Section 2 conspiracy to monopolize or maintain a monopoly claims that were based upon the conduct described above. On October 24, 2005, the District Court granted MasterCards motion to dismiss Discovers Section 2 monopolization and attempted monopolization claims against MasterCard. On November 9, 2005, the Court denied MasterCards motion to dismiss Discovers claims based
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upon effects in an alleged debit market. On November 30, 2005, MasterCard filed an answer to the amended complaint. On February 1, 2006, the District Court issued a case management order establishing a discovery schedule for this action, which ordered that fact discovery shall be completed by February 1, 2007, and scheduled a status conference for January 4, 2007 to discuss any remaining discovery issues, including expert discovery, as well as the timing of collateral estoppel motions. At this time it is not possible to determine the ultimate resolution of, or estimate the liability related to, the Discover litigation. No provision for losses has been provided in connection with this matter.
On November 15, 2004, American Express filed a complaint against MasterCard, Visa and eight member banks, including JPMorgan Chase & Co., Bank of America Corp., Capital One Financial Corp., U.S. Bancorp, Household International Inc., Wells Fargo & Co., Providian Financial Corp. and USAA Federal Savings Bank. Subsequently, USAA Federal Savings Bank, Bank of America Corp. and Household International Inc. announced settlements with American Express and have been dismissed from the case. The complaint, which was filed in the U.S. District Court for the Southern District of New York, was designated as a related case to the DOJ litigation and was assigned to the same judge. The complaint alleges that the implementation and enforcement of MasterCards CPP and Visas bylaw provision violated Sections 1 and 2 of the Sherman Act in an alleged market for general purpose card network services and a market for debit card network services. Specifically, American Express claimed that MasterCards CPP unreasonably restrained trade by prohibiting financial institutions who were members of MasterCard from issuing payment cards on the American Express network. American Express seeks treble damages in an amount to be proved at trial, along with attorneys fees and costs. On January 14, 2005, MasterCard filed a motion to dismiss the complaint for failure to state a claim. American Express also requested that the Court apply collateral estoppel with respect to its final judgment in the DOJ litigation. On April 14, 2005, the District Court denied, at this stage in the litigation, American Express request to give collateral estoppel effect to the findings in the DOJ litigation. However, the Court indicated that American Express may refile a motion for collateral estoppel after discovery. As with the lawsuit brought by Discover that is described in the preceding paragraph, if the Court were to give effect to collateral estoppel on one or more issues in the future, then significant elements of plaintiffs claims would be established, thereby making it more likely that we would be found liable and making the possibility of an award of damages that much more likely. In the event all issues are subsequently decided against MasterCard in dispositive motions during the course of the litigation then there is the possibility that the sole issue remaining will be whether a damage award is appropriate and, if so, what the amount of damages should be. In addition, that same day and in subsequent rulings, the Court denied MasterCards motion to dismiss American Express Section 1 conspiracy to restrain trade claims and Section 2 conspiracy to monopolize claims that were based upon the conduct described above. On November 9, 2005, the Court denied MasterCards motion to dismiss American Express conspiracy to restrain trade claims in the alleged market for debit card network services. On November 30, 2005, MasterCard filed an answer to the complaint. On February 1, 2006, the Court issued a case management order establishing a discovery schedule for this action, which ordered that fact discovery shall be completed by February 1, 2007, and scheduled a status conference for January 4, 2007 to discuss any remaining discovery issues, including expert discovery, as well as the timing of collateral estoppel motions. At this time it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter. No provision for losses has been provided in connection with the American Express litigation.
Currency Conversion Litigations
MasterCard International, together with Visa U.S.A., Inc. and Visa International Corp., are defendants in a state court lawsuit in California. The lawsuit alleges that MasterCard and Visa wrongfully imposed an asserted one percent currency conversion fee on every credit card transaction by U.S. MasterCard and Visa cardholders involving the purchase of goods or services in a foreign country, and that such alleged fee is unlawful. This action, titled Schwartz v. Visa Intl Corp., et al ., was brought in the Superior Court of California in February 2000, purportedly on behalf of the general public. Trial of the Schwartz matter commenced on May 20, 2002 and concluded on November 27, 2002. The Schwartz action claims that the alleged fee grossly exceeds any costs the defendants might incur in connection with currency conversions relating to credit card purchase transactions made in foreign countries and is not properly disclosed to cardholders. MasterCard denies these allegations.
On April 8, 2003, the trial court judge issued a final decision in the Schwartz matter. In his decision, the trial judge found that MasterCards currency conversion process does not violate the Truth in Lending Act or regulations, nor is it unconscionably priced under California law. However, the judge found that the practice is deceptive under
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California law, and ordered that MasterCard mandate that members disclose the currency conversion process to cardholders in cardholder agreements, applications, solicitations and monthly billing statements. As to MasterCard, the judge also ordered restitution to California cardholders. The judge issued a decision on restitution on September 19, 2003, which requires a traditional notice and claims process in which consumers have approximately six months to submit their claims. The court issued its final judgment on October 31, 2003. On December 29, 2003, MasterCard appealed the judgment. The final judgment and restitution process have been stayed pending MasterCards appeal. On August 6, 2004 the court awarded plaintiffs attorneys fees in the amount of $28,224 to be paid equally by MasterCard and Visa. Accordingly, during the three months ended September 30, 2004, MasterCard accrued amounts totaling $14,112 which are included in U.S. Merchant Lawsuit and Other Legal Settlements in the Consolidated Statements of Operations (see Note 8). MasterCard subsequently filed a notice of appeal on the attorneys fee award on October 1, 2004. With respect to restitution, MasterCard believes that it is likely to prevail on appeal. In February 2005, MasterCard filed an appeal regarding the applicability of Proposition 64, which amended sections 17203 and 17204 of the California Business and Professions Code, to this action. On September 28, 2005, the appellate court reversed the trial court, finding that the plaintiff lacked standing to pursue the action in light of Proposition 64. Plaintiff filed a petition for review with the California Supreme Court on November 7, 2005, which was granted on December 14, 2005. The California Supreme Court has deferred from taking further action pending consideration and disposition of related issues with the court.
In addition, MasterCard has been served with complaints in state courts in New York, Arizona, Texas, Florida, Arkansas, Illinois, Tennessee, Michigan, Pennsylvania, Ohio, Minnesota and Missouri seeking to, in effect, extend the judges decision in the Schwartz matter to MasterCard cardholders outside of California. Some of these cases have been transferred to the U.S. District Court for the Southern District of New York and combined with the federal complaints in MDL No. 1409 discussed below. In other state court cases, MasterCard has moved to dismiss the claims. On February 1, 2005 a Michigan action was dismissed with prejudice and on April 12, 2005, the plaintiff agreed to withdraw his appeal of that decision. On June 24, 2005, a Minnesota action was dismissed with prejudice; however, plaintiff filed an amended complaint on September 15, 2005. On August 31, 2005, an Illinois action was dismissed with prejudice; plaintiff filed an appeal on February 6, 2006. Briefing is not complete and no date for oral argument has been set. On September 7, 2005, a Texas state court granted MasterCards motion to arbitrate, and plaintiff subsequently filed notice that he was withdrawing his lawsuit against MasterCard for all claims. MasterCard has also been served with complaints in state courts in California, Texas and New York alleging it wrongfully imposed an asserted one percent currency conversion fee in every debit card transaction by U.S. MasterCard cardholders involving the purchase of goods or services or withdrawal of cash in a foreign country and that such alleged fee is unlawful. Visa USA Inc. and Visa International Corp. have been named as co-defendants in the California cases. One such Texas case was dismissed voluntarily by plaintiffs. Stipulated temporary stay orders have been entered in actions in the following state courts: Arkansas, Arizona, California, Florida, Minnesota, New York, Ohio, Pennsylvania, Texas and Tennessee.
MasterCard International, Visa U.S.A., Inc., Visa International Corp., several member banks including Citibank (South Dakota), N.A., Chase Manhattan Bank USA, N.A., Bank of America, N.A. (USA), MBNA, and Citicorp Diners Club Inc. are also defendants in a number of federal putative class actions that allege, among other things, violations of federal antitrust laws based on the asserted one percent currency conversion fee. Pursuant to an order of the Judicial Panel on Multidistrict Litigation, the federal complaints have been consolidated in MDL No. 1409 before Judge William H. Pauley III in the U.S. District Court for the Southern District of New York. In January 2002, the federal plaintiffs filed a Consolidated Amended Complaint (MDL Complaint) adding MBNA Corporation and MBNA America Bank, N.A. as defendants. This pleading asserts two theories of antitrust conspiracy under Section 1 of the Sherman Act: (i) an alleged inter-association conspiracy among MasterCard (together with its members), Visa (together with its members) and Diners Club to fix currency conversion fees allegedly charged to cardholders of no less than 1% of the transaction amount and frequently more; and (ii) two alleged intra-association conspiracies, whereby each of Visa and MasterCard is claimed separately to have conspired with its members to fix currency conversion fees allegedly charged to cardholders of no less than 1% of the transaction amount and to facilitate and encourage institutionand collectionof second tier currency conversion surcharges. The MDL Complaint also asserts that the alleged currency conversion fees have not been disclosed as required by the Truth in Lending Act and Regulation Z.
Defendants have moved to dismiss the MDL Complaint. On July 3, 2003, Judge Pauley issued a decision granting MasterCards motion to dismiss in part. Judge Pauley dismissed the Truth in Lending claims in their
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entirety as against MasterCard, Visa and several of the member bank defendants. Judge Pauley did not dismiss the antitrust claims. Fact and expert discovery in this matter have closed. On November 12, 2003 plaintiffs filed a motion for class certification, which was granted on October 15, 2004. On March 9, 2005, Judge Pauley issued a decision on defendants motion to reconsider the class certification decision. The Judge ruled that the arbitration provisions in the cardholder agreements of member bank defendants, Bank One, MBNA, Providian, Household and Bank of America are valid as to those respective banks and MasterCard and, consequently, cardholders of those banks can no longer participate in the class action certified in his earlier decision and must pursue any claims through arbitration. Plaintiffs moved for further reconsideration, which was denied by Judge Pauley on June 16, 2005. In addition, Judge Pauley declined to give effect to the arbitration clauses in the Citibank and Chase cardholder agreements; both banks have appealed that decision. Briefing on the appeal is complete but no date has been set for oral argument. The trial date has been set for May 15, 2006. On March 29, 2006, Judge Pauley entered an order suspending all briefing obligations until May 15, 2006 or until further consent order.
Based upon litigation developments, certain of which were favorable to MasterCard and progress in ongoing settlement discussions in these currency conversion cases that occurred during the third and fourth quarters of 2005 and the first quarter of 2006, and pursuant to Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, MasterCard recorded an additional $75,158 of legal reserves in 2005. As a result of this additional provision, MasterCard has now established total legal reserves of $89,270 in connection with these currency conversion cases. At this time, it is not possible to determine the ultimate resolutions of these matters.
Merchant Chargeback-Related Litigations
On May 12, 2003, a complaint alleging violations of federal and state antitrust laws, breach of contract, fraud and other theories was filed in the U.S. District Court for the Central District of California (Los Angeles) against MasterCard by a merchant aggregator whose customers include businesses selling adult entertainment content over the Internet. The complaints allegations focus on MasterCards past and potential future assessments on the plaintiffs merchant bank (acquirer) for exceeding excessive chargeback standards in connection with the plaintiffs transaction activity as well as the effect of MasterCards chargeback rules and other practices on card-not-present merchants. Chargebacks refer to a situation where a transaction is returned, or charged back, to an acquirer by an issuer at the request of cardholders or for other reasons. Prior to MasterCard filing any motion or responsive pleading, the plaintiff filed a voluntary notice of dismissal without prejudice on December 5, 2003. On the same date, the plaintiff filed a complaint in the U.S. District Court for the Eastern District of New York making similar allegations to those made in its initial California complaint. MasterCard moved to dismiss all of the claims in the complaint for failure to state a cause of action. On March 30, 2005 the judge granted MasterCards motion and dismissed all of the claims in the complaint. On April 11, 2005, the plaintiff filed a notice of appeal of the district courts order. The Second Circuit heard oral argument on the appeal on November 22, 2005. The parties are awaiting a decision.
In addition, on June 6, 2003, an action titled California Law Institute v. Visa U.S.A., et al . was initiated against MasterCard and Visa U.S.A., Inc. in the Superior Court of California, purportedly on behalf of the general public. Plaintiff seeks disgorgement, restitution and injunctive relief for unlawful and unfair business practices in violation of California Unfair Trade Practices Act Section 17200, et. seq. Plaintiff purportedly alleges that MasterCards (and Visas) chargeback fees are unfair and punitive in nature. Plaintiff seeks injunctive relief preventing MasterCard from continuing to engage in its chargeback practices and requiring MasterCard to provide restitution and/or disgorgement for monies improperly obtained by virtue of them. On June 10, 2005, MasterCard filed a motion requesting that the court bifurcate and decide certain dispositive issues to be tried separately. On December 8, 2005, the court indicated that it would stay the motion and all proceedings indefinitely, pending an opinion from the California Supreme Court in an unrelated case regarding standing requirements under Section 17200 of the California Business and Professions Code that may be dispositive in the instant action.
On September 20, 2004, MasterCard was served with a complaint titled PSW Inc. v. Visa U.S.A. Inc ., MasterCard International Incorporated, et. al., No. 04-347, in the District Court of Rhode Island. The plaintiff, as alleged in the complaint, provided credit card billing services primarily for adult content web sites. The plaintiff alleges defendants excessive chargeback standards, exclusionary rules, merchant registration programs, cross-border acquiring rules and interchange pricing to internet merchants violate federal and state antitrust laws as well as state contract and tort law. The plaintiff seeks $60,000 in compensatory damages as well as $180,000 in punitive
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damages. On November 24, 2004, MasterCard moved to dismiss the complaint. Prior to the court ruling on MasterCards motion to dismiss, plaintiff filed an amended complaint on April 6, 2005. This complaint generally mirrors the original complaint but includes additional causes of action based on the purported deprivation of plaintiffs rights under the First Amendment of the U.S. Constitution. On May 20, 2005, MasterCard moved to dismiss all of PSWs claims in the complaint for failure to state a claim and argument on the motion before a magistrate judge was held on November 2, 2005. On February 3, 2006, the magistrate issued a report and recommendation in which he recommended the dismissal of plaintiffs antitrust claims, First Amendment claim, and state law claims for conversion, embezzlement, tortious interference with prospective economic advantage, and breach of the implied covenant of good faith and fair dealing. However, the magistrates report also recommended that MasterCards motion to dismiss plaintiffs claims for breach of contract and tortious interference with contractual relations be denied. On February 28, 2006, the District Court adopted the magistrates report and recommendation. On March 22, 2006, MasterCard filed an answer to the complaint. The District Court has scheduled discovery to conclude on September 15, 2006.
At this time it is not possible to determine the outcome of, or, except as indicated above in the PSW litigation, estimate the liability related to, the merchant chargeback-related litigations. No provision for losses has been provided in connection with these litigations.
U.S. Merchant Opt Out and Consumer Litigations
Commencing in October 1996, several class action suits were brought by a number of U.S. merchants against MasterCard International and Visa U.S.A., Inc. challenging certain aspects of the payment card industry under U.S. federal antitrust law. Those suits were later consolidated in the U.S. District Court for the Eastern District of New York. The plaintiffs claimed that MasterCards Honor All Cards rule (and a similar Visa rule), which required merchants who accept MasterCard cards to accept for payment every validly presented MasterCard card, constituted an illegal tying arrangement in violation of Section 1 of the Sherman Act. Plaintiffs claimed that MasterCard and Visa unlawfully tied acceptance of debit cards to acceptance of credit cards. The plaintiffs also claimed that MasterCard and Visa conspired to monopolize what they characterized as the point-of-sale debit card market, thereby suppressing the growth of regional networks such as ATM payment systems. On June 4, 2003, MasterCard International signed a settlement agreement to settle the claims brought by the plaintiffs in this matter, which the Court approved on December 19, 2003. For a description of the settlement agreement, see Note 8. A number of class members have appealed the District Courts approval of the settlement. These appeals largely focused on the courts attorneys fees award as well on the courts ruling on the scope of the release set forth in the settlement agreement. On January 4, 2005, the Second Circuit Court of Appeals issued an order affirming the District Courts approval of the settlement agreement. Accordingly, the settlement is now final.
Several lawsuits were commenced by merchants who opted not to participate in the plaintiff class in the U.S. merchant lawsuit, including Best Buy Stores, CVS, Giant Eagle, Home Depot, Toys R Us and Darden Restaurants (collectively, the Opt Out Plaintiffs). The majority of these cases were filed in the U.S. District Court for the Eastern District of New York. MasterCard has entered into separate settlement agreements with each of the Opt Out Plaintiffs resolving their claims against MasterCard. The District Court has entered orders dismissing with prejudice each of the Opt Out Plaintiffs complaints against MasterCard.
In addition, individual or multiple complaints have been brought in 19 different states and the District of Columbia alleging state unfair competition, consumer protection and common law claims against MasterCard International (and Visa) on behalf of putative classes of consumers. The claims in these actions largely mirror the allegations made in the U.S. merchant lawsuit and assert that merchants, faced with excessive merchant discount fees, have passed these overcharges to consumers in the form of higher prices on goods and services sold. MasterCard has been successful in the majority of these cases as courts have granted MasterCards motions to dismiss for failure to state a claim or plaintiffs have voluntarily dismissed their complaints. Specifically, courts in Arizona, Iowa, New York, Michigan, Minnesota, Nebraska, Maine, North Dakota, Kansas, North Carolina, South Dakota, Vermont, Wisconsin, Florida, Nevada and the District of Columbia have granted MasterCards motions and dismissed the complaints with prejudice. Plaintiffs have outstanding appeals of these dismissals in Nebraska and Iowa. In addition, there are outstanding cases in the District of Columbia, New Mexico, Tennessee, California and West Virginia. The parties are awaiting decisions on MasterCards motion to dismiss in New Mexico and the District of Columbia. The courts in Tennessee and California have granted MasterCards motion to dismiss the
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(In thousands, except per share and percent data)
respective state unfair competition claims but have denied MasterCards motions with respect to unjust enrichment claims in Tennessee and Section 17200 claims for unlawful, unfair, and/or fraudulent business practices in California. Both parties have appealed the Tennessee decisions. On March 27, 2006, the Tennessee Court of Appeals affirmed the dismissal of the state unfair competition claims. In addition, it reversed the lower courts denial of MasterCards motion to dismiss the unjust enrichment claims and remanded the case to the lower court for the dismissal of the entire case. The West Virginia Circuit Court denied MasterCards motion for summary judgment. On February 14, 2006, MasterCard answered the West Virginia complaint. The parties in West Virginia are currently negotiating a protective order before moving forward with discovery.
On March 14, 2005, MasterCard was served with a complaint that was filed in Ohio state court on behalf of a putative class of consumers under Ohio state unfair competition law. The claims in this action mirror those in the consumer actions described above but also name as co-defendants a purported class of merchants who were class members in the U.S. merchant lawsuit. Plaintiffs allege that Visa, MasterCard and the class members of the U.S. merchant lawsuit conspired to attempt to monopolize the debit card market by tying debit card acceptance to credit card acceptance. On October 7, 2005, plaintiffs filed a voluntary notice of dismissal of their complaint.
On April 29, 2005, a complaint was filed in California state court on behalf of a putative class of consumers under California unfair competition law (Section 17200) and the Cartwright Act. The claims in this action seek to piggyback on the portion of the DOJ antitrust litigation in which the United States District Court for the Southern District of New York found that MasterCards CPP and Visas bylaw constitute unlawful restraints of trade under the federal antitrust laws. See Department of Justice Antitrust Litigation and Related Private Litigation. On July 15, 2005, MasterCard and Visa jointly moved to dismiss plaintiffs claims for failure to state a claim. On November 2, 2005, the court dismissed the complaint without prejudice. On December 2, 2005, plaintiffs filed a third amended complaint. On January 24, 2006, MasterCard and Visa jointly moved to dismiss the plaintiffs claims for failure to state a claim. On March 10, 2006, plaintiffs filed an opposition to defendants motion. On April 19, 2006, the court heard oral argument and dismissed with prejudice plaintiffs Cartwright Act claims. However, the court denied defendants motion to dismiss plaintiffs Section 17200 unfair competition claims. MasterCards time in which to file an answer to the complaint is currently running. The court has scheduled a case management conference for June 21, 2006.
At this time, it is not possible to determine the outcome of, or estimate the liability related to, these consumer cases and no provision for losses has been provided in connection with them. The consumer class actions are not covered by the terms of the settlement agreement in the U.S. merchant lawsuit.
Privasys Litigation
An action was filed against MasterCard International in the U.S. District Court for the Northern District of California on September 12, 2005 by Privasys, Inc. alleging misappropriation of purported trade secrets relating to aspects of the technology used for MasterCards PayPass contactless cards. Privasys sought to add a Privasys employee as a co-inventor of a MasterCard patent and injunctive relief against MasterCards alleged misappropriation of trade secrets.
On October 3, 2005, MasterCard filed suit against Privasys in the U.S. District Court for the Southern District of New York seeking a declaration that (1) there was no need to correct the inventorship of the MasterCard patent, (2) MasterCard has not misappropriated any trade secrets of Privasys, to the extent that any exist, (3) a non-disclosure agreement between Privasys and MasterCard is void and unenforceable and that MasterCard had not breached the non-disclosure agreement or the terms of an exclusive marketing agreement between the parties. MasterCard also alleged breach of the marketing agreement by Privasys.
On October 14, 2005, MasterCard filed a motion to dismiss or transfer the California action on the grounds that the marketing agreement contained a forum selection clause specifying the New York courts as the exclusive venue for all disputes between the parties and that the marketing agreement superseded the non-disclosure agreement. On December 2, 2005, the U.S. District Court granted MasterCards motion and dismissed the California action.
On November 14, 2005, Privasys filed counterclaims against MasterCard in the New York action alleging breach of the marketing agreement, fraud and deceit, breach of fiduciary duty, misappropriation of trade secrets, unjust enrichment and monopolization and attempted monopolization under Section 2 of the Sherman Act. In its
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(In thousands, except per share and percent data)
counterclaims, Privasys included the subject matter of additional patent applications filed by MasterCard allegedly relating to PayPass, and added allegations that MasterCard had fraudulently induced Privasys to enter into the marketing agreement and subsequently frustrated Privasys performance under the marketing agreement.
On December 21, 2005, MasterCard filed a motion to dismiss Privasys antitrust, fraud and related counterclaims. On January 18, 2006, Privasys amended its counterclaims, omitting the antitrust claim and certain duplicative claims, but retaining other claims against MasterCard, including causes of action for fraud and deceit, MasterCard has replied, denying any wrongdoing. The District Court has scheduled a status conference for May 12, 2006.
The parties are in the early stages of discovery in the Privasys litigation and at this time it is not possible to determine the ultimate resolution of, or estimate the liability related to, this matter. No provision for losses has been provided in connection with the Privasys litigation.
Global Interchange Proceedings
Interchange fees represent a sharing of payment system costs among the financial institutions participating in a four-party payment card system such as MasterCards. Typically, interchange fees are paid by the merchant bank (the acquirer) to the cardholder bank (the issuer) in connection with transactions initiated with the payment systems cards. These fees reimburse the issuer for a portion of the costs incurred by it in providing services which are of benefit to all participants in the system, including acquirers and merchants. MasterCard or its members establish a default interchange fee (MIF) in certain circumstances that applies when there is no other interchange fee arrangement between the issuer and the acquirer. MasterCard establishes a variety of MIF rates depending on such considerations as the location and the type of transaction, and collects the MIF on behalf of the institutions entitled to receive it and remits the MIF to eligible institutions. As described more fully below, MasterCard or its members MIFs are subject to regulatory or legal review and/or challenges in a number of jurisdictions. At this time, it is not possible to determine the ultimate resolution of, or estimate the liability related to, any of the interchange proceedings described below. No provision for losses has been provided in connection with them.
United States. In July 2002, a purported class action lawsuit was filed by a group of merchants in the U.S. District Court for the Northern District of California against MasterCard International, Visa U.S.A., Inc., Visa International Corp. and several member banks in California alleging, among other things, that MasterCards and Visas interchange fees contravene the Sherman Act. The suit seeks treble damages in an unspecified amount, attorneys fees and injunctive relief. On March 4, 2004, the court dismissed the lawsuit with prejudice in reliance upon the approval of the settlement agreement in the U.S. merchant lawsuit by the U.S. District Court for the Eastern District of New York, which held that the settlement and release in that case extinguished the claims brought by the merchant group in the present case. The plaintiffs have appealed the U.S. District Court for the Eastern District of New Yorks approval of the U.S. merchant lawsuit settlement and release to the Second Circuit Court of Appeals and have also appealed the U.S. District Court for the Northern District of Californias dismissal of the present lawsuit to the Ninth Circuit Court of Appeals. On January 4, 2005, the Second Circuit Court of Appeals issued an order affirming the District Courts approval of the U.S. merchant lawsuit settlement agreement, including the District Courts finding that the settlement and release extinguished such claims. Plaintiffs did not seek certiorari of the Second Circuits decision to the U.S. Supreme Court. On March 27, 2006 the Ninth Circuit Court of Appeals affirmed the U.S. District Court for the Northern District of Californias dismissal of the case. Plaintiffs time in which to seek certiorari from the Ninth Circuit Court of Appeals decision is currently running.
On October 8, 2004, a purported class action lawsuit was filed by a group of merchants in the U.S. District Court for the Northern District of California against MasterCard International, Visa U.S.A., Inc., Visa International Corp. and several member banks in California alleging, among other things, that MasterCards and Visas interchange fees contravene the Sherman Act and the Clayton Act. The complaint contains similar allegations to those brought in the interchange case described in the preceding paragraph, and plaintiffs have designated it as a related case. The plaintiffs seek damages and an injunction against MasterCard (and Visa) setting interchange and engaging in joint marketing activities, which plaintiffs allege include the purported negotiation of merchant discount rates with certain merchants. On November 19, 2004, MasterCard filed an answer to the complaint. The plaintiffs filed an amended complaint on April 25, 2005. MasterCard moved to dismiss the claims in the complaint for failure to state a claim and, in the alternative, also moved for summary judgment with respect to certain of the claims. On July 25, 2005, the court issued an order granting MasterCards motion to dismiss and dismissed the
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(In thousands, except per share and percent data)
complaint with prejudice. On August 10, 2005, the plaintiffs filed a notice of appeal. Plaintiffs opening appeal brief was filed on November 28, 2005. MasterCard filed its opposition brief to plaintiffs appeal on December 26, 2005.
On June 22, 2005, a purported class action lawsuit was filed by a group of merchants in the U.S. District Court of Connecticut against MasterCard International Incorporated, Visa U.S.A., Inc., Visa International Services Association and a number of member banks alleging, among other things, that MasterCards and Visas purported setting of interchange fees violates Section 1 of the Sherman Act. In addition, the complaint alleges MasterCards and Visas purported tying and bundling of transaction fees also constitutes a violation of Section 1 of the Sherman Act. The suit seeks treble damages in an unspecified amount, attorneys fees and injunctive relief. Since the filing of this complaint, there have been approximately forty similar complaints (the majority styled as class actions although six complaints are on behalf of individual plaintiffs) filed on behalf of merchants against MasterCard and Visa (and in some cases, certain member banks) in federal courts in California, New York, Wisconsin, Pennsylvania, New Jersey, Ohio, Kentucky and Connecticut. On October 19, 2005, the Judicial Panel on Multidistrict Litigation issued an order transferring these cases to Judge Gleeson of the U.S. District Court for the Eastern District of New York for coordination of pre-trial proceedings. On April 24, 2006, the group of purported class plaintiffs filed a First Amended Class Action Complaint. Taken together, the claims in the First Amended Class Action Complaint and in the six complaints brought on behalf of individual merchants are generally brought under Sections 1 and 2 of the Sherman Act. Specifically, the complaints contain some or all of the following claims: (i) that MasterCards and Visas setting of interchange fees (for both credit and offline debit transactions) violates Section 1 of the Sherman Act; (ii) that MasterCard and Visa have enacted and enforced various rules, including the no surcharge rule and purported anti-steering rules, in violation of Section 1 or 2 of the Sherman Act; (iii) that MasterCards and Visas purported bundling of the acceptance of premium credit cards to standard credit cards constitutes an unlawful tying arrangement; and (iv) that MasterCard and Visa have unlawfully tied and bundled transaction fees. In addition to the claims brought under federal antitrust law, some of these complaints contain certain state unfair competition law claims based upon the same conduct described above. These interchange-related litigations also seek treble damages in an unspecified amount (although several of the complaints allege that the plaintiffs expect that damages will range in the tens of billions of dollars), as well as attorneys fees and injunctive relief. MasterCards responses to the First Amended Class Action Complaint and the individual merchant complaints are currently due on June 6, 2006. The Court has ordered that new fact discovery may proceed, and such fact discovery is scheduled to be completed by November 30, 2007 with expert discovery scheduled to be completed by July 18, 2008. Summary judgment and other pretrial motions are scheduled to be completed by November 24, 2008.
European Union . In September 2000, the European Commission issued a Statement of Objections challenging Visa Internationals cross-border MIF under European Community competition rules. On July 24, 2002, the European Commission announced its decision to exempt the Visa MIF from these rules based on certain changes proposed by Visa to its MIF. Among other things, in connection with the exemption order, Visa agreed to adopt a cost-based methodology for calculating its MIF similar to the methodology employed by MasterCard, which considers the costs of certain specified services provided by issuers, and to reduce its MIF rates for debit and credit transactions to amounts at or below certain specified levels.
On September 25, 2003, the European Commission issued a Statement of Objections challenging MasterCard Europes cross-border MIF. MasterCard Europe filed its response to this Statement of Objections on January 5, 2004. The European Commission has informed MasterCard Europe that it intends to issue a supplemental Statement of Objections in the near future. Following this, the European Commission could issue a prohibition decision ordering MasterCard to change the manner in which it calculates its cross-border MIF. MasterCard Europe could appeal such a decision to the European Court of Justice. Because the cross-border MIF constitutes an essential element of MasterCard Europes operations, changes to it could significantly impact MasterCard Internationals European members and MasterCard Europes business. In addition, a negative decision by the European Commission could lead to the filing of private actions against MasterCard Europe by merchants seeking substantial damages.
On June 13, 2005 the European Commission announced a sector inquiry into the financial services industry, which includes an investigation of interchange fees. On April 12, 2006, the European Commission released its interim report on its sector inquiry into the payments card industry. In the report, the European Commission
19
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
criticizes or expresses concern about a large number of industry practices, including interchange fees, of a multiplicity of industry participants, and warns of possible regulatory or legislative action. However, the report does not indicate against whom any such regulatory action might be taken or what legislative changes might be sought. The European Commission provided for a ten-week comment period on the reports findings, and indicated that its final report would be issued by the end of the year.
United Kingdom Office of Fair Trading . On September 25, 2001, the Office of Fair Trading of the United Kingdom (OFT) issued a Rule 14 Notice under the U.K. Competition Act 1998 challenging the MasterCard MIF, the fee paid by acquirers to issuers in connection with point of sale transactions, and multilateral service fee (MSF), the fee paid by issuers to acquirers when a customer uses a MasterCard-branded card in the United Kingdom either at an ATM or over the counter to obtain a cash advance. Until November 2004, the MIF and MSF were established by MasterCard U.K. Members Forum Limited (MMF) (formerly MasterCard Europay U.K. Ltd. (MEPUK)) for domestic credit card transactions in the United Kingdom. The notice contained preliminary conclusions to the effect that the MasterCard U.K. MIF and MSF may infringe U.K. competition law and do not qualify for an exemption in their present forms. On February 11, 2003, the OFT issued a supplemental Rule 14 Notice, which also contained preliminary conclusions challenging MasterCards U.K. MIF under the Competition Act. On November 10, 2004, the OFT issued a third notice (now called a Statement of Objections) claiming that the MIF infringes U.K. and European Union competition law.
On November 18, 2004, MasterCards board of directors adopted a resolution withdrawing the authority of the U.K. members to set domestic MasterCard MIFs and MSFs and conferring such authority exclusively on MasterCards President and Chief Executive Officer.
On September 6, 2005, the OFT issued its decision, concluding that MasterCards U.K. MIFs that were established by MMF prior to November 18, 2004 contravene U.K. and European Union competition law. The OFT decided not to impose penalties on MasterCard or MMF. On November 2 and 4, 2005, respectively, MMF and MasterCard appealed the OFTs decision to the U.K. Competition Appeals Tribunal. It is possible that a hearing on the appeals could take place as early as September 2006 and a decision could be issued by the end of the year. Because the MIF constitutes an essential element of MasterCards U.K. operations, the OFTs decision, if it is upheld on appeal, could have a significant adverse impact on MasterCards U.K. members and on MasterCards competitive position and overall business in the United Kingdom. In addition, the OFTs decision could lead to the filing of private actions against MasterCard by merchants and/or consumers which, if its appeal of the OFTs decision fails, could result in an award or awards of substantial damages.
In addition, referencing the November 18, 2004 change described above, the OFT commenced a new investigation of MasterCards current U.K. MIFs and, if it determines that they contravene U.K. and European Union competition law, it will issue a new decision and possibly levy fines accruing from the date of its first decision. MasterCard would likely appeal a negative decision by the OFT in any future proceeding to the Competition Appeals Tribunal. Such an OFT decision could lead to the filing of private actions against MasterCard by merchants and/or consumers which, if MasterCards appeal of the OFTs decision were to fail, could result in an award or awards of substantial damages.
Germany. On January 19, 2006, a German retailers association filed a complaint with the Federal Cartel Office in Germany concerning MasterCards and Visas domestic MIFs. The complaint alleges that MasterCards and Visas MIFs are not transparent to cardholders and include extraneous costs. MasterCard understands that the Federal Cartel Office is reviewing the complaint.
Other Jurisdictions. In Spain, the Competition Tribunal issued a decision in April 2005 denying the interchange fee exemption applications of two of the three domestic credit and debit card processing systems and beginning the process to revoke the exemption it had previously granted to the third such system. The interchange fees set by these three processors apply to MasterCard transactions in Spain and consequently, MasterCard has appealed this decision. In addition, the Tribunal expressed views as to the appropriate manner for setting domestic interchange fees which, if implemented, would result in substantial reductions in credit and debit card interchange fees in Spain. In December 2005, the processors agreed to change the manner in which they set interchange fees, and the new fees are currently being assessed by the Spanish competition authorities to determine if they qualify for an exemption. This could have a material impact on MasterCards business in Spain. MasterCard is aware that regulatory authorities and/or central banks in certain other jurisdictions, including Poland, Portugal, Norway,
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Sweden, New Zealand, Mexico, Colombia, Brazil and Hungary are reviewing MasterCards and/or its members interchange fees and/or related practices and may seek to regulate the establishment of such fees and/or such practices.
At this time, it is not possible to determine the outcome of, or estimate the liability related to, these interchange-related litigations and proceedings. No provision for losses have been provided in connection with these litigations and proceedings.
Plaintiff Communication
One of the plaintiffs in MasterCards antitrust litigations has asserted in a written communication that the damages it believes it is likely to recover in its lawsuit will exceed MasterCards capital and ability to pay, and that MasterCard has failed to adequately disclose to public investors in the proposed initial public offering described in Note 2 the possibility of substantial damages judgments against MasterCard in such lawsuit and the other pending litigations against MasterCard, which the plaintiff has asserted are likely to be in the billions of dollars before trebling. The plaintiff has also requested that MasterCard not relinquish its right to assess its member banks, which the plaintiff alleged would shift the liability to public investors, and increase MasterCards litigation reserves to an appropriate (but unspecified) amount. MasterCard has responded to this plaintiff indicating that it disagrees with the plaintiffs characterization of both its lawsuit and MasterCards financial position following the closing of the proposed initial public offering. Contrary to the plaintiffs claims, MasterCard also believes that its litigation disclosure is materially accurate and complete and in accord with all applicable laws and regulations.
Note 10. Settlement and Travelers Cheque Risk Management
Settlement risk is the legal exposure due to the difference in timing between the payment transaction date and subsequent settlement. Settlement risk is estimated using the average daily card charges during the quarter multiplied by the estimated number of days to settle. The Company has global risk management policies and procedures, which include risk standards to provide a framework for managing the Companys settlement exposure. MasterCard Internationals rules generally guarantee the payment of certain MasterCard, Cirrus and Maestro transactions between principal members. The term and amount of the guarantee are unlimited. Member-reported transaction data and the transaction clearing data underlying the settlement risk exposure calculation may be revised in subsequent reporting periods.
In the event that MasterCard International effects a payment on behalf of a failed member, MasterCard International may seek an assignment of the underlying receivables. Subject to approval by the Board of Directors, members may be charged for the amount of any settlement loss incurred during the ordinary activities of the Company. MasterCard Internationals right to impose special assessments arising out of extraordinary events on its members will be eliminated once the new ownership structure and governance changes are completed, as described in Note 2.
MasterCard requires certain members that are not in compliance with the Companys risk standards in effect at the time of review to post collateral, typically in the form of letters of credit and bank guarantees. This requirement is based on management review of the individual risk circumstances for each member that is out of compliance. In addition to these amounts, MasterCard holds collateral to cover variability and future growth in member programs; the possibility that it may choose to pay merchants to protect brand integrity in the event of merchant bank/acquirer failure, although it is not contractually obligated to do so; and Cirrus and Maestro related risk. MasterCard monitors its credit risk portfolio on a regular basis to estimate potential concentration risks and the adequacy of collateral on hand. 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.
Estimated settlement exposure, and the portion of the Companys uncollateralized settlement exposure for MasterCard-branded transactions that relates to members that are deemed not to be in compliance with, or that are under review in connection with, the Companys risk management standards were as follows:
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Although MasterCard holds collateral at the member level, the Cirrus and Maestro estimated settlement exposures are calculated at the regional level. Therefore, these settlement exposures are reported on a gross basis, rather than net of collateral.
Of the total estimated settlement exposure under the MasterCard brand, net of collateral, the U.S. accounted for approximately 49% at March 31, 2006 and December 31, 2005. The second largest country that accounted for this exposure was the United Kingdom at approximately 9% and 10% at March 31, 2006 and December 31, 2005, respectively. Of the total uncollateralized settlement exposure attributable to non-compliant members, five members represented approximately 75% at March 31, 2006 and December 31, 2005.
MasterCard guarantees the payment of MasterCard-branded travelers cheques in the event of issuer default. The guarantee estimate is based on all outstanding MasterCard-branded travelers cheques, reduced by an actuarial determination of cheques that are not anticipated to be presented for payment. The term and amount of the guarantee are unlimited. MasterCard calculated its MasterCard-branded travelers cheques exposure under this guarantee as $818,915 and $934,124 at March 31, 2006 and December 31, 2005, respectively.
A significant portion of the Companys credit risk is concentrated in one MasterCard travelers cheque issuer. MasterCard has obtained an unlimited guarantee estimated at $662,126 and $762,579 at March 31, 2006 and December 31, 2005, respectively, from a financial institution that is a member, to cover all of the exposure of outstanding travelers cheques with respect to that issuer. In addition, MasterCard has obtained guarantees estimated at $24,305 and $26,457 at March 31, 2006 and December 31, 2005, respectively, from financial institutions that are members in order to cover the exposure of outstanding travelers cheques with respect to another issuer. These guarantee amounts have also been reduced by an actuarial determination of cheques that are not anticipated to be presented for payment.
Based on the Companys ability to charge its members for settlement and travelers cheque losses, the effectiveness of the Companys global risk management policies and procedures, and the historically low level of losses that the Company has experienced, management believes the probability of future payments for settlement and travelers cheque losses in excess of existing reserves is negligible. As a result of the proposed change in ownership structure and governance, which is described in Note 2, the Company reassessed whether it would be necessary to record an obligation for the fair value of some or all of its settlement and travelers cheque guarantees and has determined that an obligation should not be established.
Note 11. Foreign Exchange Risk Management
The Company enters into foreign currency forward contracts to minimize risk associated with anticipated receipts and disbursements denominated in foreign currencies and the possible changes in value due to foreign exchange fluctuations of assets and liabilities denominated in foreign currencies. MasterCards forward contracts are classified by functional currency as summarized below:
U.S. Dollar Functional Currency | ||||||||||||||
March 31, 2006 | December 31, 2005 | |||||||||||||
Forward Contracts |
Notional |
Estimated Fair Value |
Notional |
Estimated Fair Value |
||||||||||
Commitments to purchase foreign currency |
$ | 63,690 | $ | (455 | ) | $ | 77,555 | $ | 194 | |||||
Commitments to sell foreign currency |
$ | 24,816 | $ | (246 | ) | $ | 33,351 | $ | 245 | |||||
Euro Functional Currency | ||||||||||||||
March 31, 2006 | December 31, 2005 | |||||||||||||
Forward Contracts |
Notional |
Estimated Fair Value |
Notional |
Estimated Fair Value |
||||||||||
Commitments to purchase foreign currency |
$ | 164,067 | $ | (2,528 | ) | $ | 217,925 | $ | 922 | |||||
Commitments to sell foreign currency |
$ | 25,208 | $ | 218 | $ | 39,446 | $ | (535 | ) |
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued
(In thousands, except per share and percent data)
Brazilian Real Functional Currency
March 31, 2006 | December 31, 2005 | ||||||||||||
Forward Contracts |
Notional |
Estimated Fair Value |
Notional |
Estimated Fair Value |
|||||||||
Commitments to purchase foreign currency |
$ | 36,036 | $ | (1,358 | ) | $ | | $ | |
The currencies underlying the foreign currency forward contracts consist primarily of euro, U.K. pounds sterling, Brazilian real, Australian dollars and Japanese yen. The fair value of the foreign currency forward contracts generally reflects the estimated amounts that the Company would receive or (pay), on a pre-tax basis, to terminate the contracts at the reporting date based on broker quotes for the same or similar instruments. The terms of the foreign currency forward contracts are generally less than 18 months. The Company has deferred $1,716 of net losses and $739 of net gains, after tax, in accumulated other comprehensive income as of March 31, 2006 and December 31, 2005, respectively, all of which is expected to be reclassified to earnings within the next nine months to provide an economic offset to the earnings impact of the anticipated cash flows hedged.
The Companys derivative financial instruments are subject to both credit and market risk. Credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual terms. Market risk is the potential change in an investments value caused by fluctuations in interest and currency exchange rates, credit spreads or other variables. Credit and market risk related to derivative instruments were not material at March 31, 2006 and December 31, 2005.
Generally, the Company does not obtain collateral related to forward contracts because of the high credit ratings of the counterparties that are members. The amount of accounting loss the Company would incur if the counterparties failed to perform according to the terms of the contracts is not considered material.
Note 12. Subsequent Events
On April 28, 2006, the Company entered into a committed 3-year unsecured $2,500,000 revolving credit facility (the Credit Facility) with certain financial institutions. The Credit Facility, which expires on April 28, 2009, replaced our prior $2,250,000 credit facility which was to expire on June 16, 2006 (the Prior Credit Facility). Borrowings under the facility are available to provide liquidity in the event of one or more settlement failures by MasterCard International members and, subject to a limit of $500,000, for general corporate purposes. Interest on borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) plus an applicable margin of 28 basis points or an alternative base rate. A utilization fee of 10 basis points would be charged in certain circumstances if outstanding borrowings under the facility exceed 50% of commitments. MasterCard has agreed to pay a facility fee of 7 basis points on the total commitment, or $1,750 annually. MasterCard was in compliance with the covenants of our prior credit facility as of March 31, 2006. There were no borrowings under the prior credit facility at March 31, 2006. The majority of Credit Facility lenders are members or affiliates of members of MasterCard International.
Upon completion of the planned initial public offering, as described in Note 2, Standard & Poors Ratings Services (S&P) has announced that it expects to lower MasterCards counterparty credit ratings from A-/A-2 to BBB+/A-2 and MasterCards subordinated debt rating from BBB+ to BBB, both with stable outlook. Until such time, the existing ratings will remain on credit watch with negative implications. If S&P lowers MasterCards counterparty credit rating to BBB+, the facility fee will increase to 8 basis points on the total commitment, or $2,000 annually and the applicable margin on LIBOR based loans will increase to 37 basis points. The applicable margin, the utilization fee, and the facility fee are based on MasterCards counterparty credit rating and would increase further if our credit rating is further lowered.
In April 2006, MasterCard canceled approximately 23 shares of Class A redeemable common stock primarily due to stockholders who have disclaimed ownership to these shares.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion should be read in conjunction with the consolidated financial statements and notes of MasterCard Incorporated and its consolidated subsidiaries, including MasterCard International Incorporated (MasterCard International) and MasterCard Europe sprl (MasterCard Europe)(together, MasterCard or the Company) included elsewhere in this report. References to we, our and similar terms in the following discussion are references to the Company.
Forward-Looking Statements
This Report on Form 10-Q contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this Report, the words believe, expect, could, may, would, will and similar words are intended to identify forward-looking statements. These statements relate to our 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. We believe there are certain risk factors that are important to our business, and these could cause actual results to differ from our expectations. Reference should be made to the Companys 2005 Annual Report on Form 10-K for a complete discussion of these risk factors under the caption Risk Factors in Item 1A Risk Factors.
Overview
We are a global payment solutions company that provides a variety of services in support of our customers credit, debit and related payment programs. We manage a family of well-known, widely accepted payment card brands including MasterCard ® , MasterCard Electronic , Maestro ® and Cirrus ® , which we license to our financial institution customers. As part of managing these brands, we also provide our customers with information and transaction processing services and establish and enforce rules and standards surrounding the use of our payment card system by customers and merchants. We generate revenues from the fees that we charge our customers for providing these transaction processing and other payment-related services (operations fees) and by charging assessments to our customers based on the gross dollar volume (GDV) of activity on the cards that carry our brands (assessments). Our pricing for transactions and services is complex. Each category of revenue has numerous fee components depending on the types of transactions or services provided. In addition, standard pricing varies among our regional businesses, and such pricing can be customized further for our customers through incentive and rebate agreements. Operations fees are typically transaction-based and include authorization, settlement and switch, connectivity, currency conversion, warning bulletins, and other fees for a variety of additional services. Assessments are based on GDV for a specific time period and the rates vary depending on the nature of the transactions that generate GDV. GDV includes the aggregated dollar amount of usage (purchases, cash disbursements, balance transfers and convenience checks) on MasterCard-branded cards. Our revenues are based upon transactional information accumulated by our systems or reported by our customers. Our operating expenses are comprised primarily of general and administrative expenses such as personnel, professional fees, data processing, telecommunications, travel and advertising and marketing expenses to promote our brands, including promotions and sponsorships.
We evaluate and monitor our business based on our results from operations, including our percentage of revenue growth and operating expenses as a percentage of total revenue, and our financial position. In addition, we utilize growth in GDV and processed transactions to monitor the strength of our business.
Our liquidity and capital position are strong. We had $1.3 billion in cash, cash equivalents and available-for-sale securities, and $1.3 billion in stockholders equity as of March 31, 2006.
We achieved double-digit revenue growth of 12% in the first three months of 2006 from the comparable period in 2005, which includes a 2% impact of foreign currency fluctuation against the euro. The increase in revenues was due to higher gross usage on cards carrying our brands for goods and services, a larger number of transactions processed by MasterCard, higher cross-border travel by cardholders using our cards and certain pricing changes that went into
24
effect on April 1, 2005. The pricing changes, including implementing new fees, increasing existing fees or modifying our fee calculation methodology accounted for approximately 5% of net revenue growth for the three months ended March 31, 2006. Significant changes in the methodology for calculating fees primarily related to a component of settlement fees being changed from tiered pricing to a flat rate, a component of authorization fees being changed from monthly pricing to weekly pricing and connectivity fees being expanded to include a charge for the volume of information being transmitted in addition to the fixed fee initially charged. We review our pricing on a regular basis and do not anticipate significant pricing increases in 2006. Rebates and incentives were 23% and 19% of our gross revenues in the three months ended March 31, 2006 and 2005, respectively. In the three months ended March 31, 2006, we provided significant incentives to support the conversion of a large payment card program to MasterCard. The conversion is anticipated to be completed in June 2006 which will have a significant negative impact on our second quarter assessment revenue and, accordingly, a significant negative impact on our second quarter net revenue growth. We expect increasing incentives and rebates under our agreements with our customers and merchants to continue to largely offset gross assessments growth throughout 2006. Operating expenses increased 10% in the first three months of 2006 from the comparable period in 2005, which includes a 2% impact of foreign currency fluctuation against the euro. We continued to reduce our operating expenses as percentage of total revenues to 75% in 2006 from 77% in 2005.
We believe the trend within the global payments industry from paper-based forms of payment such as cash and checks toward electronic forms of payment such as cards creates significant opportunities for the continued growth of our business. Our strategy is to drive growth by further penetrating our existing customer base and by expanding our role in targeted geographies and higher-growth segments of the global payments industry (such as corporate payments, prepaid cards and chip based cards), enhancing our merchant relationships, maintaining unsurpassed acceptance and continuing to invest in our brands. We intend to expand our role in targeted geographies by, among other things, pursuing incremental payment processing opportunities in the European Union in connection with the implementation of the Single European Payment Area initiative and in Latin American and Asia/Pacific countries. We are committed to providing our key customers with coordinated services through integrated, dedicated account teams in a manner that allows us to leverage our expertise in payment programs, brand marketing, product development, technology, processing and consulting services for these customers. By investing in strong customer relationships over the long-term, we believe that we can increase our volume of business with key customers over time, and in support of this strategy, we are continuing to hire additional resources and developing sales and other personnel.
There is increased regulatory scrutiny of interchange fees and other aspects of the payments industry which could have an adverse impact on our business. In addition, we face exposure to antitrust and other types of litigation. Competition and pricing pressure within the global payments industry is increasing, due in part to consolidation within the banking sector and the growing power of merchants. Regulatory actions, litigation, and pricing pressure may lead us to change our pricing arrangements and could reduce our overall revenues. See Item 1A Risk Factors of the Companys 2005 Annual Report on Form 10-K for these and other risks facing our business.
We establish standards and procedures for the acceptance and settlement of our customers transactions on a global basis. Our customers may choose to engage third parties for transaction processing and are responsible to ensure that these third parties comply with our standards. Cardholder and merchant relationships are managed principally by our customers. Accordingly, we do not issue cards, extend credit to cardholders, determine the interest rates (if applicable) or other fees charged to cardholders by issuers, or establish the merchant discount charged by acquirers in connection with the acceptance of cards that carry our brands.
Proposed New Ownership and Governance Structure
We are pursuing a plan for a new ownership and governance structure that will include the appointment of a new board of directors comprised of a majority of directors that will be independent of MasterCard and our members, the establishment of a charitable foundation and the transition to being a publicly traded company.
Under the proposed ownership and governance structure, MasterCards current stockholders are expected to retain a 44% equity interest (or 41% of our equity if the underwriters exercise their option to purchase additional shares in full) in the company through ownership of new non-voting Class B common stock. In addition, existing stockholders are expected to receive a new Class M common stock that will have no economic rights but will provide them with certain rights, including the right to approve specified significant corporate actions and entitle them to elect up to three of MasterCards directors (but not more than one quarter of all directors) but are otherwise non-voting.
MasterCard also intends to issue shares of a new voting Class A common stock to public investors through an initial public offering. Upon successful completion of the offering, these public investors will hold shares representing an expected 46% of the Companys equity and 82% of its general voting power (or 49% of our equity
25
and 83% of our general voting power if the underwriters exercise their option to purchase additional shares in full). Additional shares of Class A common stock, representing approximately 10% of the Companys equity and 18% of its voting rights (or 17% of our general voting power if the underwriters exercise their option to purchase additional shares in full), are expected to be issued as a donation to The MasterCard Foundation, a charitable foundation incorporated in Canada (the Foundation). This donation will have a dilutive effect on each existing stockholders equity interest in the Company. The Foundation will build on MasterCards existing charitable giving commitments by continuing to support programs and initiatives that help children and youth to access education, understand and utilize technology and develop the skills necessary to succeed in a diverse and global work force. In addition, the Foundation will work in conjunction with organizations that provide microfinance programs and services to financially disadvantaged persons and communities in order to enhance local economies and develop entrepreneurs. We are in the process of identifying directors of the Foundation that will be required to be independent of us and our members.
In connection with this donation we expect to record an expense that is equal to the aggregate value of the Class A common stock we are donating at the time of the offering together with approximately $40 million in cash to be donated to the Foundation over a period of up to four years in support of its operating expenses and charitable disbursements for the first four years of its operations, and we may make additional cash contributions to the Foundation after this period. Because the Foundations operations are currently being established, the overall size and timing of our expected initial cash donation have not been finally determined. The value of the shares of Class A common stock we donate will be determined based on the initial public offering price per share of Class A common stock in the initial public offering less a marketability discount of 25%. This marketability discount and the methodology used to quantify it were determined by management in consultation with independent valuation consultants retained by MasterCard. As a result of this expense, we expect to record a significant net loss in the three and six months ended June 30, 2006 and may record a net loss for the 2006 fiscal year. We also expect to record expense equal to the value of any cash we donate in the period or periods in which such donation or donations are made. The expense of these donations will generally not be deductible to MasterCard for tax purposes. As a result of the difference between financial statement and tax treatments of the donations, we expect there to be a significant increase to our effective tax rate in the periods in which the contributions are made.
We intend to use all but $650 million of our net proceeds from the initial public offering (including any proceeds received pursuant to the underwriters option to purchase additional shares) to redeem a number of shares of Class B common stock from our existing stockholders that is equal to the aggregate number of shares of Class A common stock that we issue to investors in the initial public offering (including any shares sold pursuant to the underwriters option to purchase additional shares) and to the Foundation. We intend to use the remaining proceeds to increase our capital, defend ourselves against legal and regulatory challenges, expand our role in targeted geographies and higher growth segments of the global payments industry and for other general corporate purposes. However, we have not determined the amounts of such remaining proceeds that are to be allocated to these purposes. Implementation of the new ownership and governance structure is subject to various approvals, including requisite regulatory filings. Our stockholders approved the new ownership and governance structure at a special meeting on November 28, 2005.
In addition, in connection with our new ownership and governance structure we are implementing equity based compensation plans. We expect to convert our existing long term incentive cash award plans into an equity based compensation plan. Based on the proposal for this conversion, we may recognize approximately $10 million additional personnel expense in future periods based on vesting within the plans. Our Compensation Committee also approved 2006 awards under the equity based long term incentive plan. The implementation date of these awards has not been determined as the underlying transactions have not been completed. We also intend to grant a one time restricted stock unit award to non-executive management employees of approximately 440 thousand shares in total which will result in deferred stock-based compensation equal to the fair value of the restricted stock units on the grant date, which will be amortized over the three-year vesting period.
Impact of Foreign Currency Rates
Our operations are impacted by changes in foreign currency exchange rates. Assessment fees are calculated based on local currency volume, after conversion to U.S. dollar volume using average exchange rates for the quarter. As a result, assessment revenues decreased due to the strengthening of the U.S. dollar in the three months ended March 31, 2006 versus the comparable period in 2005. In the first quarter of 2006, a 12% increase in GDV on a
26
U.S. dollar converted basis, was below local currency GDV growth of 13%, compared to the same period in the prior year.
We are especially impacted by the movements of the euro relative to the U.S. dollar since the functional currency of MasterCard Europe, our principal European operating subsidiary, is the euro. The strengthening or devaluation of the U.S. dollar against the euro impacts the translation of MasterCard Europes operating results into U.S. dollar amounts are summarized as follows:
For the three months
ended March 31, |
||||||||
2006 | 2005 | |||||||
Average euro to U.S. dollar average exchange rate |
$ | 1.2018 | $ | 1.3083 | ||||
Strengthening (devaluation) of U.S. dollar to euro |
8 | % | (5 | )% | ||||
Revenue change attributable to translation of MasterCard Europe revenues to U.S. dollars |
(2 | )% | 1 | % | ||||
Operating expense change attributable to translation of MasterCard Europe expenses to U.S. dollars |
(2 | )% | 1 | % |
Revenues
We earned approximately 67% and 63% of our net revenues from net operations fees and approximately 33% and 37% of our net revenues from net assessments in the three months ended March 31, 2006 and 2005, respectively. Operations fees are typically user fees for facilitating the processing of payment transactions and information management among our customers. MasterCards system for transaction processing involves four participants in addition to us: issuers (the cardholders banks), acquirers (the merchants banks), merchants and cardholders. Operations fees are charged to issuers, acquirers or their delegated processors for transaction processing services, specific programs to promote MasterCard-branded card acceptance and additional services to assist our customers in managing their businesses. The significant components of operations fees are as follows:
| Authorization occurs when a merchant requests approval for a cardholders transaction. We charge a fee for routing the authorization for approval to or from the issuer or in certain circumstances, such as when the issuers systems are unavailable, for approval by us or others on behalf of the issuer in accordance with the issuers instructions. Our rules, which vary across regions, establish the circumstances under which merchants and acquirers must seek authorization of transactions. These fees are primarily paid by issuers. |
| Settlement refers to the process in which we determine the amounts due between issuers and acquirers for payment transactions and associated fees. Once quantified we transfer the financial transaction details and relevant funds among issuers, acquirers or their designated third-party processors. We charge a fee for these settlement services. These fees are primarily paid by issuers. |
| Switch fees are fees for the use of the MasterCard Debit Switch (MDS), our debit processing system. The MDS transmits financial messages between acquirers and issuers and provides transaction and statistical reporting and performs settlement between members and other debit transaction processing networks. These fees are primarily paid by issuers. |
| Currency conversion fees are volume-based fees charged to issuers for foreign currency conversion. We process transactions denominated in more than 160 currencies. As a result of our global system, cardholders have the ability to pay for transactions in the local currency of a merchant and for the charge to appear on the cardholders statement in their own home currency. Accordingly, currency conversion is used for cross-border transactions to complete the settlement between issuers and acquirers. |
| Acceptance development fees are charged to issuers based on GDV and support our focus on developing merchant relationships and promoting acceptance at the point of sale. These fees are primarily U.S. based. |
27
| Warning bulletin fees are charged to issuers and acquirers for listing invalid or fraudulent accounts either electronically or in paper form and for distributing this listing to merchants. |
| Connectivity fees are charged to issuers and acquirers for network access, equipment, and the transmission of authorization and settlement messages. The methodology for calculating the transmission fees was changed on April 1, 2005 so that they are based on the volume of information being transmitted through our systems and the number of connections to our systems. Prior to April 1, 2005, these transmission fees were calculated solely based on the number of connections. |
| Consulting and research fees as well as outsourcing services fees are primarily generated by MasterCard Advisors, our professional advisory services group. We provide a wide range of consulting, information and outsourcing services associated with our customers payment activities and programs. Research includes revenues from subscription-based services, access to research inquiry, and peer networking services generated by our independent financial and payments industry research group. We do not anticipate research becoming a significant percentage of our business. MasterCard Advisors revenues, of which consulting and research fees are components, are less than 10% of our consolidated revenues. |
| Other operations fees are primarily user-pay services including the sale of manuals, publications, holograms, information and reports, as well as compliance programs, to assist our customers in managing their businesses. In addition, other operations fees include fees for cardholder services in connection with the benefits provided with MasterCard-branded cards, such as insurance, telecommunications assistance for lost cards or locating automated teller machines. |
Generally we process all MasterCard-branded domestic transactions in the U.S. and in a few international markets. We process substantially all cross-border MasterCard, Maestro and Cirrus transactions. We charge relatively higher operations fee rates for settlement, authorization and switch fees on cross-border transactions and earn currency conversion fees if the transactions require conversion between two different currencies. Offline debit transactions are generally signature-based debit transactions and are processed and priced similar to credit transactions. Operations fees for processing domestic online debit transactions (Maestro and Cirrus transactions) are priced in a similar manner as domestic offline debit and credit transactions, but international offline debit and credit transactions are priced higher than international online debit transactions.
Assessments are calculated based on our customers GDV. Assessment rates vary by region. Most of our assessment rates are tiered and rates decrease when customers meet incremental volume hurdles. These rates also vary by the type of transaction. We generally assess at higher rates for cross-border volumes compared to domestic volumes. We also assess at higher rates for retail purchases versus cash withdrawals. Credit and offline debit transactions are assessed at higher rates than online debit transactions. In addition, from time to time the Company may introduce assessments for specific purposes such as market development programs. These assessments are often introduced at the request of customers in a particular region or country. Assessments that are based on quarterly GDV are estimated utilizing aggregate transaction information and projected customer performance.
In the three months ended March 31, 2006, gross revenue grew 17% from the comparable period in 2005. A component of our revenue growth for the three months ended March 31, 2006 was the result of implementing new fees and changes to existing fees charged to our customers on April 1, 2005. Our overall revenue growth is being moderated by the demand from our customers for better pricing arrangements and greater rebates and incentives. Accordingly, we have entered into business agreements with certain customers and merchants to provide GDV and other performance-based support incentives. Rebates and incentives as a percentage of gross revenues were approximately 23% and 19% for the three months ended March 31, 2006 and 2005, respectively. These pricing arrangements reflect enhanced competition in the global payments industry and the continued consolidation and globalization of our key customers and merchants. The rebates and incentives are calculated on a monthly basis based upon estimated performance and the terms of the related business agreements. Rebates and incentives are recorded as a reduction of revenue in the same period that performance occurs.
The United States remains our largest geographic market based on revenues. However, international revenues grew at a faster rate than U.S. revenues in the first quarter 2006 compared to the same period in 2005. The growth
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was not specifically related to any one region in which we do business. Revenue generated in the United States was approximately 53% and 56% of total revenues in the three months ended March 31, 2006 and 2005, respectively. No individual country, other than the United States, generated more than 10% of total revenues in any period.
Our business is dependent on certain world economies and consumer behaviors. In the past, our revenues have been impacted by specific events such as the war in Iraq, the SARS outbreak and the September 11, 2001 terrorist attack. Consumer behavior can be impacted by a number of factors, including confidence in the MasterCard brand.
Results of Operations
For the three months ended March 31, |
Percent
Increase
|
||||||||||
2006 | 2005 |
2006 vs. 2005 |
|||||||||
(In millions, except per share, percent and GDV amounts) | |||||||||||
Operations fees |
$ | 495 | $ | 412 | 20.1 | % | |||||
Assessments |
244 | 246 | (0.8 | )% | |||||||
Net revenue |
739 | 658 | 12.3 | % | |||||||
General and administrative |
348 | 307 | 13.4 | % | |||||||
Advertising and market development |
183 | 172 | 6.4 | % | |||||||
Depreciation and amortization |
25 | 28 | (10.7 | )% | |||||||
Total operating expenses |
556 | 507 | 9.7 | % | |||||||
Operating income |
183 | 151 | 21.2 | % | |||||||
Total other income (expense) |
10 | (7 | ) | 242.9 | % | ||||||
Income before income tax expense |
193 | 144 | 34.0 | % | |||||||
Income tax expense |
66 | 51 | 29.4 | % | |||||||
Net income |
$ | 127 | $ | 93 | 36.6 | % | |||||
Net income per share (basic and diluted) 1 |
$ | 1.27 | $ | .93 | 36.6 | % | |||||
Pro forma net income per share (basic and diluted) 2 |
$ | .94 | $ | .69 | 36.2 | % | |||||
Weighted average shares outstanding (basic and diluted) 1 |
100 | 100 | | ||||||||
Pro forma weighted average shares outstanding (basic and diluted) 2 |
135 | 135 | | ||||||||
Effective income tax rate |
34.3 | % | 35.3 | % | ** | ||||||
Gross dollar volume (GDV) on a U.S. dollar converted basis (in billions) |
426 | 382 | 11.5 | % | |||||||
Processed transactions 3 |
3,521 | 3,040 | 15.8 | % |
** | Not meaningful |
1 | As more fully described in Note 2 to the Consolidated Financial Statements included herein, in connection with the ownership and governance transactions we will reclassify all of our approximately 100 outstanding shares of existing Class A redeemable common stock so that our existing stockholders will receive 1.35 shares of our Class B common stock for each share of Class A redeemable common stock that they held prior to the reclassification and a single share of our Class M common stock. Accordingly, shares and per share data will be retroactively restated in the financial statements subsequent to the reclassification to reflect the reclassification as if it were effective at the start of the first period being presented in the financial statements. |
2 | Pro forma amounts give effect to the reclassification described above as if it were in place for the periods presented. |
3 | The data set forth for processed transactions represents all transactions processed by MasterCard, including PIN-based online debit transactions. Prior to 2005, processed transactions reported by MasterCard included certain MasterCard branded (excluding Maestro and Cirrus) transactions for which we received transaction details from our customers but which were not processed by our systems. We have also updated our transaction detail in 2006 to remove certain on-line debit transactions which did not result in a flow of funds, for example balance inquiry or failed transactions. Our management determined that it would be more appropriate to exclude such transactions from the processed transactions calculation. The processed transactions for the three months ended March 31, 2005 have been restated to be consistent with the calculation of processed transactions in 2006. Revenue has not been impacted by this change. |
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Operations Fees
For the three months ended March 31, |
Dollar
Increase (Decrease) |
Percent
Increase (Decrease) |
|||||||||||||
2006 | 2005 |
2006 vs.
2005 |
2006 vs. 2005 |
||||||||||||
(In millions, except percent) | |||||||||||||||
Authorization, settlement and switch |
$ | 265 | $ | 234 | $ | 31 | 13.2 | % | |||||||
Currency conversion |
78 | 71 | 7 | 9.9 | % | ||||||||||
Acceptance development fees |
47 | 29 | 18 | 62.1 | % | ||||||||||
Warning bulletin fees |
17 | 16 | 1 | 6.3 | % | ||||||||||
Connectivity |
18 | 8 | 10 | 125.0 | % | ||||||||||
Consulting and research fees |
17 | 9 | 8 | 88.9 | % | ||||||||||
Other operations fees |
102 | 87 | 15 | 17.2 | % | ||||||||||
Gross operations fees |
544 | 454 | 90 | 19.8 | % | ||||||||||
Rebates |
(49 | ) | (42 | ) | (7 | ) | 16.7 | % | |||||||
Net operations fees |
$ | 495 | $ | 412 | $ | 83 | 20.1 | % | |||||||
| Authorization, settlement and switch revenues increased due to the number of transactions processed through our systems increasing 16% in the three months ended March 31, 2006 from the comparable period in 2005. In 2006, a portion of the revenue increase was due to the pricing of a component of these revenues being restructured on April 1, 2005. In addition, the decreased volatility of exchange rates contributed to a decrease of $6 million in settlement revenue for the three months ended March 31, 2006. |
| Currency conversion revenues fluctuate with the level of cross-border transactions and our customers need for transactions to be converted into their base currency. |
| Acceptance development fees in the three months ended March 31, 2006 increased compared to the same period in 2005 primarily due to the implementation of new fees and increases on the pricing of existing fees which occurred on April 1, 2005. |
| Warning bulletin fees fluctuate with our customer requests for distribution of invalid account information. |
| Connectivity revenues in the three months ended March 31, 2006 increased compared to the same period in 2005 primarily due to a change in the connectivity fee structure on April 1, 2005. |
| Consulting and research fees increased primarily due to new engagements with our customers in the three months ended March 31, 2006 compared to the same period in 2005. Our business agreements with certain customers include consulting services as an incentive. Approximately 60% of the increase in the three months ended March 31, 2006 was generated by new engagements which were provided to customers as a result of incentive agreements. This type of incentive increases consulting fees and reduces assessments. |
| Other operations fees represent various revenue streams including cardholder services, compliance, holograms, and manuals and publications. The change in any individual revenue component was not material. |
| Rebates relating to operations fees are primarily based on transactions and volumes and, accordingly, increase as these variables increase. Rebates have been increasing due to agreements with new customers, renewals of existing agreements, ongoing consolidation of our customers and competition. Rebates as a percentage of gross operations fees were 9% in each of the three months ended March 31, 2006 and 2005, respectively. |
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Assessments
Assessments are revenues that are calculated based on our customers GDV. The components of assessments are as follows:
For the three months ended March 31, |
Dollar
Increase (Decrease) |
Percent
Increase (Decrease) |
|||||||||||||
2006 | 2005 |
2006 vs.
2005 |
2006 vs. 2005 |
||||||||||||
(In millions, except percent) | |||||||||||||||
Gross assessments |
$ | 411 | $ | 360 | $ | 51 | 14.2 | % | |||||||
Rebates and incentives |
(167 | ) | (114 | ) | (53 | ) | 46.5 | % | |||||||
Net Assessments |
$ | 244 | $ | 246 | $ | (2 | ) | (0.8 | )% | ||||||
GDV growth was 13% in the three months ended March 31, 2006 when measured in local currency terms, and 12% when measured on a U.S. dollar converted basis. Rebates and incentives provided to customers and merchants reduce assessments growth. Rebates and incentives as a percentage of gross assessments were 41% and 32% in the three months ended March 31, 2006 and 2005 respectively. Rebates and incentives are primarily based on GDV, however they may also contain fixed components for the issuance of new cards, launch of new programs or consulting services. In the three months ended March 31, 2006, we provided significant incentives to support the conversion of a large payment card program to MasterCard. The conversion is anticipated to be completed in June 2006 which will have a significant negative impact on our second quarter assessment revenue. We expect our agreements with our customers and merchants to continue to largely offset gross assessments growth in 2006.
Operating Expenses
Our operating expenses are comprised of general and administrative, advertising and market development, U.S. merchant lawsuit and other legal settlements and depreciation and amortization expenses. In the three months ended March 31, 2006, there was an increase in operating expenses of $49 million or 10% compared to the same period in 2005.
General and Administrative
General and administrative expenses consist primarily of personnel, professional fees, data processing, telecommunications and travel. In each of the three months ended March 31, 2006 and 2005, these activities accounted for approximately 47% of total revenues, respectively. The major components of general and administrative expenses were as follows:
For the three months ended March 31, |
Dollar
Increase (Decrease) |
Percent
Increase (Decrease) |
|||||||||||
2006 | 2005 |
2006 vs.
2005 |
2006 vs. 2005 |
||||||||||
(In millions, except percent) | |||||||||||||
Personnel |
$ | 227 | $ | 197 | $ | 30 | 15.2 | % | |||||
Professional fees |
32 | 31 | 1 | 3.2 | % | ||||||||
Telecommunications |
17 | 16 | 1 | 6.3 | % | ||||||||
Data processing |
15 | 16 | (1 | ) | (6.3 | )% | |||||||
Travel and entertainment |
22 | 19 | 3 | 15.8 | % | ||||||||
Other |
35 | 28 | 7 | 25.0 | % | ||||||||
General and administrative expenses |
$ | 348 | $ | 307 | $ | 41 | 13.4 | % | |||||
31
| Personnel expense increased in the three months ended March 31, 2006 primarily due to additional staff to support our strategic initiatives. As we continue to expand our customer-focused approach and expand our relationships with merchants, additional personnel are required. |
| Professional fees increased in the three months ended March 31, 2006 primarily due to consulting services used for implementing our strategic initiatives. |
| Telecommunications expense consists of expenses to support our global payments system infrastructure as well as our other telecommunication needs. |
| Data processing consists of expenses to operate and maintain MasterCards computer systems. These expenses vary with business volume growth, system upgrades and usage. |
| Travel and entertainment expenses are incurred primarily for travel to customer and regional meetings and accordingly have increased with the corresponding increase in our business activity. |
| Other includes rental expense for our facilities, foreign exchange gains and losses and other miscellaneous administrative expenses. |
Advertising and Market Development
Advertising and market development consists of expenses associated with advertising, marketing, promotions and sponsorships, which promote our brand and assist our customers in achieving their goals by raising consumer awareness and usage of cards carrying our brands. In the three months ended March 31, 2006, these activities accounted for approximately 25% of total revenues compared to 26% in the same period in 2005. Advertising and market development expenses increased $11 million or 6% in the three months ended March 31, 2006 versus the comparable period in 2005.
Our brands, principally MasterCard, are valuable strategic assets that drive card acceptance and usage and facilitate our ability to successfully introduce new service offerings and access new markets. Our approach to marketing activities combines advertising, sponsorships, promotions, interactive media and public relations as part of an integrated package designed to increase MasterCard brand awareness and preference and usage of MasterCard cards. We are committed to maintaining and enhancing our brands and image through advertising and marketing efforts on a global scale.
Merchant Lawsuit and Other Legal Settlements
In the first quarter of 2003, we recorded a pre-tax charge of $721 million ($469 million after-tax) consisting of (i) the monetary amount of the U.S. merchant lawsuit settlement (discounted at 8 percent over the payment term), (ii) certain additional costs in connection with, and in order to comply with, other requirements of the U.S. merchant lawsuit settlement, and (iii) costs to address the merchants who opted not to participate in the plaintiff class in the U.S. merchant lawsuit. The $721 million pre-tax charge amount was an estimate, which was subsequently revised based on the approval of the U.S. merchant lawsuit settlement agreement by the court, and other factors.
We are party to a number of currency conversion litigations which are more fully described in Note 9 to the Consolidated Financial Statements included herein. We may need to revise our $89 million reserve for the currency conversion litigations based on future developments.
Total liabilities for the U.S. merchant lawsuit and other legal settlements changed as follows (in millions):
Balance as of December 31, 2005 |
$ | 605 | |
Interest accretion |
10 | ||
Balance as of March 31, 2006 |
$ | 615 | |
32
Depreciation and Amortization
Depreciation and amortization expenses decreased $3 million in the three months ending March 31, 2006 versus the comparable period in 2005. This decrease was primarily related to certain assets becoming fully depreciated and less additions of equipment and software.
Other Income (Expense)
Other income (expense) is comprised primarily of investment income, interest expense and other gains and losses. Investment income increased $11 million in the three months ended March 31, 2006 due to dividends received and an increase in interest income from higher cash balances and interest rates. Interest expense decreased $6 million in the three months ended March 31, 2006 of which $4 million was due to a refund of interest assessed in the audit of the Companys federal income tax return, as well as the reduction of interest reserve requirements related to the Companys tax reserves.
Income Taxes
The effective income tax rate was 34.3% and 35.3% for the three months ended March 31, 2006 and 2005. The rate in 2006 is lower than 2005 primarily due to favorable developments with respect to foreign tax audits which occurred in the three months ended March 31, 2006. As discussed in more detail under the heading Proposed New Ownership and Governance Structure, MasterCard expects to record a significant expense equal to the value of Class A common shares and cash we donate to the Foundation. These donations will generally not be deductible to MasterCard for tax purposes. Accordingly, as a result of the difference between financial statement and tax treatments of the donations, we expect there to be a significant increase to our effective income tax rate in the periods in which the contributions are made.
Liquidity
We need capital resources and liquidity to fund our global development, to provide for credit and settlement risk, to finance capital expenditures and any future acquisitions and to service the payments of principal and interest on our outstanding debt and the settlement of the U.S. merchant lawsuit. At March 31, 2006 and December 31, 2005, we had $1.3 billion of cash, cash equivalents and available-for-sale securities with which to manage operations. We expect that the cash generated from operations and our borrowing capacity will be sufficient to meet our operating, working capital and capital needs in 2006. However, our liquidity could be negatively impacted by the adverse outcome of any of the legal or regulatory proceedings to which we are a party. See Item 1A Risk Factors Legal and Regulatory Risks in Part I, Item 1A of the Companys 2005 Annual Report on Form 10-K for a complete discussion of these risk factors.
Three Months Ended March 31, |
Percent Increase (Decrease) |
||||||||||
2006 | 2005 | 2006 vs. 2005 | |||||||||
(In millions) | |||||||||||
Cash flow data: |
|||||||||||
Net cash provided by (used in) operating activities |
$ | 41 | $ | (14 | ) | 392.9 | % | ||||
Net cash provided by (used in) investing activities |
(98 | ) | 52 | (288.5 | )% |
March 31, 2006 |
December 31, 2005 |
Percent Increase (Decrease) |
|||||||
2006 vs. 2005 | |||||||||
(In millions) | |||||||||
Balance sheet data: |
|||||||||
Current assets |
$ | 2,246 | $ | 2,228 | 0.8 | % | |||
Current liabilities |
1,418 | 1,557 | (8.9 | )% | |||||
Long-term liabilities |
980 | 970 | 1.0 | % | |||||
Equity |
1,308 | 1,169 | 11.9 | % |
Net cash provided by operating activities in the three months ended March 31, 2006 was $41 million compared to $14 million of net cash used in operating activities in the three months ended March 31, 2005. The increase in
33
cash from operations was principally due to stronger performance and higher collection of accounts receivable versus the prior period, partially offset by greater payments and prepayments for advertising, rebates and incentives in 2006 as compared to 2005. The use of cash from investing activities in the three months ended March 31, 2006 was primarily due to the purchases of available-for-sale-securities.
Under the terms of the U.S. merchant lawsuit settlement agreement, we are required to pay $100 million annually each December through the year 2012. Additionally, in accordance with the Companys employee incentive plans, certain payouts to participants are made in the first quarter of each year.
On April 28, 2006, we entered into a committed 3-year unsecured $2.5 billion revolving credit facility (the Credit Facility) with certain financial institutions. The Credit Facility, which expires on April 28, 2009, replaced our prior $2.25 billion credit facility which was to expire on June 16, 2006 (the Prior Credit Facility). Borrowings under the facility are available to provide liquidity in the event of one or more settlement failures by our members and, subject to a limit of $500 million, for general corporate purposes. Interest on borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (LIBOR) plus an applicable margin of 28 basis points or an alternative base rate. A utilization fee of 10 basis points would be charged in certain circumstances if outstanding borrowings under the facility exceed 50% of commitments. We have agreed to pay a facility fee of 7 basis points on the total commitment, or $1.8 million annually. We were in compliance with the covenants of our prior credit facility as of March 31, 2006. There were no borrowings under the prior credit facility at March 31, 2006. The majority of Credit Facility lenders are members or affiliates of members of MasterCard International.
Upon completion of the planned initial public offering, as described in Note 2 to the Consolidated Financial Statements included herein, Standard & Poors Ratings Services (S&P) has announced that it expects to lower our counterparty credit ratings from A-/A-2 to BBB+/A-2 and our subordinated debt rating from BBB+ to BBB, both with stable outlook. Until such time, the existing ratings will remain on credit watch with negative implications. If S&P lowers MasterCards counterparty credit rating to BBB+, the facility fee will increase to 8 basis points on the total commitment, or $2.0 million annually, and the applicable margin on LIBOR based loans will increase to 37 basis points. The applicable margin, the utilization fee, and the facility fee are based on MasterCards counterparty credit rating and would increase further if our credit rating is further lowered.
MasterCard Europe and European Payment System Services sprl, a subsidiary of MasterCard, have a 1 million euro overdraft facility for MasterCard Europe and European Payment System Services sprl and a 1 million euro guarantee facility for MasterCard Europe. Interest on borrowings under the overdraft facility is charged at 50 basis points over the relevant market index and interest for the guarantee facility is paid at a rate of 1.5% per annum on outstanding guarantees. There were no borrowings under these facilities at March 31, 2006 and December 31, 2005. Deutsche Bank AG is the lender of these facilities and is a member of MasterCard International.
MasterCard Europe has one additional uncommitted credit agreement totaling 100 million euros. The interest rate under this facility is Euro LIBOR plus 50 basis points per annum for amounts below 100 million euros and Euro LIBOR plus 250 basis points for amounts over the 100 million euro limit. For drawings in currencies other than the euro, interest will be charged at the above margins over the relevant currency base rate. There were no borrowings under this agreement at March 31, 2006 and 4 million euros outstanding at December 31, 2005. HSBC Bank plc is the lender of this facility and is a member of MasterCard International.
After the consummation of the initial public offering and subject to legally available funds, we currently intend to pay a quarterly cash dividend of $0.09 per share of Class A common stock and Class B common stock, commencing in the fourth quarter of 2006. The declaration and payment of any future dividends will be at the sole discretion of our board of directors after taking into account various factors, including our financial condition, settlement guarantees, operating results, available cash and current and anticipated cash needs.
34
Future Obligations
The following table summarizes as of March 31, 2006 our obligations that are expected to impact liquidity and cash flow in future periods. We believe we will be able to fund these obligations through cash generated from operations and our existing cash balances.
Payments Due by Period | |||||||||||||||
Total |
Less Than 1 Year |
2-3 Years | 4-5 Years |
More Than 5 Years |
|||||||||||
(In millions) | |||||||||||||||
Capital leases 1 |
$ | 54 | $ | 4 | $ | 6 | $ | 4 | $ | 40 | |||||
Operating leases 2 |
98 | 25 | 48 | 17 | 8 | ||||||||||
Sponsorships 3 , licensing & other 4 |
811 | 276 | 312 | 116 | 107 | ||||||||||
U.S. merchant lawsuit and other legal settlements 5 |
789 | 189 | 200 | 200 | 200 | ||||||||||
Debt 6 |
243 | 5 | 88 | 150 | | ||||||||||
Executive incentive plan benefit 7 |
21 | 21 | | | | ||||||||||
Total |
$ | 2,016 | $ | 520 | $ | 654 | $ | 487 | $ | 355 | |||||
1 | Most capital leases relate to certain property, plant and equipment used in our business. Our largest capital lease relates to our Kansas City, Missouri co-processing facility. |
2 | We enter into operating leases in the normal course of business, including the lease on our facility in St. Louis, Missouri. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional lease agreements. |
3 | Includes $180 million as of March 31, 2006 relating to a sponsorship agreement which the Company has sought to enforce through legal proceedings. Should the Company not succeed it would not be obligated to make payment. |
4 | Amounts primarily relate to sponsorships with certain organizations to promote the MasterCard brand. The amounts included are fixed and non-cancelable. In addition, these amounts include amounts due in accordance with leases for computer hardware, software licenses and other service agreements. Future cash payments that will become due to our customers under agreements which provide pricing rebates on our standard fees and other incentives in exchange for increased transaction volumes are not included in the table because the amounts due are indeterminable and contingent until such time as performance has occurred. MasterCard has accrued $295 million as of March 31, 2006 related to these agreements. |
5 | Represents amounts due in accordance with legal settlements, including the settlement agreement in the U.S. merchant lawsuit. |
6 | Debt primarily represents principal and interest owed on our subordinated notes due June 2008 and the principal owed on our Series A Senior Secured Notes due September 2009. We also have various credit facilities for which there were no outstanding balances at March 31, 2006 that, among other things, would provide liquidity in the event of settlement failures by our members. Our debt obligations would change if one or more of our members failed and we borrowed under these credit facilities to settle on our members behalf or for other reasons. |
7 | Represents Executive Incentive Plan and the Senior Executive Incentive Plan cash payments due to employees should they terminate employment. These amounts exclude the portion of the award that will be converted to restricted stock units. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
MasterCard has limited exposure to market risk or the potential for economic losses on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign currency exchange rates, and equity price risk. Management establishes and oversees the implementation of policies, which have been approved by the Board of Directors, governing our funding, investments, and use of derivative financial instruments. We monitor aggregate risk exposures on an ongoing basis. There have been no material changes in our market risk exposures at March 31, 2006 as compared to December 31, 2005.
35
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
MasterCard Incorporateds management, including the President and Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the Companys disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on that evaluation, the Companys President and Chief Executive Officer and Chief Financial Officer concluded that MasterCard Incorporated had effective disclosure controls and procedures for (i) recording, processing, summarizing and reporting information that is required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, within the time periods specified in the Securities and Exchange Commissions rules and forms and (ii) ensuring that information required to be disclosed in such reports is accumulated and communicated to MasterCard Incorporateds management, including its President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
In connection with the evaluation by the Companys Chief Executive Officer and Chief Financial Officer of changes in internal control over financial reporting that occurred during the Companys last fiscal quarter, no change in the Companys internal control over financial reporting was identified that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
36
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of MasterCard Incorporated:
We have reviewed the accompanying consolidated balance sheet of MasterCard Incorporated and its subsidiaries (the Company) as of March 31, 2006, and the related consolidated statements of operations, the consolidated statements of cash flows, and the consolidated condensed statements of comprehensive income for each of the three month periods ended March 31, 2006 and 2005, and the consolidated statement of changes in stockholders equity for the three month period ended March 31, 2006. These interim financial statements are the responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2005, and the related consolidated statements of operations, of comprehensive income (loss), of changes in stockholders equity, and of cash flows for the year then ended, managements assessment of the effectiveness of the Companys internal control over financial reporting as of December 31, 2005 and the effectiveness of the Companys internal control over financial reporting as of December 31, 2005; and in our report dated March 16, 2006, we expressed unqualified opinions thereon. Our report contained an explanatory paragraph for a change in accounting principle. Specifically, the Company changed its method for calculating the market-related value of pension plan assets used in determining the expected return on the assets component of annual pension cost in 2003. The consolidated financial statements and managements assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2005, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
New York, New York
May 2, 2006
37
MASTERCARD INCORPORATED
FORM 10-Q
PART II OTHER INFORMATION
Item 1. | Legal Proceedings |
Refer to Notes 8 and 9 to the Consolidated Financial Statements included herein.
Item 5. | Other Information |
On April 27, 2006, we entered into indemnification agreements with each of our directors that provide for us to indemnify them to the fullest extent permitted by Delaware law. We have also entered into indemnification agreements with each of the persons who have consented to be named as future directors in our registration statement on Form S-1 with respect to any liability that may arise as a result therefrom. The form of these indemnification agreements is filed as an exhibit to this report.
Item 6. | Exhibits |
Refer to the Exhibit Index included herein.
38
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: May 2, 2006 | MASTERCARD INCORPORATED | |||||||
(Registrant) | ||||||||
Date: May 2, 2006 | By: | /s/ ROBERT W. SELANDER | ||||||
Robert W. Selander President and Chief Executive Officer (Principal Executive Officer) |
||||||||
Date: May 2, 2006 | By: | /s/ CHRIS A. MCWILTON | ||||||
Chris A. McWilton Chief Financial Officer (Principal Financial Officer) |
||||||||
Date: May 2, 2006 | By: | /s/ TARA MAGUIRE | ||||||
Tara Maguire Corporate Controller (Principal Accounting Officer) |
39
EXHIBIT INDEX
Exhibit Number |
Exhibit Description |
|
3.1(a) | Amended and Restated Certificate of Incorporation of MasterCard Incorporated (incorporated by reference to Exhibit 3.1(a) to the Companys Quarterly Report on Form 10-Q dated June 28, 2002 and filed November 3, 2005 (No. 000-50250)). | |
3.1(b) | Amended and Restated Bylaws of MasterCard Incorporated (incorporated by reference to Exhibit 3.1(b) to the Companys Annual Report on Form 10-K filed March 2, 2005 (No. 000-50250)). | |
3.2(a) | Amended and Restated Certificate of Incorporation of MasterCard International Incorporated (incorporated by reference to Exhibit 3.2(a) to the Companys Quarterly Report on Form 10-Q filed November 3, 2005 (No. 000-50250)). | |
3.2(b) | Amended and Restated Bylaws of MasterCard International Incorporated (incorporated by reference to Exhibit 3.2(b) to the Companys Quarterly Report on Form 10-Q filed August 14, 2002 (No. 333-67544)). | |
10.1 | $2,500,000,000 Credit Agreement, dated as of April 28, 2006, among MasterCard Incorporated, MasterCard International Incorporated, the several lenders, Citigroup Global Markets Inc., as sole lead arranger and sole book manager, Citibank, N.A., as co-administrative agent, JPMorgan Chase Bank, N.A. as co-administrative agent, and J.P. Morgan Securities Inc., as co-arranger. | |
10.2 | Form of Indemnification Agreement between MasterCard Incorporated and each of its directors. | |
10.3 | Form of Indemnification Agreement between MasterCard Incorporated and each of its director nominees. | |
31.1 | Certification of Robert W. Selander, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chris A. McWilton, Chief Financial Officer, pursuant to Rule 13a-14(a)/ 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Robert W. Selander, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chris A. McWilton, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
40
Exhibit 10.1
EXECUTION COPY
$2,500,000,000
CREDIT AGREEMENT
Dated as of April 28, 2006
among
MASTERCARD INCORPORATED,
as Borrower
MASTERCARD INTERNATIONAL INCORPORATED,
as Guarantor
The Several Lenders
from Time to Time Parties Hereto
CITIGROUP GLOBAL MARKETS INC.,
as Sole Lead Arranger and
Sole Book Manager
and
CITIBANK, N.A.,
as Co-Administrative Agent
JPMORGAN CHASE BANK, N.A.,
as Co-Administrative Agent
J.P. MORGAN SECURITIES, INC.,
as Co-Arranger
COMMONWEALTH BANK OF AUSTRALIA,
HSBC BANK (USA), N.A. and
THE ROYAL BANK OF SCOTLAND PLC,
as Co-Syndication Agents
TABLE OF CONTENTS
Page | ||||
SECTION 1. DEFINITIONS | 1 | |||
1.1 |
Defined Terms | 1 | ||
1.2 |
Other Definitional Provisions | 18 | ||
SECTION 2. AMOUNT AND TERMS OF LOANS | 18 | |||
2.1 |
Revolving Credit Commitments | 18 | ||
2.2 |
Procedure for Revolving Credit Borrowing | 19 | ||
2.3 |
Facility Fee | 19 | ||
2.4 |
Termination or Reduction of Commitments | 19 | ||
2.5 |
Repayment of Revolving Credit Loans; Evidence of Debt | 20 | ||
2.6 |
Optional Prepayments | 20 | ||
2.7 |
Conversion and Continuation Options | 21 | ||
2.8 |
CAF Advances | 21 | ||
2.9 |
Procedure for CAF Advance Borrowing | 21 | ||
2.10 |
CAF Advance Payments | 24 | ||
2.11 |
Evidence of Debt | 25 | ||
2.12 |
Certain Restrictions | 25 | ||
2.13 |
Minimum Amounts of Tranches | 25 | ||
2.14 |
Interest Rates and Payment Dates | 25 | ||
2.15 |
Computation of Interest and Fees | 26 | ||
2.16 |
Inability to Determine Interest Rate | 26 | ||
2.17 |
Pro Rata Treatment and Payments | 27 | ||
2.18 |
Swing Line Commitment | 27 | ||
2.19 |
Illegality | 29 | ||
2.20 |
Requirements of Law | 30 | ||
2.21 |
Taxes | 31 | ||
2.22 |
Indemnity | 33 | ||
2.23 |
Commitment Increases | 33 | ||
2.24 |
Commitment Extensions | 34 | ||
2.25 |
Replacement of Lenders | 35 | ||
SECTION 3. REPRESENTATIONS AND WARRANTIES | 36 | |||
3.1 |
Financial Condition | 36 | ||
3.2 |
No Change | 36 | ||
3.3 |
Existence; Compliance with Law | 36 | ||
3.4 |
Corporate Power; Authorization; Enforceable Obligations | 37 | ||
3.5 |
No Legal Bar | 37 | ||
3.6 |
No Material Litigation | 37 | ||
3.7 |
No Default | 37 | ||
3.8 |
Ownership of Property; Liens | 38 | ||
3.9 |
Intellectual Property | 38 |
i
3.10 |
No Burdensome Restrictions | 38 | ||
3.11 |
Taxes | 38 | ||
3.12 |
Federal Margin Regulations | 38 | ||
3.13 |
ERISA | 39 | ||
3.14 |
Investment Company Act; Other Regulations | 39 | ||
3.15 |
Subsidiaries | 39 | ||
3.16 |
Purpose of Loans | 39 | ||
3.17 |
Environmental Matters | 40 | ||
3.18 |
Solvency | 40 | ||
SECTION 4. CONDITIONS PRECEDENT | 40 | |||
4.1 |
Conditions to Initial Loan | 40 | ||
4.2 |
Conditions to Each Loan | 42 | ||
SECTION 5. AFFIRMATIVE COVENANTS | 42 | |||
5.1 |
Financial Statements | 42 | ||
5.2 |
Certificates; Other Information | 43 | ||
5.3 |
Payment of Obligations | 43 | ||
5.4 |
Conduct of Business and Maintenance of Existence | 44 | ||
5.5 |
Maintenance of Property; Insurance | 44 | ||
5.6 |
Inspection of Property; Books and Records; Discussions | 44 | ||
5.7 |
Notices | 44 | ||
5.8 |
Environmental Laws | 45 | ||
SECTION 6. NEGATIVE COVENANTS | 46 | |||
6.1 |
Maintenance of Net Worth | 46 | ||
6.2 |
Limitation on Liens | 46 | ||
6.3 |
Limitation on Fundamental Changes | 47 | ||
6.4 |
Limitation on Transfer or Disposition of Assets | 47 | ||
6.5 |
Limitation on Investments | 48 | ||
6.6 |
Limitation on Transactions with Affiliates | 48 | ||
6.7 |
Limitation on Lines of Business | 48 | ||
6.8 |
Upstreaming | 48 | ||
SECTION 7. EVENTS OF DEFAULT | 49 | |||
SECTION 8. THE ADMINISTRATIVE AGENT | 51 | |||
8.1 |
Appointment | 51 | ||
8.2 |
Delegation of Duties | 51 | ||
8.3 |
Exculpatory Provisions | 51 | ||
8.4 |
Reliance by Administrative Agent | 52 | ||
8.5 |
Notice of Default | 52 | ||
8.6 |
Non-Reliance on Administrative Agent and Other Lenders | 52 |
ii
8.7 |
Indemnification | 53 | ||
8.8 |
Administrative Agent in Its Individual Capacity | 53 | ||
8.9 |
Successor Administrative Agent | 53 | ||
8.10 |
Substitute Administrative Agent | 54 | ||
8.11 |
Arrangers, Etc. | 54 | ||
8.12 |
Trust Indenture Act. | 54 | ||
SECTION 9. GUARANTEE | 55 | |||
SECTION 10. MISCELLANEOUS | 58 | |||
10.1 |
Amendments and Waivers | 58 | ||
10.2 |
Notices | 59 | ||
10.3 |
No Waiver; Cumulative Remedies | 61 | ||
10.4 |
Survival of Representations and Warranties | 61 | ||
10.5 |
Payment of Expenses and Taxes | 61 | ||
10.6 |
Successors and Assigns; Participations and Assignments | 62 | ||
10.7 |
Adjustments; Set-off | 66 | ||
10.8 |
Counterparts | 66 | ||
10.9 |
Severability | 66 | ||
10.10 |
Integration | 67 | ||
10.11 |
Termination of Commitments and Swing Line Commitments | 67 | ||
10.12 |
GOVERNING LAW | 67 | ||
10.13 |
Submission To Jurisdiction; Waivers | 67 | ||
10.14 |
Acknowledgements | 67 | ||
10.15 |
WAIVERS OF JURY TRIAL | 68 | ||
10.16 |
Confidentiality | 68 | ||
10.17 |
USA PATRIOT Act | 68 | ||
10.18 |
Termination of Agreement | 68 |
iii
SCHEDULES
1.1(a) | - | Cash Equivalents | ||
1.1(b) | - | Permitted Investments | ||
1.2 | - | Commitments | ||
3.1 | - | Interest Rate and Currency Protection | ||
3.6 | - | Material Litigation | ||
3.15 | - | Subsidiaries | ||
6.2(f) | - | Liens | ||
6.8 | - | Dividend Blocks | ||
10.7(b) | - | Fiduciary Accounts |
EXHIBITS
A | Form of Revolving Credit Note | |
B | Form of Swing Line Note | |
C | Form of Closing Certificate | |
D-1 | Form of CAF Advance Request | |
D-2 | Form of CAF Advance Offer | |
D-3 | Form of CAF Advance Confirmation | |
D-4 | Form of CAF Advance Assignment | |
E | Form of Swing Line Loan Participation Certificate | |
F-1 | Form of Opinion of General Counsel of Borrower and International | |
F-2 | Form of Opinion of Special New York Counsel to the Administrative Agent | |
G | Form of Borrowing Notice | |
H | Form of Assignment and Acceptance | |
I | Form of Compliance Certificate | |
J-1 | Form of New Lender Supplement | |
J-2 | Form of Commitment Increase Supplement |
CREDIT AGREEMENT, dated as of April 28, 2006 among MASTERCARD INCORPORATED, a Delaware corporation (the Borrower ), MASTERCARD INTERNATIONAL INCORPORATED, a Delaware corporation ( International or the Guarantor ), the several banks and other financial institutions from time to time parties to this Agreement (the Lenders ), and CITIBANK, N.A. ( Citibank ), as administrative agent for the Lenders hereunder (in such capacity, the Administrative Agent ), and JPMORGAN CHASE BANK, N.A., as back-up administrative agent for the Lenders hereunder (in such capacity, the Backup Agent ).
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms . As used in this Agreement, the following terms shall have the following meanings:
ABR : a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of:
(i) the rate of interest announced publicly by Citibank in New York City from time to time as Citibanks base rate; and
(ii) 1.00% per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publications shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case adjusted to the nearest 0.25%, or if there is no nearest 0.25%, to the next higher 0.25%; and
(iii) for any day, 0.50% per annum above the Federal Funds Rate in effect on such day.
Each change in any interest rate provided for herein based upon the ABR resulting from a change in the ABR shall take effect at the time of such change in the ABR.
ABR Loans : Revolving Credit Loans hereunder, the rate of interest applicable to which is based upon the ABR.
Administrative Agent : as defined in the preamble hereof.
Administrative Questionnaire : an Administrative Questionnaire in a form supplied by the Administrative Agent.
Affiliate : as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, control of a Person means the power, directly or indirectly, either to (a) vote 25% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
Agreement : this Credit Agreement, as amended, supplemented or otherwise modified from time to time.
Applicable Facility Fee Rate : for any Rating Level Period, the rate per annum set forth below opposite the reference to such Rating Level Period:
Rating Level Period |
Applicable Facility Fee Rate | |
Rating Level 1 Period |
0.060% | |
Rating Level 2 Period |
0.070% | |
Rating Level 3 Period |
0.080% | |
Rating Level 4 Period |
0.100% | |
Rating Level 5 Period |
0.150% | |
Rating Level 6 Period |
0.200% |
Each change in the Applicable Facility Fee Rate resulting from a Rating Level Change shall be effective on the effective date of such Rating Level Change.
Applicable Margin : for each LIBOR Loan and for any Rating Level Period, the rate per annum set forth below opposite the reference to such Rating Level Period:
Rating Level Period |
Applicable Margin | |
Rating Level 1 Period |
0.190% | |
Rating Level 2 Period |
0.280% | |
Rating Level 3 Period |
0.370% | |
Rating Level 4 Period |
0.525% | |
Rating Level 5 Period |
0.600% | |
Rating Level 6 Period |
0.800% |
C REDIT A GREEMENT
2
plus the Applicable Utilization Fee Rate for such Rating Level Period. Each change in the Applicable Margin resulting from a Rating Level Change shall be effective on the effective date of such Rating Level Change.
Applicable Utilization Fee Rate : for each day on which the drawn portion of the aggregate amount of the Commitments (including Swing Line Loans and CAF Advances) exceeds 50% of the aggregate amount of Commitments as in effect on the Closing Date, for any Rating Level Period, the rate per annum set forth below opposite the reference to such Rating Level Period:
Rating Level Period |
Applicable Utilization Fee Rate | |
Rating Level 1 Period |
0.100% | |
Rating Level 2 Period |
0.100% | |
Rating Level 3 Period |
0.100% | |
Rating Level 4 Period |
0.125% | |
Rating Level 5 Period |
0.125% | |
Rating Level 6 Period |
0.250% |
Each change in the Applicable Utilization Fee Rate resulting from a Rating Level Change shall be effective on the effective date of such Rating Level Change.
Assignee : as defined in subsection 10.6(c).
Available Commitment : as to any Lender on any day, an amount equal to the excess, if any, of (a) the amount of such Lenders Commitment over (b) the aggregate of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding and (ii) an amount equal to such Lenders Commitment Percentage of the aggregate principal amount of all Swing Line Loans then outstanding (after giving effect to any repayment of Swing Line Loans on such day).
Backup Agent : as defined in the preamble hereof.
Board : the Board of Governors of the Federal Reserve System of the United States (or any successor).
Borrower : as defined in the preamble hereof.
Borrowing Date : any Business Day specified in a notice pursuant to Sections 2.2, 2.9 or 2.18 as a date on which the Borrower requests the Lenders or the Swing Line Lender, as the case may be, to make Loans hereunder.
Business : as defined in subsection 3.17(b).
C REDIT A GREEMENT
3
Business Day : a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided that when such term is used to describe a day on which a borrowing, payment or interest rate determination is to be made in respect of a LIBOR Loan or a LIBOR CAF Advance, such day shall also be a day on which dealings in foreign currencies and exchange between banks may be carried on in London, England.
CAF Advance : each CAF Advance made pursuant to Section 2.8.
CAF Advance Availability Period : the period from and including the Closing Date to and including the date which is 7 days prior to the Revolving Credit Termination Date.
CAF Advance Confirmation : each confirmation by the Borrower of its acceptance of CAF Advance Offers, which confirmation shall be substantially in the form of Exhibit D-3 and shall be delivered to the Administrative Agent by facsimile transmission.
CAF Advance Interest Payment Date : as to each CAF Advance, each interest payment date specified by the Borrower for such CAF Advance in the related CAF Advance Request.
CAF Advance Maturity Date : as to any CAF Advance, the date specified by the Borrower pursuant to subsection 2.9(a) in its acceptance of the related CAF Advance Offer.
CAF Advance Offer : each offer by a Lender to make CAF Advances pursuant to a CAF Advance Request, which offer shall contain the information specified in Exhibit D-2 and shall be delivered to the Administrative Agent by telephone, immediately confirmed by facsimile transmission.
CAF Advance Request : each request by the Borrower for Lenders to submit bids to make CAF Advances, which request shall contain the information in respect of such requested CAF Advances specified in Exhibit D-1 and shall be delivered to the Administrative Agent in writing, by facsimile transmission, or by telephone, immediately confirmed by facsimile transmission.
Capital Lease : as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is, or is required to be, accounted for as a capital lease on the balance sheet of that Person.
Capitalized Lease Obligations : all obligations under Capital Leases of any Person, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP.
Capital Stock : any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person other than a corporation and any and all warrants or options to purchase any of the foregoing.
C REDIT A GREEMENT
4
Cash Equivalents : (i) cash equivalents in existence on March 31, 2006 as set forth on Schedule 1.1(a) (and, in the case of any such cash equivalents described on Schedule 1.1(a), any replacement of any such cash equivalents with substantially the same Investment), (ii) securities fully guaranteed by any state, commonwealth or territory of the United States or any other OECD Country, or by any municipality, political subdivision or taxing authority of any such state, commonwealth or territory, (iii) time deposits, eurocurrency time deposits, certificates of deposit, bankers acceptances or overnight bank deposits issued by any bank or financial institution having combined capital and surplus of not less than $500,000,000 and a Thomson Bank Watch Rating (or its equivalent) of at least B or by any Lender (any such bank, an Approved Bank ), with maturities of not more than one year from the date of acquisition, (iv) repurchase obligations with a term of not more than one year for underlying securities of the type described in clause (ii) entered into with an Approved Bank, (v) commercial paper issued by, or guaranteed by, any Approved Bank or by the parent company of any Approved Bank or commercial paper issued by, or guaranteed by, any company with a short-term commercial paper rating of at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moodys, or with an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, or issued by, or guaranteed by, any company with a long term unsecured debt or counterparty rating of at least A or A2, or the equivalent of each thereof, from S&P or Moodys, respectively, or with an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing such ratings generally, and in each case maturing within one year after the date of acquisition, (vi) debt securities issued by, or guaranteed by, any Approved Bank or by the parent company of any Approved Bank or debt securities issued by, or guaranteed by, any company with a long term unsecured debt or counterparty rating of at least A- or A3, or the equivalent of each thereof, from S&P or Moodys, respectively, or with an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing such ratings generally, (vii) asset-backed securities, mortgage-backed securities or other similar securities, in each case with a rating of at least A- or A3, or the equivalent of each thereof, from S&P or Moodys, respectively, or with an equivalent rating by a nationally recognized rating agency, (viii) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States or, if such obligations are in the currency of such country, any other OECD Country, (ix) any fund or funds making Investments generally in Investments of the type described in clauses (i) through (viii) above (or the equivalent thereof) or money market funds that comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, as amended and (x) other Investments in debt obligations in connection with the cash management operations of the Borrower and its subsidiaries so long as the aggregate outstanding amount of such Investments does not exceed $100,000,000 at any time.
C/D Assessment Rate : for any day as applied to any loan the interest rate applicable to which is based upon the ABR, the annual assessment rate in effect on such
C REDIT A GREEMENT
5
day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the FDIC ) classified as well-capitalized and within supervisory subgroup B (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. § 327.4 (or any successor provision) to the FDIC (or any successor) for the FDICs (or such successors) insuring time deposits at offices of such institution in the United States.
C/D Reserve Percentage : for any day as applied to any loan the interest rate applicable to which is based upon the ABR, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more.
Citibank : as defined in the preamble hereof.
Closing Date : the date on which the conditions precedent set forth in Section 4.1 shall be satisfied.
Code : the Internal Revenue Code of 1986, as amended from time to time.
Commitment : as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lenders name on Schedule 1.2, as such amount may be reduced or increased from time to time in accordance with the provisions of this Agreement.
Commitment Increase Offer : as defined in subsection 2.23(a).
Commitment Increase Supplement : as defined in subsection 2.23(c).
Commitment Percentage : as to any Lender at any time, the percentage which such Lenders Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lenders Revolving Credit Loans then outstanding constitutes of the aggregate principal amount of the Revolving Credit Loans then outstanding).
Commitment Period : the period from and including the date hereof to but not including the Revolving Credit Termination Date or such earlier date on which the Commitments shall terminate as provided herein.
Commonly Controlled Entity : an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001(a)(14) of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b) or (c) of the Code.
C REDIT A GREEMENT
6
Confidential Information : non-public information that the Borrower or any of its Subsidiaries (or any of their representatives) furnishes to the Administrative Agent or any Lender, but does not include any such information that is or becomes generally available to the public (other than as a result of a breach of this Agreement) or that was available to the Administrative Agent or such Lender on a non-confidential basis prior to its being furnished by the Borrower or any of its Subsidiaries (other than as a result of a breach of this Agreement or to the extent obtained from a source known to the Administrative Agent or such Lender to be bound by a confidentiality agreement with the Borrower or any of its Subsidiaries and to be in breach of such confidentiality agreement).
Consolidated Net Worth : for any Person and as at any date of determination, the members or stockholders equity of such Person, as the case may be, as determined in accordance with GAAP and as would be reflected on a consolidated balance sheet of such Person prepared as of such date.
Contractual Obligation : as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is legally bound.
Declined Amount : as defined in subsection 2.23(a).
Declining Lender : as defined in subsection 2.23(a).
Default : any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.
Dollars and $ : dollars in lawful currency of the United States.
Domestic Subsidiary : any Subsidiary organized under the laws of any jurisdiction within the United States.
Environmental Laws : any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
ERISA : the Employee Retirement Income Security Act of 1974, as amended from time to time.
Eurocurrency Reserve Requirements : for any day as applied to a LIBOR Loan or a LIBOR CAF Advance, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D of the Board) maintained by a member bank of such system.
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Event of Default : any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.
Executive Incentive Compensation Plan : as described in the annual report of the Borrower.
Existing Credit Agreement : the Credit Agreement dated as of June 17, 2005, among the Borrower, the Guarantor, certain Lenders, Citibank, as Administrative Agent, and JPMorgan Chase Bank, N.A., as Backup Agent, as amended.
Federal Funds Rate : for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average of the quotations received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.
Fixed Rate CAF Advance : any CAF Advance made pursuant to a Fixed Rate CAF Advance Request.
Fixed Rate CAF Advance Request : any CAF Advance Request requesting the Lenders to offer to make CAF Advances at a fixed rate of interest (as opposed to a rate composed of the London Interbank Offered Rate plus (or minus) a margin).
Foreign Subsidiary : as to any Person, any Subsidiary of such Person organized under the laws of any jurisdiction outside the United States.
Form S-1 : the registration statement on Form S-1 filed by the Borrower with the Securities and Exchange Commission on September 15, 2005 in accordance with the Securities Act of 1933, as amended, and all amendments to such registration statement through and including Amendment No. 4 thereto so filed on April 17, 2006, but without giving effect to any further amendments to such registration statement filed after the date hereof.
GAAP : generally accepted accounting principles in the United States in effect from time to time.
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Governmental Authority : any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
Guarantee : as to any Person (the guaranteeing person ), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the primary obligations ) of any other third Person (the primary obligor ) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided , however , that the term Guarantee shall not include endorsements of instruments for deposit or collection in the ordinary course of business or obligations of any Obligor or its Subsidiaries in respect of settlement failures by one or more of its members. The amount of any Guarantee of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee shall be such guaranteeing persons maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
Guaranteed Obligations : as defined in Section 9.
Guarantor : as defined in the preamble hereof.
Indebtedness : as to any Person, (a) all indebtedness of such Person for borrowed money, (b) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (c) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (d) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (e) all Capitalized Lease Obligations of such Person, (f) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, e.g. , take-or-pay and similar obligations, (g) all obligations of such Person under Interest Rate Agreements, and (h) without duplication, all Guarantees of such Person of Indebtedness of others, provided that
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Indebtedness shall not include trade payables and accrued expenses relating to employees, in each case arising in the ordinary course of business and the amount of Indebtedness pursuant to clause (g) above shall be the amount that would be payable upon termination of the relevant Interest Rate Agreement (giving effect to netting).
Insolvency : with respect to any Multiemployer Plan, the condition that such Multiemployer Plan is insolvent within the meaning of Section 4245 of ERISA.
Insolvent : pertaining to a condition of Insolvency.
Interest Payment Date : (a) as to any Loan, the rate of interest applicable to which is based upon the ABR, the last day of each March, June, September and December, on the Revolving Credit Termination Date, (b) as to any LIBOR Loan or LIBOR CAF Advance having an Interest Period of three months or less, or any Fixed Rate CAF Advance having an Interest Period of 90 days or less, the last day of such Interest Period and (c) as to any LIBOR Loan or any Fixed Rate CAF Advance having an Interest Period longer than three months or 90 days, respectively, each day which is three months or 90 days, respectively, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period.
Interest Period : (a) with respect to any LIBOR Loan:
(i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto;
(b) with respect to any CAF Advance, the period specified in the CAF Advance Confirmation with respect to such CAF Advance;
provided that all of the foregoing provisions relating to Interest Periods are subject to the following:
(A) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of LIBOR Loans or LIBOR CAF Advances, the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
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(B) any Interest Period that would otherwise extend beyond the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date; and
(C) any Interest Period pertaining to a LIBOR Loan or a LIBOR CAF Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
Interest Rate Agreement : any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate futures contract, interest rate option contract or other similar agreement or arrangement designed to protect any Person against fluctuations in interest rates.
International : as defined in the preamble hereof.
Investments : as defined in Section 6.5.
LIBOR CAF Advance : any CAF Advance made pursuant to a LIBOR CAF Advance Request.
LIBOR CAF Advance Request : any CAF Advance Request requesting the Lenders to offer to make CAF Advances at an interest rate equal to the London Interbank Offered Rate plus (or minus) a margin.
LIBOR Loans : Revolving Credit Loans hereunder the rate of interest applicable to which is based upon the London Interbank Offered Rate.
Lien : any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Capital Lease having substantially the same economic effect as any of the foregoing).
Loan : any Revolving Credit Loan, CAF Advance or Swing Line Loan made by any Lender pursuant to this Agreement.
Loan Documents : this Agreement and any Notes issued hereunder.
London Interbank Offered Base Rate : with respect to each day during each Interest Period pertaining to a LIBOR Loan or a LIBOR CAF Advance, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 A.M., London time, two Business Days prior to the commencement
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of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the London Interbank Offered Base Rate with respect to such LIBOR Loan or LIBOR CAF Advance for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of Citibank in immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period.
London Interbank Offered Rate : with respect to each day during each Interest Period pertaining to a LIBOR Loan or a LIBOR CAF Advance, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100 th of 1%):
London Interbank Offered Base Rate |
1.00 - Eurocurrency Reserve Requirements |
Margin Stock : margin stock within the meaning of Regulation U.
MasterCard Europe : MasterCard Europe Sprl, a Belgian corporation.
MasterCard Initial Public Offering : the planned initial underwritten public offering by the Borrower of common stock of the Borrower pursuant to a registration statement on Form S-1 filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended.
Material Adverse Effect : a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole (it being understood that a settlement failure by one or more members of International shall not constitute an event, development or circumstance that has a Material Adverse Effect) or (b) the validity or enforceability of any of the Loan Documents or the material rights or remedies of the Administrative Agent or the Lenders thereunder.
Material Subsidiary : at any time, any Subsidiary (i) accounting, during the immediately preceding fiscal quarter of the Borrower, for more than 5% of the total revenues of the Borrower and its Subsidiaries on a consolidated basis or (ii) having, as at the last day of such fiscal quarter, more than 5% of the total assets of the Borrower and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP.
Materials of Environmental Concern : any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
Moodys : Moodys Investors Service, Inc., and its successors.
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Moodys Rating : at any time, the counterparty rating of the Borrower then most recently announced and effective by Moodys.
Multiemployer Plan : a Plan which is a multiemployer plan as defined in Section 4001 (a)(3) of ERISA and which is subject to Title IV of ERISA, to which the Borrower or any Commonly Controlled Entity is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions.
New Lender : as defined in subsection 2.23(b).
New Lender Supplement : as defined in subsection 2.23(b).
Non-Excluded Taxes : as defined in Section 2.21.
Notes : the collective reference to the Revolving Credit Notes and the Swing Line Note.
Obligors : the collective reference to the Borrower and the Guarantor.
OECD Country : each country member of the Organisation for Economic Co-operation and Development other than the Czech Republic, Greece, the Republic of Hungary, the Republic of Korea, the Republic of Poland, the Slovak Republic, the Republic of Turkey and the United Mexican States.
Participant : as defined in subsection 10.6(b).
PBGC : the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA.
Permitted Investments : (a) Investments in Cash Equivalents; (b) Investments in existence on the date of this Agreement and disclosed in the financial statements previously delivered to the Administrative Agent and the Lenders and as set forth on Schedule 1.1(b) or any substantially similar Investment; (c) Investments in any Subsidiary by the Borrower or by any Subsidiary (including Guarantees in respect of hedging or foreign exchange transactions entered into in the ordinary course of business and governed by ISDA documentation, subject to the limitations set forth in the proviso to this definition, including any Investment made to acquire such Subsidiary); (d) Investments in the Borrower by any existing or future Subsidiary of the Borrower; (e) sales of goods or services on trade credit terms in the ordinary course of business; (f) loans and advances to employees in the ordinary course of business; (g) loans or advances to vendors or contractors of the Borrower in the ordinary course of business; (h) lease, utility and other similar deposits in the ordinary course of business; (i) stock, obligations or securities received in the ordinary course of business in settlement of debts owing to the Borrower or a Subsidiary as a result of foreclosure, perfection or enforcement of any Lien, or in connection with good faith settlement of delinquent obligations owing to the Borrower or a Subsidiary; (j) Investments in partnerships or joint ventures engaged in a business related to that engaged in by the Borrower on the date of
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this Agreement and Investments in other entities engaged in the development or production of new technologies directly related to the businesses engaged in by the Borrower and its Subsidiaries on the date of this Agreement, the outstanding amount of which Investments, together with any outstanding amount of other Investments pursuant to this clause (j) as of such time, do not exceed 25% of the total assets of the Borrower and its consolidated Subsidiaries as of the last day of the immediately preceding fiscal period for which financial statements have been delivered (with such calculation of total assets to give pro forma effect (without duplication) to any issuance of Capital Stock by the Borrower (including, without limitation, pursuant to the MasterCard Initial Public Offering or in connection with any Investment) as if such issuance occurred on such last day but only to the extent such issuance occurs after such last day and on or prior to the date such Investment is effected); (k) Investments by the Borrower pursuant to the Executive Incentive Compensation Plan, Senior Executive Incentive Plan or 2006 Long-Term Incentive Plan, in an aggregate amount, together with any other Investments pursuant to this clause (k) as of such time, not to exceed 15% of the total assets of the Borrower and its consolidated Subsidiaries as of the last day of the immediately preceding fiscal period for which financial statements have been delivered; (l) Investments or assumed Indebtedness under Interest Rate Agreements and currency exchange and protection agreements entered into in the ordinary course of business; (m) Investments in auction rate securities issued by issuers with a senior unsecured or corporate debt rating of at least A or the equivalent thereof by S&P or at least A2 or the equivalent thereof by Moodys; and (n) in addition to Permitted Investments described in the foregoing clauses (a) through (m), Investments in an aggregate outstanding amount, together with the outstanding amount of any other Investments pursuant to this clause (n) as of such time, not to exceed an amount equal to 20% of the total assets of the Borrower and its consolidated Subsidiaries as of the last day of the immediately preceding fiscal period for which financial statements have been delivered (with such calculation of total assets to give pro forma effect (without duplication) to any issuance of Capital Stock by the Borrower (including, without limitation, pursuant to the MasterCard Initial Public Offering or in connection with any Investment) as if such issuance occurred on such last day but only to the extent such issuance occurs after such last day and on or prior to the date such Investment is effected); provided that the aggregate outstanding amount of Investments by International and its Subsidiaries in Subsidiaries of the Borrower that are not also Subsidiaries of International shall not exceed, together with the outstanding amount of any other such Investments as of such time, an amount equal to 30% of the total assets of International and its consolidated Subsidiaries as of the last day of the immediately preceding fiscal period for which financial statements have been delivered (with such calculation of total assets to give pro forma effect (without duplication) to any issuance of Capital Stock by the Borrower (including, without limitation, pursuant to the MasterCard Initial Public Offering or in connection with any Investment) as if such issuance occurred on such last day but only to the extent such issuance occurs after such last day and on or prior to the date such Investment is effected); and provided , further , that a Guarantee of obligations of MasterCard Europe in respect of hedging or foreign exchange transactions entered into in the ordinary course of business with one or more Lenders (or Affiliates thereof) and governed by ISDA documentation shall not be considered an Investment for purposes of the immediately preceding proviso.
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Person : an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
Plan : at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Properties : as defined in Section 3.17.
Rating Level Change : a change in the S&P Rating or the Moodys Rating, as applicable (other than as a result of a change in the rating system of S&P or Moodys, as applicable) that results in the change from one Rating Level Period to another, which Rating Level Change shall be effective on the date on which the relevant change in the S&P Rating or the Moodys Rating, as applicable, is first announced and effective by S&P or Moodys, as applicable.
Rating Level Period : a Rating Level 1 Period, a Rating Level 2 Period, a Rating Level 3 Period, a Rating Level 4 Period or a Rating Level 5 Period; provided that:
(i) | Rating Level 1 Period means a period during which the S&P Rating is A+ or better or the Moodys Rating is A1 or better; |
(ii) | Rating Level 2 Period means a period that is not a Rating Level 1 Period during which the S&P Rating is A- or better or the Moodys Rating is A3 or better; |
(iii) | Rating Level 3 Period means a period during which the S&P Rating is BBB+ or the Moodys Rating is Baa1; |
(iv) | Rating Level 4 Period means a period during which the S&P Rating is BBB or the Moodys Rating is Baa2; |
(v) | Rating Level 5 Period means a period during which the S&P Rating is BBB- or the Moodys Rating is Baa3; |
(vi) | Rating Level 6 Period means a period other than a Rating Level 1 Period, a Rating Level 2 Period, a Rating Level 3 Period, a Rating Level 4 Period or a Rating Level 5 Period, and shall include each period during which there is no S&P Rating or Moodys Rating in effect; and |
(vii) | If during any period both an S&P Rating and a Moodys Rating have been announced and are effective, if such S&P Rating and Moodys Rating shall not be equivalent to each other, (x) the higher such rating shall be used to |
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determine the Rating Level Period, provided that, if such S&P Rating and Moodys Rating shall be separated by more than one subcategory, the lower such rating, adjusted up by one subcategory, shall be used to determine the Rating Level Period.
Register : as defined in subsection 10.6(e).
Regulation U : Regulation U of the Board as in effect from time to time.
Reorganization : with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
Reportable Event : any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under PBGC Reg. § 4043.
Required Lenders : at any time, Lenders the Commitment Percentages of which aggregate more than 50%.
Requirement of Law : as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Responsible Officer : the president and chief executive officer and the chief operating officer of the Borrower and, with respect to financial matters, the chief financial officer or the treasurer of the Borrower.
Revolving Credit Loans : as defined in Section 2.1.
Revolving Credit Note : as defined in subsection 2.5(e).
Revolving Credit Termination Date : April 28, 2009, as extended from time to time pursuant to Section 2.24, or such earlier date as the Commitments shall terminate pursuant to the terms hereof; provided that if the Revolving Credit Termination Date would otherwise fall on a day that is not a Business Day, the Revolving Credit Termination Date shall be the immediately preceding Business Day.
S&P : Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.
S&P Rating : at any time, the counterparty rating of the Borrower then most recently announced and effective by S&P.
Senior Executive Incentive Plan : as described in the proxy statement of the Borrower.
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Single Employer Plan : any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.
Solvent : with respect to any Person on a particular date, means that (i) the fair value of the property of such Person is greater than the total amount of the liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Persons ability to pay such debts and liabilities as they mature, and (iv) such Person is not engaged in business, and is not about to engage in business, for which such Persons property would constitute unreasonably small capital.
Subsidiary : as to any Person, a corporation, partnership or other entity of which a majority of the Voting Shares are at the time owned, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a Subsidiary or to Subsidiaries in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
Swing Line Commitment : the Swing Line Lenders obligation to make Swing Line Loans pursuant to Section 2.18.
Swing Line Lender : Citibank in its capacity as provider of the Swing Line Loans.
Swing Line Loan Participation Certificate : a certificate in substantially the form of Exhibit E.
Swing Line Loans : as defined in subsection 2.18(a).
Swing Line Note : as defined in subsection 2.18(b).
Tranche : the collective reference to LIBOR Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such loans shall originally have been made on the same day); Tranches may be identified as LIBOR Tranches .
Transferee : as defined in subsection 10.6(g).
2006 Long-Term Incentive Plan : as described in the annual report on Form 10-K of the Borrower as filed with the Securities and Exchange Commission on March 16, 2006.
Type : as to any Revolving Credit Loan, its nature as an ABR Loan or a LIBOR Loan.
United States : the United States of America.
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Voting Shares : as to any Person, shares of stock of or other ownership interests in such Person having ordinary voting power (other than such stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors (or similar managers) of such Person.
1.2 Other Definitional Provisions . (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate or modify the effect of any change occurring after the date hereof in GAAP or in the application or interpretation thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.
(c) The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(e) The words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 Revolving Credit Commitments . (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ( Revolving Credit Loans ) to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding, when added to such Lenders Commitment Percentage of all outstanding Swing Line Loans, not to exceed the amount of such Lenders Commitment, provided that the aggregate principal amount of all Loans outstanding at any time shall not exceed the aggregate amount of the Commitments at such time. During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.
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(b) The Revolving Credit Loans may from time to time be LIBOR Loans, ABR Loans, or a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7.
2.2 Procedure for Revolving Credit Borrowing . The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 4:00 P.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially LIBOR Loans, or (b) 3:00 P.M., New York City time, on the same Business Day of the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of LIBOR Loans, ABR Loans, or a combination thereof and (iv) if the borrowing is to be entirely or partly of LIBOR Loans, the respective amounts of each such Type of Revolving Credit Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to at least $10,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then aggregate Available Commitments are less than $10,000,000, such lesser amount). Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Except as contemplated by subsection 2.18(c), each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 10.2 prior to 2:00 P.M., New York City time, to the extent the requested Revolving Credit Loans are to be initially LIBOR Loans, or 4:00 P.M., New York City time, otherwise, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.
2.3 Facility Fee . The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee for the period from and including the first day of the Commitment Period to the Revolving Credit Termination Date, computed at a rate per annum equal to the Applicable Facility Fee Rate on the average daily Commitment of such Lender, whether or not utilized, from and including the first day of the Commitment Period until the Revolving Credit Termination Date. Such facility fee shall be payable quarterly in arrears on the last day of each March, June, September and December, on the Revolving Credit Termination Date or such earlier date as the Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof.
2.4 Termination or Reduction of Commitments . The Borrower shall have the right, upon not less than one Business Days notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments, provided that (a) after giving effect to such termination or reduction, the aggregate outstanding principal amount of the Loans shall not exceed the aggregate Commitments and (b) a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice (and any required prepayments) may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the
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specified effective date) if such condition is not satisfied. Any such reduction shall be in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Commitments then in effect.
2.5 Repayment of Revolving Credit Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the unpaid principal amount of each Revolving Credit Loan of such Lender on the Revolving Credit Termination Date (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 7). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Revolving Credit Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.14.
(b) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing indebtedness of the Borrower to such Lender resulting from each Revolving Credit Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to subsection 10.6(e), and a record therein for each Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lenders share thereof.
(d) The entries made in the Register and the records of each Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided , however , that the failure of any Lender or the Administrative Agent to maintain the Register or any such record, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Revolving Credit Loans made to such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A with appropriate insertions as to date and principal amount (a Revolving Credit Note ).
2.6 Optional Prepayments . The Borrower may at any time and from time to time prepay the Revolving Credit Loans, in whole or in part, without premium or penalty (subject to Section 2.22), upon at least two Business Days irrevocable notice to the Administrative Agent, if such prepayment is to be applied in whole or in part to LIBOR Loans, and upon same day notice otherwise (which notices shall be made on the relevant day not later than 10:00 A.M., New York City time), specifying the date and amount of prepayment and whether the prepayment is of LIBOR Loans, or a combination of LIBOR and ABR Loans, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the
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Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any accrued interest to such date on the amount prepaid and any other amounts payable pursuant to Section 2.22. Partial prepayments shall be in an aggregate principal amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof. The Borrower shall not have the right to prepay any principal amount of any CAF Advance except as provided in subsection 2.10(a). Prepayments of any Swing Line Loan shall be as provided in subsection 2.18(a).
2.7 Conversion and Continuation Options . (a) The Borrower may elect from time to time to convert LIBOR Loans to ABR Loans, by giving the Administrative Agent at least three Business Days prior irrevocable notice of such election, provided that any such conversion of LIBOR Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to LIBOR Loans by giving the Administrative Agent at least three Business Days prior irrevocable notice of such election. Any such notice of conversion to LIBOR Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding LIBOR Loans and ABR Loans may be converted as provided herein, provided that (i) no Revolving Credit Loan may be converted into a LIBOR Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a conversion is not appropriate, and (ii) no Swing Line Loan may be converted into a loan that bears interest at any rate other than the ABR.
(b) Any LIBOR Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term Interest Period set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Revolving Credit Loans, provided that no LIBOR Loan may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a continuation is not appropriate; and provided , further , that if the Borrower shall fail to give such notice or if such continuation is not permitted such Revolving Credit Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period.
2.8 CAF Advances . Subject to the terms and conditions of this Agreement, the Borrower may borrow CAF Advances from time to time on any Business Day during the CAF Advance Availability Period. CAF Advances may be borrowed in amounts such that the aggregate principal amount of all Loans outstanding at any time shall not exceed the aggregate amount of the Commitments at such time. Within the limits and on the conditions hereinafter set forth with respect to CAF Advances, the Borrower may from time to time borrow, repay and reborrow CAF Advances.
2.9 Procedure for CAF Advance Borrowing . (a) The Borrower shall request CAF Advances by delivering a CAF Advance Request to the Administrative Agent, not later than 1:00 P.M., New York City time, four Business Days prior to the proposed Borrowing Date (in the case of a LIBOR CAF Advance Request), and not later than 11:00 A.M., New York City time, one Business Day prior to the proposed Borrowing Date (in the case of a Fixed Rate CAF Advance Request). Each CAF Advance Request in respect of any Borrowing Date may solicit
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bids for CAF Advances on such Borrowing Date in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and having not more than three alternative CAF Advance Maturity Dates. The CAF Advance Maturity Date for each CAF Advance shall be the date set forth therefor in the relevant CAF Advance Request, which date shall be (i) not less than 7 days nor more than 60 days after the Borrowing Date therefor, in the case of a Fixed Rate CAF Advance, (ii) one or two months after the Borrowing Date therefor, in the case of a LIBOR CAF Advance and (iii) not later than the Revolving Credit Termination Date, in the case of any CAF Advance. The Administrative Agent shall notify each Lender promptly by facsimile transmission of the contents of each CAF Advance Request received by the Administrative Agent.
(b) In the case of a LIBOR CAF Advance Request, upon receipt of notice from the Administrative Agent of the contents of such CAF Advance Request, each Lender may elect, in its sole discretion, to offer irrevocably to make one or more CAF Advances at the applicable London Interbank Offered Rate plus (or minus) a margin determined by such Lender in its sole discretion for each such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF Advance Offer to the Administrative Agent, before 10:30 A.M., New York City time, on the day that is three Business Days before the proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance Maturity Date and the aggregate maximum amount of CAF Advances for all CAF Advance Maturity Dates which such Lender would be willing to make (which amounts may, subject to Section 2.8, exceed such Lenders Commitment); and
(ii) the margin above or below the applicable London Interbank Offered Rate at which such Lender is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 11:00 A.M., New York City time, on the date which is three Business Days before the proposed Borrowing Date of the contents of each such CAF Advance Offer received by it. If the Administrative Agent, in its capacity as a Lender, shall elect, in its sole discretion, to make any such CAF Advance Offer, it shall advise the Borrower of the contents of its CAF Advance Offer before 10:15 A.M., New York City time, on the date which is three Business Days before the proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon receipt of notice from the Administrative Agent of the contents of such CAF Advance Request, each Lender may elect, in its sole discretion, to offer irrevocably to make one or more CAF Advances at a rate of interest determined by such Lender in its sole discretion for each such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF Advance Offer to the Administrative Agent before 9:30 A.M., New York City time, on the proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance Maturity Date, and the aggregate maximum amount for all CAF Advance Maturity Dates, which such Lender would be willing to make (which amounts may, subject to Section 2.8, exceed such Lenders Commitment); and
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(ii) the rate of interest at which such Leader is willing to make each such CAF Advance.
The Administrative Agent shall advise the Borrower before 10:00 A.M., New York City time, on the proposed Borrowing Date of the contents of each such CAF Advance Offer received by it. If the Administrative Agent, in its capacity as a Lender, shall elect, in its sole discretion, to make any such CAF Advance Offer, it shall advise the Borrower of the contents of its CAF Advance Offer before 9:15 A.M., New York City time, on the proposed Borrowing Date.
(d) Before 11:30 A.M., New York City time, three Business Days before the proposed Borrowing Date (in the case of CAF Advances requested by a LIBOR CAF Advance Request) and before 10:30 A.M., New York City time, on the proposed Borrowing Date (in the case of CAF Advances requested by a Fixed Rate CAF Advance Request), the Borrower, in its absolute discretion, shall:
(i) cancel such CAF Advance Request by giving the Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent (immediately confirmed by delivery to the Administrative Agent of a CAF Advance Confirmation by facsimile transmission) (A) subject to the provisions of subsection 2.9(e), accept one or more of the offers made by any Lender or Lenders pursuant to subsection 2.9(b) or subsection 2.9(c), as the case may be, and (B) reject any remaining offers made by Lenders pursuant to subsection 2.9(b) or subsection 2.9(c), as the case may be.
(e) The Borrowers acceptance of CAF Advances in response to any CAF Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance Maturity Date specified by any Lender in its CAF Advance Offer shall not exceed the maximum amount for such CAF Advance Maturity Date specified in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all CAF Advance Maturity Dates specified by any Lender in its CAF Advance Offer shall not exceed the aggregate maximum amount specified in such CAF Advance Offer for all such CAF Advance Maturity Dates;
(iii) the Borrower may not accept offers for CAF Advances for any CAF Advance Maturity Date in an aggregate principal amount in excess of the maximum principal amount requested in the related CAF Advance Request; and
(iv) if the Borrower accepts any of such offers, it must accept offers based solely upon pricing for each relevant CAF Advance Maturity Date and upon no other criteria whatsoever, and if two or more Lenders submit offers for any CAF Advance Maturity Date at identical pricing and the Borrower accepts any of such offers but does not wish to (or, by reason of the limitations set forth in Section 2.8, cannot) borrow the total amount offered by such Lenders with such identical pricing, the Borrower shall accept offers
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from all of such Lenders in amounts allocated among them pro rata according to the amounts offered by such Lenders (with appropriate rounding, in the sole discretion of the Borrower, to assure that each accepted CAF Advance is an integral multiple of $1,000,000); provided that if the number of Lenders that submit offers for any CAF Advance Maturity Date at identical pricing is such that, after the Borrower accepts such offers pro rata in accordance with the foregoing provisions of this paragraph, the CAF Advance to be made by any such Lender would be less than $5,000,000 principal amount, the number of such Lenders shall be reduced by the Administrative Agent by lot until the CAF Advances to be made by each such remaining Lender would be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
(f) If the Borrower notifies the Administrative Agent that a CAF Advance Request is cancelled pursuant to subsection 2.9(d)(i), the Administrative Agent shall give prompt telephone notice thereof to the Lenders.
(g) If the Borrower accepts pursuant to subsection 2.9(d)(ii) one or more of the offers made by any Lender or Lenders, the Administrative Agent promptly shall notify each Lender which has made such an offer of (i) the aggregate amount of such CAF Advances to be made on such Borrowing Date for each CAF Advance Maturity Date and (ii) the acceptance or rejection of any offers to make such CAF Advances made by such Lender. Before 12:00 Noon, New York City time, on the Borrowing Date specified in the applicable CAF Advance Request, each Lender whose CAF Advance Offer has been accepted shall make available to the Administrative Agent at its office set forth in Section 10.2 the amount of CAF Advances to be made by such Lender, in immediately available funds. The Administrative Agent will make such funds available to the Borrower as soon as practicable on such date at such office of the Administrative Agent. As soon as practicable after each Borrowing Date, the Administrative Agent shall notify each Lender of the aggregate amount of CAF Advances advanced on such Borrowing Date and the respective CAF Advance Maturity Dates thereof.
2.10 CAF Advance Payments . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the account of each Lender which has made a CAF Advance, on the applicable CAF Advance Maturity Date, the then unpaid principal amount of such CAF Advance. The Borrower shall not have the right to prepay any principal amount of any CAF Advance without the consent of the Lender to which such CAF Advance is owed.
(b) The Borrower hereby further agrees to pay interest on the unpaid principal amount of each CAF Advance from the Borrowing Date of such CAF Advance to the applicable CAF Advance Maturity Date at the rate of interest specified in the CAF Advance Offer accepted by the Borrower in connection with such CAF Advance (calculated on the basis of a 360-day year for actual days elapsed), payable on each applicable CAF Advance Interest Payment Date.
(c) If any principal of, or interest on, any CAF Advance shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such CAF Advance shall, without limiting any rights of any Lender under this Agreement, bear interest from the date on which such payment was due at a rate per annum which is 2% per annum above the rate which would otherwise be applicable to such CAF Advance until the stated CAF Advance Maturity Date of such CAF Advance, and for each day thereafter at a rate per annum which is 2% per annum above the ABR, in each case until paid in full (as well after as before judgment). Interest accruing pursuant to this paragraph (c) shall be payable from time to time on demand.
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2.11 Evidence of Debt . Each Lender shall maintain in accordance with its usual practice appropriate records evidencing indebtedness of the Borrower to such Lender resulting from each CAF Advance of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time in respect of such CAF Advance. The Administrative Agent shall maintain the Register pursuant to subsection 10.6(e), and a record therein for each Lender, in which shall be recorded (i) the amount of each CAF Advance made by such Lender, the CAF Advance Maturity Date thereof, the interest rate applicable thereto and each CAF Advance Interest Payment Date applicable thereto, and (ii) the amount of any sum received by the Administrative Agent hereunder from the Borrower on account of such CAF Advance. The entries made in the Register and the records of each Lender maintained pursuant to this Section shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided , however , that the failure of any Lender or the Administrative Agent to maintain the Register or any such record, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the CAF Advances made by such Lender in accordance with the terms of this Agreement.
2.12 Certain Restrictions . A CAF Advance Request may request offers for CAF Advances to be made on not more than one Borrowing Date and to mature on not more than three CAF Advance Maturity Dates. No CAF Advance Request may be submitted earlier than five Business Days after submission of any other CAF Advance Request.
2.13 Minimum Amounts of Tranches . All borrowings, conversions and continuations of Revolving Credit Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Revolving Credit Loans comprising each LIBOR Tranche shall be equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event shall there be more than ten LIBOR Tranches outstanding at any time.
2.14 Interest Rates and Payment Dates . (a) Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the London Interbank Offered Rate for such Interest Period plus the Applicable Margin.
(b) Each ABR Loan and Swing Line Loan shall bear interest at a rate per annum equal to the ABR. Each CAF Advance shall bear interest as provided in Section 2.8.
(c) If all or a portion of (i) any principal of any Revolving Credit Loan or Swing Line Loan, (ii) any interest payable thereon, (iii) any facility fee or (iv) any other amount payable hereunder (other than overdue CAF payments provided for in subsection 2.10(c)) shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), any such principal and overdue interest, facility fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% per annum or (y) in the case of any such overdue interest, facility fee or other amount, the rate applicable to ABR Loans pursuant to
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subsection 2.14(b) plus 2% per annum, in each case from the date of such non-payment until such overdue principal, interest, facility fee or other amount is paid in full (as well after as before judgment).
(d) Interest on Revolving Credit Loans and Swing Line Loans shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.
2.15 Computation of Interest and Fees . (a) Whenever it is calculated on the basis of the ABR, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest and the facility fee and utilization fee shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a London Interbank Offered Rate. Any change in the interest rate on a Loan resulting from a change in the ABR, the Eurocurrency Reserve Requirements, the C/D Assessment Rate or the C/D Reserve Percentage shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.14(a) or 2.7(b).
2.16 Inability to Determine Interest Rate . If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the London Interbank Offered Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the Required Lenders that the London Interbank Offered Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to LIBOR Loans, shall be converted to or continued as ABR Loans and (z) any outstanding LIBOR Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further LIBOR Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to LIBOR Loans, as the case may be.
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2.17 Pro Rata Treatment and Payments . (a) Except as provided in Section 2.23(d), each borrowing of Revolving Credit Loans by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any facility or utilization fee hereunder and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on any Loans (other than any CAF Advance) shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 2:00 P.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agents office specified in Section 10.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its allocable share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. If such Lenders Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
2.18 Swing Line Commitment . (a) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make swing line loans ( Swing Line Loans ) to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed $300,000,000, provided that the aggregate principal amount of all Loans outstanding at any one time shall not exceed the aggregate amount of the Commitments at such time. During the Commitment Period, the Borrower may use the Swing Line Commitment by borrowing, prepaying the Swing Line Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. All Swing Line Loans shall bear interest based upon the ABR and shall not be entitled to be converted into loans that bear interest at any other
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rate. The Borrower shall give the Swing Line Lender irrevocable notice (which notice must be received by the Swing Line Lender prior to 4:00 P.M., New York City time, on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in a minimum amount of $100,000 or a whole multiple of $50,000 in excess thereof). The proceeds of the Swing Line Loan will be made available by the Swing Line Lender to the Borrower at the office of the Swing Line Lender by 5:00 P.M., New York City time, on the Borrowing Date by crediting the account of the Borrower at such office with such proceeds. The Borrower may, at any time and from time to time, prepay the Swing Line Loans, in whole or in part, without premium or penalty, by notifying the Swing Line Lender prior to 4:00 P.M., New York City time, on any Business Day of the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of $100,000 or a whole multiple of $50,000 in excess thereof.
(b) The Swing Line Loans shall, at the request of the Swing Line Lender, be evidenced by and repayable with interest in accordance with a promissory note of the Borrower substantially in the form of Exhibit B to this Agreement, with appropriate insertions (the Swing Line Note ), payable to the order of the Swing Line Lender and representing the obligation of the Borrower to pay the amount of the Swing Line Commitment or, if less, the unpaid principal amount of the Swing Line Loans, with interest thereon as prescribed in Section 2.14. The Swing Line Lender is hereby authorized to record the Borrowing Date, the amount of each Swing Line Loan and the date and amount of each payment or prepayment of principal thereof, on the schedule annexed to and constituting a part of the Swing Line Note and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure by the Swing Line Lender to make any such recordation shall not affect any of the obligations of the Borrower under such Swing Line Note or this Agreement. The Swing Line Note shall (a) be dated the Closing Date, (b) be stated to mature on the Revolving Credit Termination Date and (c) bear interest for the period from the date thereof until paid in full on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in, and payable as specified in, Section 2.14.
(c) The Swing Line Lender at any time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf) request each Lender, including the Swing Line Lender, to make a Revolving Credit Loan that shall be initially an ABR Loan in an amount equal to such Lenders Commitment Percentage of the amount of the Swing Line Loans outstanding on the date such notice is given (the Outstanding Swing Line Loans ). Unless any of the events described in paragraph (f) of Section 7 shall have occurred with respect to the Borrower (in which event the procedures of paragraph (e) of this Section shall apply) each Lender shall make the proceeds of its Revolving Credit Loan available to the Administrative Agent for the account of the Swing Line Lender at the office of the Administrative Agent specified in Section 10.2 prior to 12:00 Noon, New York City time, in funds immediately available on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Outstanding Swing Line Loans. Effective on the day such Revolving Credit Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans, shall no longer be due under the Swing Line Note and shall be evidenced as provided in subsection 2.5(b). The Borrower authorizes the Swing Line Lender to charge the Borrowers
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accounts with the Administrative Agent (up to the amount available in each such account) in order to immediately pay the amount of such Outstanding Swing Line Loans to the extent amounts received from the Lenders are not sufficient to repay in full such Outstanding Swing Line Loans.
(d) Notwithstanding anything herein to the contrary, the Swing Line Lender shall not be obligated to make any Swing Line Loans if the conditions set forth in Section 4.2 have not been satisfied.
(e) If prior to the making of a Revolving Credit Loan pursuant to subsection 2.18(c) one of the events described in paragraph (f) of Section 7 shall have occurred and be continuing with respect to the Borrower, each Lender will, on the date such Revolving Credit Loan was to have been made pursuant to the notice in subsection 2.18(c), purchase an undivided participating interest in the Outstanding Swing Line Loan in an amount equal to (i) its Commitment Percentage times (ii) the aggregate principal amount of Swing Line Loans then outstanding. Each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation, and upon receipt thereof the Swing Line Lender will deliver to such Lender a Swing Line Loan Participation Certificate dated the date of receipt of such funds and in such amount.
(f) Whenever, at any time after any Lender has purchased a participating interest in a Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders participating interest was outstanding and funded); provided , however , that in the event that such payment received by the Swing Line Lender is required to be returned, such Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender to it.
(g) Each Lenders obligation to make the Revolving Credit Loans referred to in subsection 2.18(c) and to purchase participating interests pursuant to subsection 2.18(e) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default or termination of the Commitments; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower, any Subsidiary or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
2.19 Illegality . Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert ABR Loans to LIBOR Loans shall forthwith be cancelled and (b) such Lenders Loans then outstanding as LIBOR Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with
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respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.20.
2.20 Requirements of Law . (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any LIBOR Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.21, taxes expressly excluded by Section 2.21 and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the London Interbank Offered Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lenders or such corporations capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lenders or such corporations policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts pursuant to paragraphs (a) or (b) of this Section 2.20, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled and of the basis for the calculation of such additional amounts; provided that the Borrower shall not be required to compensate a Lender pursuant to such paragraph for any increased costs incurred
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more than 180 days prior to the date that such Lender notifies the Borrower of the change giving rise to such increased costs and of such Lenders intention to claim compensation therefor; provided , further that, if the change giving rise to such increased costs is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.21 Taxes . (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ( Non-Excluded Taxes ) are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided , however , that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lenders failure to comply with the requirements of paragraph (b) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lenders assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United States or a state thereof (a Non-U.S. Lender ) shall:
(i) on or before the date such Lender becomes a party to this Agreement, deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8 BEN or W-8 ECI or, in the case of a Non-U.S. Lender claiming exemption from United States federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest, a statement substantially in the form of Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, United States federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents;
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(ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Person that shall become a Lender or a Participant pursuant to Section 10.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased.
(c) If the Administrative Agent or any Lender determines, in its sole discretion, exercised in good faith, that it has received a refund of any Non-Excluded Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.21, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.21 with respect to the Non-Excluded Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.
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2.22 Indemnity . The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making either (i) a borrowing of LIBOR Loans or LIBOR CAF Advances or (ii) a conversion into or continuation of LIBOR Loans, in each case after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement (in the case of a borrowing of LIBOR CAF Advances, so long as the Borrower shall have accepted a CAF Advance offered in connection with any such notice), (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement (regardless of whether such notice is permitted to be revocable under Section 2.4 and is revoked in accordance herewith) or (c) the making of either (i) a prepayment of LIBOR Loans, LIBOR CAF Advances or Fixed Rate CAF Advances or (ii) a conversion of LIBOR Loans, in each case on a day which is not the last day of an Interest Period with respect thereto. Such indemnification shall constitute an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.23 Commitment Increases . (a) In the event that Borrower wishes to increase the aggregate Commitments, it shall notify the Lenders (through the Administrative Agent) of the amount of such proposed increase (such notice, a Commitment Increase Offer ). Each Commitment Increase Offer shall offer the Lenders the opportunity to participate in the increased Commitments ratably in accordance with their respective Commitment Percentages. In the event that any Lender (each, a Declining Lender ) shall fail to accept in writing a Commitment Increase Offer within 10 Business Days after receiving notice thereof, all or any portion of the proposed increase in the Commitments offered to the Declining Lenders (the aggregate of such offered amounts, the Declined Amount ) may instead be allocated to any one or more additional banks, financial institutions or other entities pursuant to paragraph (b) below and/or to any one or more existing Lenders pursuant to paragraph (c)(ii) below.
(b) Any additional bank, financial institution or other entity (herein called a New Lender ) which, with the consent of the Borrower and the Administrative Agent, elects to become a party to this Agreement and obtain a Commitment in an amount equal to all or any portion of a Declined Amount shall execute a New Lender Supplement (each, a New Lender Supplement ) with the Borrower and the Administrative Agent, substantially in the form of Exhibit J-1, whereupon such New Lender shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and Schedule 1.2 shall be deemed to be amended to add the name and Commitment of such New Lender.
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(c) Any Lender which (i) accepts a Commitment Increase Offer pursuant to subsection 2.23(a) or (ii) with the consent of the Borrower, elects to increase its Commitment by an amount equal to all or any portion of a Declined Amount shall, in each case, execute a Commitment Increase Supplement (each, a Commitment Increase Supplement ) with the Borrower and the Administrative Agent, substantially in the form of Exhibit J-2, whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule 1.2 shall be deemed to be amended to so increase the Commitment of such Lender.
(d) If on the date upon which a bank, financial institution or other entity becomes a New Lender pursuant to subsection 2.23(b) or upon which a Lenders Commitment is increased pursuant to subsection 2.23(c) there is an unpaid principal amount of Revolving Credit Loans, the Borrower shall borrow Revolving Credit Loans from the Lenders and/or (subject to compliance by the Borrower with Section 2.22) prepay Revolving Credit Loans of the Lenders such that, after giving effect thereto, the Revolving Credit Loans (including, without limitation, the Types thereof and Interest Periods with respect thereto) shall be held by the Lenders (including for such purposes the New Lenders) pro rata according to their respective Commitment Percentages.
(e) Notwithstanding anything to the contrary in this Section, (i) in no event shall any transaction effected pursuant to this Section cause (x) the aggregate Commitments to exceed $2,750,000,000 or (y) an increase in the aggregate Commitments of an amount less than $50,000,000, (ii) the aggregate amount of any increase in Commitments pursuant to subsection 2.23(b) and (c)(ii) shall be limited to the relevant Declined Amount and (iii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion.
2.24 Commitment Extensions . (a) The Borrower may, not earlier than 60 days and not later than 45 days before each of the first two anniversaries of the Closing Date (each, an Anniversary Date ), by notice to the Administrative Agent, request that the Revolving Credit Termination Date then in effect (the Existing Revolving Credit Termination Date ) be extended to the date 364 days after the Existing Revolving Credit Termination Date. The Administrative Agent shall promptly notify the Lenders of such request.
(b) Each Lender, in its sole discretion, shall advise the Administrative Agent whether or not such Lender agrees to such extension. If a Lender agrees to such extension (an Extending Lender ), it shall notify the Administrative Agent, in writing, of its decision to do so not earlier than 45 days and not later than 30 days prior to such Anniversary Date. A Lender that determines not to so extend its Commitment shall so notify the Administrative Agent promptly after making such determination and is herein called a Non-Extending Lender . If a Lender does not give timely notice to the Administrative Agent of whether or not such Lender agrees to such extension, it shall be deemed to be a Non-Extending Lender.
(c) The Administrative Agent shall notify the Borrower of each Lenders determination not earlier than 30 days and not later than 20 days prior to the relevant Anniversary Date.
(d) The Borrower shall have the right to accept Commitments from New Lenders, each of which shall be acceptable to the Administrative Agent, in an aggregate amount equal to the
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amount of the Commitments of any Non-Extending Lenders, provided that the Extending Lenders shall have the right to increase their Commitments (each such Lender being herein called an Increasing Lender ) up to the aggregate amount of the Non-Extending Lenders Commitments before the Borrower shall be permitted to substitute any New Lenders for Non-Extending Lenders.
(e) If and only if (i) more than 50% of the total of the Commitments is extended or otherwise committed to by Extending Lenders and any New Lenders, and (ii) immediately prior to the relevant Anniversary Date no Default has occurred and is continuing and the representations and warranties of the Borrower set forth in Section 3 shall be true and correct in all material respects on and as of such Anniversary Date as though made on and as of such date, and subject to each New Lender having executed a New Lender Supplement (on the effective date of which such New Lender shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement), then effective on such Anniversary Date the Commitment of each Extending Lender shall be extended to the date 364 days after the Existing Revolving Credit Termination Date (or, if such day is not a Business Day, the immediately preceding Business Day) which date shall thereafter be the Revolving Credit Termination Date; the increased Commitment of each Increasing Lender and the new Commitment of each New Lender shall take effect on such Anniversary Date; the Commitments of the Non-Extending Lenders shall be reduced pro rata on such Anniversary Date to the extent of such increased and new commitments and appropriate adjustments shall be made on such Anniversary Date to cause any then-outstanding Loans of the Lenders to be held on a pro rata basis among all Lenders; the remaining Commitment of each Non-Extending Lender shall terminate on the Existing Revolving Credit Termination Date; and the Borrower shall pay in full on the Existing Revolving Credit Termination Date all amounts payable to each Non-Extending Lender hereunder.
2.25 Replacement of Lenders . If any Lender requests compensation under Section 2.20, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.21, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(i) no Default or Event of Default has occurred and is continuing on and as of the date of such notice and the date of such assignment;
(ii) the Administrative Agent shall have received the assignment fee specified in Section 10.06(f);
(iii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.22) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
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(iv) in the case of any such assignment resulting from a claim for compensation under Section 2.20 or payments required to be made pursuant to Section 2.21, such assignment will result in a reduction in such compensation or payments thereafter; and
(v) such assignment does not conflict with applicable law.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower and, in the case of Sections 3.3, 3.4, 3.5 and 3.14, each Obligor with respect to itself, hereby represents and warrants to the Administrative Agent and each Lender that:
3.1 Financial Condition . The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2005 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by PricewaterhouseCoopers LLP, copies of which have heretofore been furnished to each Lender, are complete and correct in all material respects and present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. All such financial statements have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee outside the ordinary course of business, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment which in the aggregate may reasonably be expected to have a Material Adverse Effect, including, without limitation, any interest rate or foreign currency swap or exchange transaction (except as listed on Schedule 3.1 attached hereto), which is not reflected in the foregoing statements or in the notes thereto.
3.2 No Change . Since December 31, 2005 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect.
3.3 Existence; Compliance with Law . Each Obligor and its Subsidiaries (a) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization ( provided , that no representation is made under this clause (a) with respect to any Subsidiary that is neither an Obligor nor a Material Subsidiary of an Obligor if the failure of such Subsidiary to be duly organized, validly existing or in good standing as aforesaid could not reasonably be expected to have a Material Adverse Effect), (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to
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conduct the business in which it is currently engaged, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction (other than that of its organization) where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law, except in the case of clause (c) or (d) above, to the extent that the failure to qualify as a foreign entity or to be in good standing or to comply with any Requirement of Law could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations . Each Obligor has the corporate power and authority, and the legal right, to make, deliver, and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which either Obligor is a party. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of each Obligor. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Obligor enforceable against such Obligor in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
3.5 No Legal Bar . The execution, delivery and performance of the Loan Documents to which each Obligor is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of such Obligor and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation.
3.6 No Material Litigation . Except as listed on Schedule 3.6 or as previously disclosed in any public filing made by the Borrower prior to the date hereof, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.7 No Default . Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.
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3.8 Ownership of Property; Liens . Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property material to the business of the Borrower and its Subsidiaries, taken as a whole, and good title to, or a valid leasehold interest in, all its other property material to the business of the Borrower and its Subsidiaries, taken as a whole, and none of such property is subject to any Lien except as permitted by Section 6.2.
3.9 Intellectual Property . The Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the Intellectual Property ). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does International know of any valid basis for any such claim, except for such claims that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.10 No Burdensome Restrictions . No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.
3.11 Taxes . Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (a) any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be or (b) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge other than any Lien permitted under Section 6.2(a).
3.12 Federal Margin Regulations . Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose (whether immediate, incidental or ultimate) of buying or carrying Margin Stock. No part of the proceeds of any Loans will be used directly or indirectly for the purpose (whether immediate, incidental or ultimate) of buying or carrying Margin Stock in violation of the regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to each Lender and the Administrative Agent a statement in conformity with the requirements of Federal Reserve Form FR U-1 or FR G-3, as appropriate, referred to in Regulation U, to demonstrate the compliance of any borrowing hereunder with Regulation U.
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3.13 ERISA . Neither a Reportable Event nor an accumulated funding deficiency (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan that could reasonably be expected to have a Material Adverse Effect, and each Plan has complied with the applicable provisions of ERISA and the Code to the extent that the failure to comply could not reasonably be expected to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred (other than via a standard termination as defined in Section 4041(b) of ERISA), and no Lien in favor of the PBGC or a Single Employer Plan has arisen, during such five-year period that could reasonably be expected to have a Material Adverse Effect. The excess, if any, of the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Single Employer Plans), as of the last annual valuation date prior to the date on which this representation is made or deemed made, over the value of the assets of such Single Employer Plan allocable to such accrued benefits could not reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA that could reasonably be expected to have a Material Adverse Effect if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. The excess, if any, of the present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of the Borrower for post retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(l) of ERISA) over the assets under all such Plans allocable to such benefits could not reasonably be expected to have a Material Adverse Effect.
3.14 Investment Company Act; Other Regulations . Neither of the Obligors is an investment company, or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended. Neither of the Obligors is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board) which limits its ability to incur Indebtedness.
3.15 Subsidiaries . As of the Closing Date, Schedule 3.15 lists each Subsidiary of the Borrower (and the direct and indirect ownership interest of the Borrower therein), in each case existing on March 31, 2006.
3.16 Purpose of Loans . The proceeds of the Loans shall be used by the Borrower and its Subsidiaries solely (i) to ensure the integrity of the MasterCard payment system in the event of settlement failure by one or more of its members, including failure by one or more of its members to meet merchant payment obligations, and (ii) to refinance outstanding loans, if any, under the Existing Credit Agreement; provided , that up to $500,000,000 of the proceeds of the Loans may be used for general corporate purposes of the Borrower and its Subsidiaries.
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3.17 Environmental Matters . Except to the extent any of the following could not reasonably be expected to have a Material Adverse Effect:
(a) To the best knowledge of the Borrower, the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the Properties ) do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law.
(b) The Properties and all operations at the Properties are in compliance in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Borrower or any of its Subsidiaries (the Business ) which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof.
(c) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened.
(d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business.
3.18 Solvency . The Borrower is, and after giving effect to each borrowing hereunder will be, Solvent.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loan . The agreement of each Lender to make the initial Loan requested to be made by it is subject to the satisfaction of the following conditions precedent:
(a) Loan Documents . The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of each Obligor, with a counterpart for each Lender, and (ii) for the account of the Swing Line Lender, the Swing Line Note conforming to the requirements hereof and for the account of any Lender that requested a Revolving Credit Note, such Revolving Credit Note, conforming to the requirements hereof, each executed by a duly authorized officer of the Borrower.
(b) Related Agreements . The Administrative Agent shall have received, with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of such other
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documents or instruments as may be reasonably requested by the Administrative Agent on or prior to the Closing Date, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Borrower or its Subsidiaries may be a party.
(c) Closing Certificate . The Administrative Agent shall have received, with a copy for each Lender, a closing certificate of each Obligor, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent, executed by the President or his designee or any Vice President and the Secretary or any Assistant Secretary of each Obligor.
(d) Corporate Proceedings . The Administrative Agent shall have received, with a copy for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Obligor authorizing (i) the execution, delivery and performance by such Obligor of this Agreement and the other Loan Documents to which it is a party and (ii) in the case of the Borrower, the making of the borrowings and the uses of the proceeds contemplated hereunder and, in the case of International, the guarantee thereof as provided herein, certified by its Secretary or an Assistant Secretary as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded.
(e) Incumbency Certificate . The Administrative Agent shall have received, with a copy for each Lender, a certificate of each Obligor, dated the Closing Date, as to the incumbency and signature of its officers executing any Loan Document, satisfactory in form and substance to the Administrative Agent, executed by its President or any Vice President and its Secretary or any Assistant Secretary.
(f) Corporate Documents . The Administrative Agent shall have received, with a copy for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Obligor, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Obligor.
(g) Fees . The Administrative Agent shall have received the fees to be received on the Closing Date.
(h) Legal Opinions . The Administrative Agent shall have received, with a counterpart for each Lender, (i) the executed legal opinion of Noah J. Hanft, Esq., General Counsel and Secretary of the Borrower and International, substantially in the form of Exhibit F-1, and (ii) the executed legal opinion of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to the Administrative Agent, substantially in the form of Exhibit F-2, each dated the Closing Date and covering such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.
(i) Existing Credit Agreement . The Administrative Agent shall have received evidence satisfactory to it that the commitments under the Existing Credit Agreement have been canceled and all amounts outstanding thereunder shall have been repaid as of the Closing Date (and each Lender which is a party to the Existing Credit Agreement hereby waives compliance with the requirement under Section 2.6 of the Existing Credit Agreement for the giving of one Business Days prior written notice for termination of the commitments thereunder).
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4.2 Conditions to Each Loan . The agreement of each Lender to make any Loan requested to be made by it on any date (including, without limitation, its initial Loan) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties . Each of the representations and warranties made by the Obligors pursuant to Section 3 of this Agreement (excluding, with respect to each borrowing of Revolving Credit Loans to be used by the Borrower and its Subsidiaries for the purpose set forth in Section 3.16(i), the representations and warranties made by the Borrower in Sections 3.2 and 3.6) shall be true and correct in all material respects on and as of such date as if made on and as of such date (immediately before and immediately after giving effect to such Loan and to the application of the proceeds therefrom) except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date.
(b) No Default . No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this Section have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to:
5.1 Financial Statements . Furnish to each Lender:
(a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a going concern or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings of such quarter and of cash flows of the Borrower and its consolidated Subsidiaries for the portion of the fiscal
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year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year or, in the case of such consolidated balance sheet, for the last day of the prior fiscal year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). Information required to be delivered pursuant to this Section 5.1 shall be deemed to have been delivered to the Lenders on the date on which the Borrower provides written notice to the Lenders that such information has been posted on the Borrowers website on the Internet at http://www.mastercardintl.com or is available on the website of the Securities and Exchange Commission or any successor at http://www.sec.gov (to the extent such information has been posted or is available as described in such notice).
5.2 Certificates; Other Information . Furnish to the Administrative Agent:
(a) concurrently with the delivery of the financial statements referred to in subsections 5.1(a) and (b), a certificate of a Responsible Officer, substantially in the form of Exhibit I, stating that, to the best of such Responsible Officers knowledge, during such period the Borrower has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate;
(b) within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to shareholders generally, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; provided , that any such financial statement or report shall be deemed to have been delivered on the date that the Borrower notifies the Administrative Agent that such financial statement or report is available on EDGAR, the Electronic Data Gathering, Analysis and Retrieval system of the Securities and Exchange Commission, or http://www.sec.gov/edgar.shtml; and
(c) promptly, such additional financial and other information (other than any non-public information or materials pertaining to the Borrowers proprietary new products, systems or services, proprietary marketing programs, strategies or plans, or any member specific billing, contractual or other arrangements) as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.
5.3 Payment of Obligations . Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except (i) where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be or (ii) to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect.
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5.4 Conduct of Business and Maintenance of Existence . Except as set forth in the Form S-1, continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to Section 6.3 or 6.7 unless the failure to do so could not reasonably be expected to have a Material Adverse Effect; and comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance . Keep all property material to the business of the Borrower and its Subsidiaries taken as a whole in good working order and condition ordinary wear and tear excepted; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are, to the Borrowers knowledge, usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried.
5.6 Inspection of Property; Books and Records; Discussions . Keep proper books of records and account in which full, true and correct entries in conformity with GAAP (or such other commonly accepted accounting practice which has been previously disclosed to the Administrative Agent) and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender (coordinated through the Administrative Agent) to, upon reasonable notice, visit and inspect any of its properties (not more than one time in any fiscal year) and examine and make abstracts from any of its books and records (other than any non-public information or materials pertaining to (i) its proprietary new products, systems or services, (ii) its proprietary marketing programs, strategies or plans, or (iii) any member specific billing, contractual or other arrangements) at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that if a Default or Event of Default shall have occurred and be continuing, such visits and inspections (coordinated through the Administrative Agent) may be conducted at any time upon reasonable notice.
5.7 Notices . Promptly give notice to the Administrative Agent for distribution to the Lenders of:
(a) the occurrence of any Default or Event of Default;
(b) if the Borrower ceases to be a public reporting company under the Securities Exchange Act of 1934, as amended, any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, could reasonably be expected to have a Material Adverse Effect;
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(c) if the Borrower ceases to be a public reporting company under the Securities Exchange Act of 1934, as amended, any litigation or proceeding affecting the Borrower or any of its Subsidiaries as to which the Borrower determines that there is a reasonable probability of an adverse judgment and in which the amount involved is $50,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Single Employer Plan, a failure to make any required contribution to any pension plan (as defined in Section 3(2) of ERISA), the creation of any Lien in favor of the PBGC or a Single Employer Plan, in each case that could reasonably be expected to result in a liability or Lien in excess of $10,000,000 or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Multiemployer Plan, except where the termination, Reorganization or Insolvency of any Multiemployer Plan could not reasonably be expected to result in a liability in excess of $10,000,000; and
(e) any material adverse change in the business, operations, property or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. Notices and other communications to the Lenders required pursuant to paragraphs (b), (c), (d) and (e) of this Section 5.7 may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent.
5.8 Environmental Laws . (a) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
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SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall not and shall not permit any of its Subsidiaries to, directly or indirectly:
6.1 Maintenance of Net Worth . Permit Consolidated Net Worth of the Borrower to be less than (i) at any time prior to the completion of the MasterCard Initial Public Offering, $700,000,000, and (ii) at any time thereafter, $1,000,000,000.
6.2 Limitation on Liens . Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries taken as a whole;
(f) Liens in existence on the date hereof listed on Schedule 6.2(f), provided that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower and its Subsidiaries incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets and (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness;
(h) bankers liens arising by operation of law;
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(i) Liens on the property or assets of a corporation which becomes a Subsidiary on or after the date hereof securing Indebtedness of such corporation, provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof and (ii) any such Lien is not spread to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary;
(j) Liens arising out of judgments or awards (x) which are bonded or (y) with respect to which an appeal or a proceeding for review is being prosecuted in good faith and adequate reserves have been provided for the payment of such judgment or award;
(k) Liens in favor of the Borrower which secure the obligation of any Subsidiary to the Borrower; and
(1) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $35,000,000 in aggregate amount at any time outstanding.
6.3 Limitation on Fundamental Changes . Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business (taking the Borrower and its Subsidiaries as a whole), except:
(a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower or International ( provided that the Borrower or International, as the case may be, shall be the continuing or surviving corporation) or with or into any one or more wholly-owned Subsidiaries of the Borrower ( provided that the wholly-owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation);
(b) any wholly-owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or International or any other wholly-owned Subsidiary of the Borrower, subject, however, to the limitations set forth in Sections 6.4(c) and 6.5 below; and
(c) as permitted by Section 6.4 or Section 6.5 (including any Investment consisting of an acquisition or disposition of assets, in each case by way of merger, that is otherwise permitted under Section 6.4 or Section 6.5).
6.4 Limitation on Transfer or Disposition of Assets . Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiarys Capital Stock to any Person other than the Borrower or any wholly-owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out property in the ordinary course of business;
(b) the sale of Cash Equivalents in the ordinary course of business in connection with cash management activities or the use of proceeds thereof;
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(c) the sale or other disposition of any property; provided that (i) the aggregate book value of all assets so sold or disposed of pursuant to this clause (c) in any period of twelve consecutive months shall not exceed an amount equal to 20% of consolidated total assets of the Borrower and its Subsidiaries as at the beginning of such twelve-month period; and (ii) the aggregate book value of all assets so sold or disposed of pursuant to this clause (c) to Subsidiaries of the Borrower that are not also Subsidiaries of International by the Borrower and its Subsidiaries (other than by Subsidiaries of the Borrower that are not also Subsidiaries of International) during any period of twelve consecutive calendar months commencing with and including May, 2006 shall not exceed an amount equal to 30% of consolidated total assets of International and its Subsidiaries as at the beginning of such twelve-month period;
(d) the sale or disposition of the headquarters of the Borrower located at 2000 Purchase Street, Purchase, New York 10577-2509;
(e) the sale of inventory in the ordinary course of business;
(f) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; and
(g) as permitted by subsection 6.3(b).
6.5 Limitation on Investments . Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person (collectively, Investments ), except Permitted Investments.
6.6 Limitation on Transactions with Affiliates . Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate (other than any transaction permitted by the terms of this Agreement and any transaction between the Borrower and its consolidated Subsidiaries) unless such transaction is upon fair and reasonable terms.
6.7 Limitation on Lines of Business . Enter into any business, either directly or through any Subsidiary, except for businesses (a) in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or (b) which, after giving effect to such new business, would not result in a change in the primary business of the Borrower and its Subsidiaries, taken as a whole, on the date hereof.
6.8 Upstreaming . Permit any of its Domestic Subsidiaries to enter into, create or assume or suffer to exist any indenture, agreement or other contractual arrangement that prohibits any such Subsidiary from declaring or paying dividends or other distributions on any class of stock or membership interest of such Subsidiary other than restrictions existing on the date of this Agreement contained in agreements or arrangements listed on Schedule 6.8 or otherwise disclosed to the Lenders prior to such date (including restrictions in any amendment or replacement of any such agreements or arrangements), and restrictions in future agreements or arrangements substantially similar to such restrictions, it being agreed that customary financial covenants and other agreements affecting maintenance or retention of assets or capital by a Subsidiary shall not be deemed to be restrictions limited by this Section 6.8.
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SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder (other than principal), within five days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by either Obligor herein or in any other Loan Document or which is contained in any certificate furnished by it at any time under or in connection with this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any agreement contained in Section 6; or
(d) Either Obligor shall default in the observance or performance of any other term, covenant or agreement contained in this Agreement (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower by the Administrative Agent or the Required Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans) in excess of $35,000,000 in the aggregate, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) fail to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which failure or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity ( provided that failure to observe or perform any such agreement or condition referred to in this clause (ii) shall not be deemed to be an Event of Default until the grace period provided for in such instrument or agreement with respect to such agreement or condition has elapsed or, if no grace period is specified, such failure has continued for five Business Days; and provided further that failure by the Borrower to observe or perform any covenant relating to minimum Consolidated Net Worth of the Borrower set forth in either (i) its Guaranty dated as of August 4, 2004 in favor of the holders of the 6.67% Subordinated Notes due June 30, 2008 issued by International or (ii) its Guarantee dated as of August 31, 1999, as amended on November 23, 2004, in favor of the holders of the 7.36% Series A Senior Secured Notes due September 1, 2009 issued by MCI OFallon 1999 Trust shall not be deemed to be an Event of Default (without prejudice however to any rights and remedies of the Lenders arising from any failure by the Borrower to observe or perform the covenant set forth in Section 6.1)); or
(f) (i) The Borrower or any of its Material Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
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order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Material Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Material Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) there shall be commenced against the Borrower or any of its Material Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Material Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Material Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Single Employer Plan, (ii) any accumulated funding deficiency (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Single Employer Plan or any Lien in favor of the PBGC or a Single Employer Plan shall arise on the assets of any Obligor, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA or (v) any Obligor or any Commonly Controlled Entity shall incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan; and in each case in clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving a liability (to the extent not paid or fully covered by insurance) of $35,000,000 or more in the aggregate for all such judgments and decrees, and all such judgments or decrees shall not have been vacated, discharged, satisfied, stayed or bonded pending appeal within 90 days from the entry thereof; or
(i) Any Person or group (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (i) shall have acquired beneficial ownership of 35% or more of any outstanding class of Capital Stock having ordinary voting power in the election of directors of the Borrower or (ii) shall obtain the power (whether or not exercised) to elect a majority of the Borrowers directors; or the Borrower shall cease to own, beneficially and of record, the sole Class B membership interest in International or shall cease to have power to elect a majority of Internationals directors;
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then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment . Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
8.2 Delegation of Duties . The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions . Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Persons own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by either Obligor or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity,
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effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of either Obligor to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of either Obligor or any of its Subsidiaries.
8.4 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to either Obligor), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or such other Lenders as may be required hereunder) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or such other Lenders as may be required hereunder), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.
8.5 Notice of Default . The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default (other than an Event of Default consisting of failure of the Borrower to pay when due any principal of or interest on a Loan) hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other Lenders . Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative
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Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Obligors and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under the Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Obligors or any of their Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of either Obligor or any of their Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification . The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, (including, without limitation, enforcement of the Administrative Agents rights under this Section) any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agents gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
8.8 Administrative Agent in Its Individual Capacity . The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Obligors as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans made by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms Lender and Lenders shall include the Administrative Agent in its individual capacity.
8.9 Successor Administrative Agent . The Administrative Agent may resign as Administrative Agent upon 10 days notice to the Lenders, and the Administrative Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall appoint from among the Lenders a successor agent for
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the Lenders, which successor agent (provided that it shall have been approved by the Borrower (such approval not to be unreasonably withheld)), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term Administrative Agent shall mean such successor agent, and the former Administrative Agents rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agents resignation or removal as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
8.10 Substitute Administrative Agent . If at any time Citibank or the Borrower reasonably determines that Citibank is prevented from carrying out its functions as Administrative Agent hereunder as contemplated hereby, Citibank or the Borrower, as the case may be, shall forthwith so notify the Borrower or Citibank, as the case may be, and the Backup Agent (and Citibank shall promptly so notify the Lenders), and the Backup Agent shall thereupon automatically assume and perform all of the functions of the Administrative Agent and shall be entitled to all of the rights and benefits of the Administrative Agent hereunder, until and only until such time as Citibank and the Borrower determine, and notify the Backup Agent (which shall promptly notify the Lenders) that Citibank is no longer prevented from carrying out its functions as Administrative Agent hereunder as contemplated hereby, whereupon Citibank shall automatically resume and perform all of the functions of the Administrative Agent hereunder. Each Lender agrees to the foregoing and authorizes the Backup Agent to assume and perform the functions of the Administrative Agent under the circumstances set forth above.
8.11 Arrangers, Etc. The parties designated on the cover page hereof as Sole Lead Arranger and Sole Book Manager, Co-Arranger and Co-Syndication Agents shall have, in their capacities as such, no responsibilities or liabilities under or in connection with this Agreement.
8.12 Trust Indenture Act . In the event that Citibank or any of its Affiliates shall be or become an indenture trustee under the Trust Indenture Act of 1939 (as amended, the Trust Indenture Act ) in respect of any securities issued or guaranteed by any Obligor, the parties hereto acknowledge and agree that any payment or property received in satisfaction of or in respect of any obligation of such Obligor hereunder or under any other Loan Document by or on behalf of Citibank in its capacity as the Administrative Agent for the benefit of any Lender under any Loan Document (other than Citibank or an Affiliate of Citibank) and which is applied in accordance with the Loan Documents shall be deemed to be exempt from the requirements of Section 311 of the Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.
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SECTION 9. GUARANTEE
The Guarantor agrees, to induce the other parties to enter into this Agreement and for other valuable consideration, receipt of which is hereby acknowledged as follows:
(a) Guarantee . The Guarantor hereby guarantees to the Lenders and the Administrative Agent the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans and the Notes and all other amounts whatsoever now or hereafter payable or becoming payable by the Borrower under the Loan Documents, in each case strictly in accordance with the terms thereof (collectively, the Guaranteed Obligations ). The Guarantor hereby further agrees that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. This subsection 9(a) is a continuing guaranty and is a guaranty of payment and is not merely a guaranty of collection and shall apply to all Guaranteed Obligations whenever arising.
(b) Acknowledgments, Waivers and Consents . The Guarantor agrees that its obligations under clause (a) above shall, to the fullest extent permitted by applicable law, be primary, absolute, irrevocable and unconditional under any and all circumstances and that the guaranty therein is made with respect to any Guaranteed Obligations now existing or in the future arising. Without limiting the foregoing, the Guarantor agrees that:
(i) The occurrence of any one or more of the following shall not affect the enforceability or effectiveness of this Section 9 in accordance with its terms or affect, limit, reduce, discharge or terminate the liability of the Guarantor, or the rights, remedies, powers and privileges of the Administrative Agent or any Lender, under this subection 9(b):
(A) any modification or amendment (including without limitation by way of amendment, extension, renewal or waiver), or any acceleration or other change in the time for payment or performance of the terms of all or any part of the Guaranteed Obligations or any Loan Document, or any other agreement or instrument whatsoever relating thereto, or any modification of the Commitments;
(B) any release, termination, waiver, abandonment, lapse or expiration, subordination or enforcement of the liability of any other guarantee of all or any part of the Guaranteed Obligations;
(C) any application of the proceeds of any other guarantee (including without limitation the obligations of any other guarantor of all or any part of the Guaranteed Obligations) to all or any part of the Guaranteed Obligations in any such manner and to such extent as the Administrative Agent may determine;
(D) any release of any other Person (including without limitation any other guarantor with respect to all or any part of the Guaranteed Obligations) from any personal liability with respect to all or any part of the Guaranteed Obligations;
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(E) any settlement, compromise, release, liquidation or enforcement, upon such terms and in such manner as the Administrative Agent may determine or as applicable law may dictate, of all or any part of the Guaranteed Obligations or any other guarantee of (including without limitation any letter of credit issued with respect to) all or any part of the Guaranteed Obligations;
(F) the giving of any consent to the merger or consolidation of, the sale of substantial assets by, or other restructuring or termination of the corporate existence of the Borrower or any other Person or any disposition of any shares of the Guarantor;
(G) any proceeding against the Borrower or any other guarantor of all or any part of the Guaranteed Obligations or any collateral provided by any other Person or the exercise of any rights, remedies, powers and privileges of the Administrative Agent and the Lenders under the Loan Documents or otherwise in such order and such manner as the Administrative Agent may determine, regardless of whether the Administrative Agent or the Lenders shall have proceeded against or exhausted any collateral, right, remedy, power or privilege before proceeding to call upon or otherwise enforce this Section 9;
(H) the entering into such other transactions or business dealings with the Borrower, any Subsidiary or Affiliate of the Borrower or any other guarantor of all or any part of the Guaranteed Obligations as the Administrative Agent or any Lender may desire; or
(I) all or any combination of any of the actions set forth in this subsection 9(b)(i).
(ii) The enforceability and effectiveness of this Section 9 and the liability of the Guarantor, and the rights, remedies, powers and privileges of the Administrative Agent and the Lenders under this Section 9 shall not be affected, limited, reduced, discharged or terminated, and the Guarantor hereby expressly waives to the fullest extent permitted by law any defense now or in the future arising, by reason of:
(A) the illegality, invalidity or unenforceability of all or any part of the Guaranteed Obligations, any Loan Document or any other agreement or instrument whatsoever relating to all or any part of the Guaranteed Obligations;
(B) any disability or other defense with respect to all or any part of the Guaranteed Obligations, including the effect of any statute of limitations that may bar the enforcement of all or any part of the Guaranteed Obligations or the obligations of any such other guarantor;
(C) the illegality, invalidity or unenforceability of any security for or other guarantee (including without limitation any letter of credit) of all or any part of the Guaranteed Obligations or the lack of perfection or continuing perfection or failure of the priority of any Lien on any collateral for all or any part of the Guaranteed Obligations;
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(D) the cessation, for any cause whatsoever, of the liability of the Borrower or any other guarantor with respect to all or any part of the Guaranteed Obligations (other than, subject to subsection 9(c), by reason of the full payment of all Guaranteed Obligations);
(E) any failure of the Administrative Agent or any Lender to marshal assets in favor of the Borrower or any other Person (including any other guarantor of all or any part of the Guaranteed Obligations), to exhaust any collateral for all or any part of the Guaranteed Obligations, to pursue or exhaust any right, remedy, power or privilege it may have against the Borrower or any other guarantor of all or any part of the Guaranteed Obligations or any other Person or to take any action whatsoever to mitigate or reduce such or any other Persons liability, the Administrative Agent and the Lenders being under no obligation to take any such action notwithstanding the fact that all or any part of the Guaranteed Obligations may be due and payable and that the Borrower may be in default of its obligations under any Loan Document;
(F) any counterclaim, set-off or other claim which the Borrower or any other guarantor of all or any part of the Guaranteed Obligations has or claims with respect to all or any part of the Guaranteed Obligations;
(G) any failure of the Administrative Agent or any Lender or any other Person to file or enforce a claim in any bankruptcy or other proceeding with respect to any Person;
(H) any bankruptcy, insolvency, reorganization, winding-up or adjustment of debts, or appointment of a custodian, liquidator or the like of it, or similar proceedings commenced by or against any Person, including any discharge of, or bar or stay against collecting, all or any part of the Guaranteed Obligations (or any interest on all or any part of the Guaranteed Obligations) in or as a result of any such proceeding;
(I) any action taken by the Administrative Agent or any Lender that is authorized by this subsection 9(b) or otherwise in this Section 9 or by any other provision of any Loan Document or any omission to take any such action; or
(J) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.
(iii) To the fullest extent permitted by law, the Guarantor expressly waives, for the benefit of the Administrative Agent and the Lenders, all diligence, presentment, demand for payment or performance, notices of nonpayment or nonperformance, protest, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under any Loan Document or other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations, and all notices of acceptance of this Section 9 or of the existence, creation, incurring or assumption of new or additional Guaranteed Obligations.
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(c) Reinstatement . The obligations of the Guarantor under this Section 9 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must otherwise be restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.
(d) Subrogation . The Guarantor hereby agrees that, until the final payment in full of all Guaranteed Obligations and the expiration or termination of the Commitments under this Agreement, it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in subsection 9(a), whether by subrogation, reimbursement, contribution or otherwise, against the Borrower or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.
(e) Remedies . The Guarantor agrees that, as between the Guarantor and the Administrative Agent and the Lenders, the obligations of the Borrower under this Agreement, the Notes or any other Loan Documents may be declared to be forthwith due and payable as provided in Section 7 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 7) for purposes of subsection 9(a), notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by such Guarantor for purposes of said subsection 9(a).
(f) Payments . All payments by the Guarantor under this Section 9 shall be made in Dollars, without deduction, set-off or counterclaim at the place specified in Section 2.17 and free and clear of any and all present and future Non-Excluded Taxes.
(g) Solvency . The Guarantor represents and warrants to the Administrative Agent and the Lenders that after giving effect to each borrowing hereunder it will be Solvent.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers . Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower and the Guarantor written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower or the Guarantor hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided , however , that no
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such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lenders Commitment, in each case without the written consent of each Lender affected thereby, or (ii) reduce the voting rights of any Lender under this Section or amend, modify or waive subsection 10.6(a) or reduce the percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by any Obligor of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all the Lenders, or (iii) release the obligations of the Guarantor under subsection 9(a) without the written consent of all the Lenders, or (iv) amend, modify or waive any provision of Section 8 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Guarantor, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Guarantor, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.
10.2 Notices . (a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (i) in the case of delivery by hand, when delivered, (ii) in the case of delivery by mail, three Business Days after being deposited in the mails, certified or registered postage prepaid, or (iii) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in an Administrative Questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:
Borrower: |
MasterCard Incorporated | |
2000 Purchase Street |
||
Purchase, New York 10577-2509 |
||
Attention: Andrea Robertson, Corporate Treasurer |
||
Fax: 914-249-4205 |
||
Telephone: 914-249-5994 |
||
Guarantor: |
MasterCard International Incorporated |
|
2000 Purchase Street |
||
Purchase, New York 10577-2509 |
||
Attention: Andrea Robertson, Corporate |
||
Treasurer |
||
Fax: 914-249-4205 |
||
Telephone: 914-249-5994 |
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The Administrative | ||
Agent or the | ||
Swing Line Lender: | Citibank, N.A. | |
2 Penns Way, Suite 200 | ||
New Castle, Delaware 19720 | ||
Attention: Jonathan Lavinier | ||
Fax: 212-994-0961 | ||
Telephone: 302-894-6065 |
provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to Section 2.2, 2.4, 2.6, 2.7, 2.9, 2.17 or 2.18 shall not be effective until received.
(b) Each Obligor hereby agrees that it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) requests, or converts or continues under Section 2.7 hereof, a borrowing or relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (ii) provides notice of any Default or Event of Default under this Agreement, (iii) is required to be delivered to satisfy any condition precedent to the occurrence of the Closing Date and/or any borrowing, or (iv) initiates or responds to legal process (all such non-excluded communications being referred to herein collectively as Communications ), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com. In addition, each Obligor agrees to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.
(c) Each Obligor further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the Platform ). THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, THE AGENT PARTIES ) HAVE ANY LIABILITY TO ANY OBLIGOR, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING
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OUT OF SUCH OBLIGORS OR THE ADMINISTRATIVE AGENTS TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTYS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(d) The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (i) to provide to the Administrative Agent in writing (including by electronic communication), promptly after the date of this Agreement, an e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address.
(e) Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
10.3 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties . All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes . The Borrower agrees (a) to pay or reimburse the Administrative Agent for all reasonable fees, charges and disbursements of counsel incurred in connection with this Agreement and the other Loan Documents or the amendment, modification or waiver thereof and all reasonable and documented out-of-pocket expenses of the Administrative Agent incurred in connection with any amendment, modification or waiver with respect to this Agreement and the other Loan Documents, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement (including, without limitation, this Section), the other Loan Documents and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel (including, without limitation, the non-duplicative documented allocated cost of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold harmless each
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Lender, the Administrative Agent, their respective affiliates and their respective officers, directors, employees, agents and advisors (each, an Indemnitee ) from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold harmless each Indemnitee from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable legal fees) with respect to the execution, delivery, enforcement, performance and administration of this Agreement (including, without limitation, this Section), the other Loan Documents and any such other documents, including, without limitation, any investigative, administrative or judicial proceeding relating to the foregoing or any of the foregoing relating to any actual or proposed use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of either Obligor, any of their Subsidiaries or any of the Properties or arising out of the Commitments (all the foregoing in this clause (d), collectively, the indemnified liabilities), provided that the Borrower shall have no obligation hereunder to any Indemnitee with respect to indemnified liabilities arising from the gross negligence or willful misconduct of such Indemnitee. The Borrower waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, indirect, punitive or consequential damages. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments .
(a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither Obligor may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ( Participants ) participating interests in any Loan owing to such Lender, any Commitment or Swing Line Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lenders obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participants participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i), (ii) and (iii) of the proviso to Section 10.1. The Borrower
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agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.17, 2.18, 2.20 and 2.21 with respect to its participation in the Commitments, Swing Line Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 2.21, such Participant shall have complied with the requirements of said Section and provided , further , that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.
(c) Subject to the provisions of subsection 10.6(d) relating to the assignment of CAF Advances, any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to one or more banks or other financial institutions, including a finance company or fund (whether a corporation, partnership or other entity) which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having total assets in excess of $500,000,000, (such bank or financial institution, an Assignee ) all or any part of its rights and obligations under this Agreement and the other Loan Documents; provided , however , that
(i) except in the case of an assignment (A) to a Lender or subject to giving prior written notice thereof to the Borrower and the Administrative Agent, an Affiliate of a Lender which is a bank or financial institution or (B) of CAF Advances, each of the Administrative Agent and (except when a Default or Event of Default shall have occurred and be continuing) the Borrower must give its consent to such assignment (which in each case shall not be unreasonably withheld or delayed);
(ii) the Swing Line Lender may not transfer any portion of the Swing Line Commitment without the consent of the Borrower (such consent not to be unreasonably withheld or delayed);
(iii) in the case of any assignment to any Assignee that is not a Lender or an Affiliate thereof, the sum of the aggregate principal amount of the Loans and the aggregate amount of the Commitments and Swing Line Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans and the aggregate amount of the Commitments and Swing Line Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent); and
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(iv) such assignment shall be evidenced by an Assignment and Acceptance, substantially in the form of Exhibit H, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower and the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register.
Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment or Swing Line Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lenders rights and obligations under this Agreement such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this Section, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 7(f) shall have occurred and be continuing.
(d) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to one or more banks, financial institutions or other entities ( CAF Advance Assignees ) any CAF Advance owing to such Lender, pursuant to a CAF Advance Assignment, substantially in the form of Exhibit D-4 attached hereto, executed by the assignor Lender and the CAF Advance Assignee. Upon such execution, from and after the date of such CAF Advance Assignment, the CAF Advance Assignee shall, to the extent of the assignment provided for in such CAF Advance Assignment, be deemed to have the same rights and benefits of payment and enforcement with respect to such CAF Advance and the same rights of set-off and obligation to share pursuant to Section 10.7 as it would have had if it were a Lender hereunder; provided that unless such CAF Advance Assignment shall otherwise specify and a copy of such CAF Advance Assignment shall have been delivered to the Administrative Agent for its acceptance and recording in the Register in accordance with subsection 10.6(e), the assignor thereunder shall act as collection agent for the CAF Advance Assignee thereunder, and the Administrative Agent shall pay all amounts received from the Borrower which are allocable to the assigned CAF Advance directly to such assignor without any further liability to such CAF Advance Assignee. A CAF Advance Assignee under a CAF Advance Assignment shall not, by virtue of such CAF Advance Assignment, become a party to this Agreement or have any rights to consent to or refrain from consenting to any amendment, waiver or other modification of any provision of this Agreement or any related document; provided that (x) the assignor under such CAF Advance Assignment and such CAF Advance Assignee may, in their discretion, agree between themselves upon the manner in which such assignor will exercise its rights under this Agreement and any related document except no Lender shall sell any CAF Advance pursuant to which the CAF Advance Assignee shall have rights to approve any amendment or waiver to this Agreement except to the extent such amendment or waiver would (i) reduce the principal amount of any CAF Advance which has been assigned to such CAF Advance Assignee, (ii) reduce the rate of interest on any such CAF Advance or any fees payable in connection with such CAF Advance or (iii) extend the time of
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payment of principal or, or interest on, any such CAF Advance or any other amount owing under this Agreement and in connection with such CAF Advance, and (y) if a copy of such CAF Advance Assignment shall have been delivered to the Administrative Agent for its acceptance and recording in the Register in accordance with subsection 10.6(e), neither the principal amount of, the interest rate on, nor the maturity date of, any CAF Advance assigned to such CAF Advance Assignee thereunder will be modified without the written consent of such CAF Advance Assignee. If a CAF Advance Assignee has caused a CAF Advance Assignment to be recorded in the Register in accordance with subsection 10.6(e), such CAF Advance Assignee may thereafter, in the ordinary course of its business and in accordance with applicable law, assign the CAF Advance assigned to it to any Lender, to any affiliate or subsidiary of such CAF Advance Assignee or to any other financial institution with the consent of the Borrower (which shall not be unreasonably withheld), and the foregoing provisions of this paragraph (c) shall apply, mutatis mutandis , to any such assignment by a CAF Advance Assignee. Except in accordance with the preceding sentence, CAF Advances may not be further assigned by a CAF Advance Assignee, subject to any legal or regulatory requirement that the CAF Advance Assignees assets must remain under its control.
(e) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the Register ) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) together with payment to the Administrative Agent of a registration and processing fee of $3,500 and (if the Assignee is not a Lender) delivery to the Administrative Agent of such Assignees Administrative Questionnaire, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower.
(g) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a Transferee ) and any prospective Transferee any and all financial information in such Lenders possession concerning the Borrower and its Subsidiaries and Affiliates which has been delivered to such Lender by or on behalf of the Borrower or any of its Subsidiaries pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower or any of its Subsidiaries in connection with such Lenders credit evaluation of the Borrower and its Subsidiaries and Affiliates prior to becoming a party to this Agreement.
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(h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off . (a) If any Lender (a benefitted Lender ) shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lenders Loans, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lenders Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided , however , that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to either Obligor, any such notice being expressly waived by each of them to the extent permitted by applicable law, upon any amount becoming due and payable by either Obligor hereunder (whether at stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of such Obligor; provided that no such set-off and application may be made against deposits in the accounts listed on Schedule 10.7(b) attached hereto. Each Lender agrees promptly to notify such Obligor and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.
10.8 Counterparts . This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with International and the Administrative Agent.
10.9 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
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10.10 Integration . This Agreement and the other Loan Documents represent the entire agreement of the Obligors, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
10.11 Termination of Commitments and Swing Line Commitments . The Commitments and Swing Line Commitments shall terminate if the conditions to closing set forth in Section 4.1 shall not be satisfied on or before May 2, 2006.
10.12 GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.13 Submission To Jurisdiction; Waivers . Each Obligor hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, indirect, punitive or consequential damages.
10.14 Acknowledgements . Each Obligor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to it arising out of or in connection with this Agreement or any of the other Loan
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Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Obligors, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Obligors and the Lenders.
10.15 WAIVERS OF JURY TRIAL . EACH OBLIGOR, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.16 Confidentiality . Neither the Administrative Agent nor any Lender shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to the Administrative Agents or such Lenders Affiliates and their respective officers, directors, employees, agents and advisors and, subject to the execution of an agreement for the benefit of the Borrower to comply with the provisions of this Section, to actual or prospective assignees and participants, (b) to the extent required by any applicable law, rule or regulation or judicial process, (c) to any rating agency when required by it, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder and (f) as requested or required by any state, federal or foreign authority or examiner regulating banks or other financial institutions or banking.
10.17 USA PATRIOT Act . Each Lender hereby notifies each Obligor that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the Act), it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of such Obligor and other information that will allow such Lender to identify each Obligor in accordance with the Act.
10.18 Termination of Agreement . Upon termination of the Commitments, the repayment in full of the principal of all Loans outstanding hereunder and the payment in full of all accrued interest and fees and any other amounts then due and payable hereunder, this Agreement shall terminate except for the provisions which expressly survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
MASTERCARD INCORPORATED |
||
By: |
/s/ Andrea Robertson |
|
Name: |
Andrea Robertson |
|
Title: |
Treasurer | |
MASTERCARD INTERNATIONAL INCORPORATED | ||
By: |
/s/ Andrea Robertson |
|
Name: |
Andrea Robertson | |
Title: |
Corporate Treasurer |
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69
CITIBANK, N.A., |
||
as Administrative Agent and as Lender |
||
By: |
/s/ Diane Pockaj |
|
Name: |
Diane Pockaj | |
Title: |
Managing Director and Vice President |
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JPMORGAN CHASE BANK, N.A., |
||
as Backup Agent and as Lender |
||
By: |
/s/ Richard J. Poworoznek |
|
Name: |
Richard J. Poworoznek | |
Title: |
Vice President |
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LENDERS |
||
COMMONWEALTH BANK OF AUSTRALIA |
||
By: |
/s/ Philip Delbridge |
|
Name: |
Philip Delbridge | |
Title: |
Risk Manager |
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72
HSBC BANK USA, N.A. |
||
By: |
/s/ Joseph Travaglione |
|
Name: |
Joseph Travaglione | |
Title: |
Senior Vice President |
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73
GREENWICH CAPITAL MARKETS, Inc., as agent for |
||
The Royal Bank Of Scotland plc |
||
By: |
/s/ Diane Ferguson |
|
Name: |
Diane Ferguson | |
Title: |
Managing Director |
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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH |
||
By: |
/s/ Jesse A. Reid, Jr. |
|
Name: |
Jesse A. Reid, Jr. | |
Title: |
Authorized Signatory |
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HARRIS NESBITT FINANCING, INC. |
||
By: |
/s/ Stephen A. Maenhout |
|
Name: |
Stephen A. Maenhout | |
Title: |
Vice President |
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ING BANK N.V. |
||
By: |
/s/ W. Hollink |
|
Name: |
W. Hollink | |
Title: |
Manager / Associate | |
By: |
/s/ S. Poot |
|
Name: |
S. Poot | |
Title: |
Director |
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WILLIAM STREET COMMITMENT CORPORATION (Recourse only to assets of William Street Commitment Corporation) |
||
By: |
/s/ Mark Walton |
|
Name: |
Mark Walton | |
Title: |
Assistant Vice President |
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BANK OF AMERICA, N.A. |
||
By: |
/s/ Mark Short |
|
Name: |
Mark Short | |
Title: |
Vice President |
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DEUTSCHE BANK AG NEW YORK BRANCH |
||
By: |
/s/ Richard Herder |
|
Name: |
Richard Herder | |
Title: |
Managing Director | |
By: |
/s/ Brett Hanmer |
|
Name: |
Brett Hanmer | |
Title: |
Vice President |
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KEYBANK NATIONAL ASSOCIATION | ||
By: |
/s/ Mary K. Young |
|
Name: | Mary K. Young | |
Title: | Sr. Vice President |
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81
LLOYDS TSB BANK, PLC | ||
By: |
/s/ James Rudd |
|
Name: | James Rudd | |
Title: | Vice President | |
By: |
/s/ Melissa Curry |
|
Name: | Melissa Curry | |
Title: | Assistant Vice President |
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MIZUHO CORPORATE BANK, LTD. | ||
By: |
/s/ Robert Gallagher |
|
Name: | Robert Gallagher | |
Title: | Senior Vice President |
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83
SUMITOMO MITSUI BANKING CORPORATION | ||
By: |
/s/ Shigeru Tsuru |
|
Name: | Shigeru Tsuru | |
Title: | Joint General Manager |
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WESTPAC BANKING CORPORATION | ||
By: |
/s/ Robert F. Bossé |
|
Name: | Robert F. Bossé | |
Title: | Vice President |
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85
FIFTH THIRD BANK | ||
By: |
/s/ George B. Davis |
|
Name: | George B. Davis | |
Title: | Vice President |
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86
PNC BANK, NATIONAL ASSOCIATION | ||
By: |
/s/ Robert M. Martin |
|
Name: | Robert M. Martin | |
Title: | Senior Vice President |
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SUNTRUST BANK, INC. | ||
By: |
/s/ Brian K. Peters |
|
Name: | Brian K. Peters | |
Title: | Managing Director |
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U.S. BANK, NATIONAL ASSOCIATION | ||
By: |
/s/ M. Scott Donaldson |
|
Name: | M. Scott Donaldson | |
Title: |
Vice President U.S. Bank, N.A. |
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WELLS FARGO BANK, NATIONAL ASSOCIATION | ||
By: |
/s/ Roy H. Roberts |
|
Name: | Roy H. Roberts | |
Title: | Vice President |
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SCHEDULE 1.1(a)
MasterCard Incorporated
Permitted Investments
Cash Equivalents @ 12/31/05
Fund Managers |
|||
FIDELITY INVESTMENTS |
$ | 69,328,777 | |
FEDERATED |
67,862,161 | ||
BLACKROCK PROVIDENT |
59,402,264 | ||
WILLIAMS CAPITAL |
28,230,643 | ||
MILESTONE CAPITAL |
7,398,515 | ||
JPMORGAN CHASE |
2,691,503 | ||
WEISS, PECK & GREER |
2,545,083 | ||
WESTERN ASSET MANAGEMENT |
1,637,263 | ||
HSBC ASSET MANAGEMENT INC. |
1,344,402 | ||
MBIA CAPITAL MANAGEMENT INC |
305,231 | ||
$ | 240,745,841 | ||
MasterCard International Incorporated Managed |
|||
MICHIGAN HIGHER ED STD LN |
$ | 10,066,425 | |
MINNESOTA HIGHER ED |
10,023,333 | ||
TENNESSEE ED |
10,016,389 | ||
MONTANA HESAC |
10,006,444 | ||
NEW MEXICO ED |
9,520,946 | ||
WYOMING STUDENT LOAN |
8,718,059 | ||
MICHIGAN HIGHER ED STD LN |
8,208,468 | ||
SOUTH CAROLINA |
8,059,389 | ||
COLORADO STUDENT LN |
8,007,627 | ||
SLFC 95B3 |
8,007,089 | ||
RHODE ISLAND 98 |
7,000,000 | ||
KENTUCKY HESLC |
6,471,979 | ||
IDAHO EDUCATION LOAN |
6,072,695 | ||
WASHINGTON STUDENT LN |
6,006,197 | ||
PANHANDLE PLAINS |
6,003,867 | ||
STUDENT LOAN |
6,003,787 | ||
ALASKA STUDENT LN CORP. |
6,003,302 | ||
OKLAHOMA STUDENT LOAN |
6,002,333 | ||
NEW MEXICO ED |
5,034,300 | ||
SOUTH TEXAS |
5,003,188 | ||
BRAZOS HIGHER ED |
5,002,819 | ||
MAINE EDUCATIONAL LOAN |
5,002,367 | ||
WA STUDENT LN FIN ASSOC |
5,000,390 | ||
OHIO HEALTH FRANKLIN CO |
4,050,000 | ||
WASHINGTON STUDENT LOAN |
4,001,556 |
EDSOUTH 2004 |
3,401,884 | ||
PENN HIGHER ED., PA- SMBC |
3,200,000 | ||
PHEAA SER02 |
3,002,900 | ||
OHIO STATE AIR QUALITY |
2,925,000 | ||
ARKANSAS SLA |
2,803,114 | ||
VERMONT STUDENT ASSISTANCE CORP |
2,482,021 | ||
EDUCATIONAL FUNDING |
2,151,191 | ||
MONTANA HIGHER ED |
2,128,971 | ||
$ | 195,388,030 | ||
Note:
1. | MasterCard International Incorporated Managed investments consist of auction rate securities that are classified as cash and cash equivalents based on the effective maturity or reset date for each security. Note the stated maturity for these securities is longer than the effective maturity. |
SCHEDULE 1.1(b)
MasterCard Incorporated
Permitted Investments
Municipal Bonds and Equity Investments @ 12/31/05
MasterCard | International Portfolio |
Municipal Bonds |
Par Amount |
Maturity
Date |
Stated
Rate |
||||
UNIVERSITY COLO ENTERPRIS |
$ | 5,100,000 | 06/01/2011 | 5.00 | |||
GWINNETT CNTY GA WTR & SE |
5,000,000 | 08/01/2009 | 5.30 | ||||
ARIZONA SCH FACS BRD REV |
5,000,000 | 07/01/2009 | 4.00 | ||||
NEW MEXICO FIN AUTH ST |
5,000,000 | 06/15/2009 | 5.00 | ||||
NORTH CAROLINA EASTN MUN |
4,700,000 | 01/01/2009 | 6.13 | ||||
AUSTIN TEX WTR & WASTEWTR |
4,300,000 | 05/15/2007 | 6.00 | ||||
ORANGE COUNTY FLA TOURIST |
4,085,000 | 10/01/2009 | 5.50 | ||||
MECKLENBURG CNTY NC |
4,000,000 | 03/01/2010 | 5.00 | ||||
MOBILE CNTY ALA RFDG |
3,980,000 | 02/01/2010 | 5.00 | ||||
HILLSBOROUGH CNTY FLA UTIL |
3,500,000 | 08/01/2006 | 5.00 | ||||
DADE CNTY FLA SCH DIST RM |
3,475,000 | 08/01/2008 | 5.00 | ||||
ALBUQUERQUE N M MUN SCH DIST |
3,435,000 | 08/01/2006 | 5.00 | ||||
PENNSYLVANIA ST |
3,300,000 | 02/01/2011 | 5.25 | ||||
DETROIT MICH FRDG-SER B-1 |
3,195,000 | 04/01/2012 | 5.00 | ||||
VIRGINIA ST PUB SCH AUTH |
3,125,000 | 08/01/2009 | 5.50 | ||||
CLARK CNTY NEV PUB SAFETY |
3,000,000 | 06/01/2012 | 5.00 | ||||
NEW JERSEY ECONOMIC DEV |
3,000,000 | 09/01/2012 | 5.00 | ||||
NORTH CAROLINA ST HWY-SER A |
3,000,000 | 05/01/2007 | 4.60 | ||||
UNIVERSITY TEX PERM UNIV |
3,000,000 | 07/01/2011 | 5.00 | ||||
UT ST-SER B |
3,000,000 | 07/01/2009 | 4.50 | ||||
FLORIDA ST BRD ED LOTTERY |
3,000,000 | 07/01/2009 | 5.50 |
MILWAUKEE WIS MET SEW DIST SEW SYS-SE |
3,000,000 | 10/01/2006 | 5.00 | |||
LENAPE NJ REGL HIGH SCH |
2,815,000 | 04/01/2011 | 4.50 | |||
COLUMBUS OHIO REF-SER B |
2,795,000 | 05/15/2007 | 5.25 | |||
MARYLAND ST RFDG |
2,795,000 | 02/01/2010 | 5.00 | |||
NEW JERSEY ECONOMIC DEV AUTH REV |
2,790,000 | 09/15/2006 | 5.00 | |||
NORTH TEX TWY AUTH DALLAS |
2,725,000 | 01/01/2010 | 5.00 | |||
SOUTH CAROLINA ST |
2,670,000 | 01/01/2010 | 5.00 | |||
FLORIDA ST DEPT ENVIRON |
2,650,000 | 07/01/2009 | 5.00 | |||
COLORADO DEPT TRANS REV |
2,625,000 | 06/15/2010 | 6.00 | |||
CLARK CNTY WASH BPUB UTIL |
2,595,000 | 01/01/2009 | 5.50 | |||
METROPOLITAN GOVT NASHVIL |
2,590,000 | 10/15/2006 | 5.25 | |||
VIRGINIA COMWLTH TRANSN BRD TRANSN REV U |
2,535,000 | 05/15/2006 | 5.00 | |||
METROPOLITAN COUNCIL MINN |
2,515,000 | 02/01/2011 | 5.00 | |||
OHIO ST BLDG AUTH |
2,500,000 | 10/01/2013 | 5.00 | |||
MARICOPA CNTY ARIZ SCH |
2,500,000 | 07/01/2008 | 5.00 | |||
NEW JERSEY ST TRANSN TR F |
2,500,000 | 12/15/2010 | 5.25 | |||
DISTRICT COLUMBI.C |
2,500,000 | 01/01/2007 | 5.00 | |||
OHIO ST WTR DEV AUTH WTR |
2,500,000 | 06/01/2010 | 5.00 | |||
OKLAHOMA DEV FIN AUTH REV |
2,500,000 | 08/15/2009 | 5.63 | |||
WASHINGTON ST RFDG-SER |
2,500,000 | 01/01/2009 | 4.00 | |||
OKLAHOMA DEV FIN AUTH REV |
2,500,000 | 08/15/2009 | 5.63 | |||
REGIONAL TRANSN AUTH ILL SER A |
2,445,000 | 07/01/2006 | 5.00 | |||
NORTH CAROLINA ST RFG |
2,425,000 | 03/01/2010 | 5.00 | |||
GEORGIA ST SER D |
2,400,000 | 08/01/2009 | 6.70 | |||
CALIFORNIA ST DEPT TRANSN |
2,400,000 | 02/01/2010 | 4.00 | |||
MN REF-VARIOUS P |
2,370,000 | 06/01/2008 | 5.00 | |||
NEBRASKA PUB PWR DIST REV |
2,300,000 | 01/01/2013 | 5.00 | |||
KENTUCKY STATE PROPERTY & |
2,250,000 | 02/01/2011 | 5.38 |
PENNSYLVANIA ST TPK COMMN |
2,230,000 | 07/15/2006 | 5.00 | |||
NEW MEXICO ST SEV TAX |
2,215,000 | 07/01/2009 | 5.00 | |||
PIMA CNTY ARIZ |
2,200,000 | 07/01/2009 | 5.00 | |||
MASSACHUSETTS ST |
2,200,000 | 08/01/2009 | 5.75 | |||
DU PAGE WTR COMMN ILL RFD |
2,200,000 | 03/01/2010 | 5.25 | |||
BIRMINGHAM ALA RFDG-SER A |
2,195,000 | 04/01/2009 | 5.25 | |||
OKLAHOMA ST CAPITAL IMPT |
2,195,000 | 07/01/2010 | 5.00 | |||
CHICAGO IL HSG AUTH |
2,190,000 | 09/20/2007 | 3.45 | |||
MISSOURI ST HEALTH & EDL |
2,140,000 | 06/01/2009 | 6.40 | |||
CONNECTICUT ST CLEAN WTR |
2,115,000 | 03/01/2007 | 5.75 | |||
MISSOURI ST RFDG-THIRD |
2,100,000 | 08/01/2007 | 5.00 | |||
KITSAP CNTY WASH |
2,065,000 | 07/01/2010 | 5.88 | |||
NORTH CAROLINA ST PUB |
2,050,000 | 03/01/2008 | 5.00 | |||
HOUSTON TX COMM COLL |
2,020,000 | 04/15/2010 | 5.25 | |||
CHICAGO ILL NEIGHBORHOODS |
2,005,000 | 07/01/2010 | 6.00 | |||
DELAWARE TRNSN AUTH |
2,000,000 | 07/01/2011 | 5.00 | |||
DETROIT MICH CITY SCH DIS |
2,000,000 | 05/01/2007 | 5.00 | |||
LOWER COLO RIV AUTH TEX R |
2,000,000 | 05/15/2008 | 5.00 | |||
METROPOLITAN ATLANTA RAPID TRAN |
2,000,000 | 07/01/2006 | 6.10 | |||
NEW MEXICO FIN AUTH REV |
2,000,000 | 06/01/2012 | 5.25 | |||
PLATTE RIV PWR AUTH COLO |
2,000,000 | 06/01/2009 | 5.25 | |||
SOUTH CAROLINA ST PUB SVC |
2,000,000 | 01/01/2008 | 4.00 | |||
SOUTHERN CAL PUB PWR AUTH |
2,000,000 | 01/01/2009 | 5.38 | |||
UNIV. HOUSTON TX UNIV REV |
2,000,000 | 02/15/2009 | 4.00 | |||
WASHINGTON ST SER B |
2,000,000 | 01/01/2010 | 6.00 | |||
PRIVATE COLLEGES & UNIV |
2,000,000 | 11/01/2010 | 5.50 | |||
KANSAS CITY MO SCH DIST |
2,000,000 | 02/01/2007 | 5.00 | |||
BIRDVILLE TEX INDPT SCH D |
2,000,000 | 02/15/2009 | 4.38 |
CHIPPEWA VALLEY MICH SCHS |
2,000,000 | 05/01/2011 | 5.00 | |||
COLORADO DEPT TRANS REV |
2,000,000 | 12/15/2008 | 4.00 | |||
DETROIT MI SEW DISP REV |
2,000,000 | 07/01/2008 | 5.00 | |||
ENERGY NORTHWEST WASH |
2,000,000 | 07/01/2009 | 5.25 | |||
HOUSTON TEX RFDG-PUB |
2,000,000 | 03/01/2009 | 5.00 | |||
HOUSTON TEX RFDG-PUB IMPT |
2,000,000 | 03/01/2009 | 5.00 | |||
IVY TECH ST COLLEGE IND |
2,000,000 | 07/01/2007 | 5.00 | |||
METROPOLITAN WASH D C ARP |
2,000,000 | 10/01/2010 | 5.00 | |||
MICHIGAN ST COMPREHENSIVE |
2,000,000 | 05/15/2007 | 5.25 | |||
NEW YORK NY SER F |
2,000,000 | 02/01/2008 | 5.13 | |||
PENNSYLVANIA ST INDL DEV |
2,000,000 | 01/01/2008 | 5.80 | |||
WASHINGTON ST SER 2000 A |
2,000,000 | 07/01/2009 | 5.25 | |||
WISCONSIN ST TRANSN REV S |
2,000,000 | 07/01/2013 | 5.00 | |||
PENNSYLVANIA ST SECOND |
2,000,000 | 08/01/2008 | 5.00 | |||
KANSAS CITY MO SCH DIST B |
2,000,000 | 02/01/2007 | 5.00 | |||
CALIFORNIA STATE D |
2,000,000 | 05/01/2007 | 5.25 | |||
FORT BEND TEX IDS |
2,000,000 | 08/15/2012 | 5.00 | |||
NEW JERSEY ST TRANS TR |
2,000,000 | 12/15/2008 | 5.25 | |||
MICHIGAN MUN BD AUTH REV |
2,000,000 | 05/01/2008 | 5.00 | |||
GEORGIA ST SER C |
2,000,000 | 09/01/2008 | 5.75 | |||
WASHINGTON SUB SAN DIST |
2,000,000 | 06/01/2011 | 5.00 | |||
MASSACHUSETTS ST WTR POLL |
2,000,000 | 08/01/2010 | 5.00 | |||
MESA ARIZ INDL AUTH REV |
2,000,000 | 01/01/2010 | 5.75 | |||
MICHIGAN ST BLDG AUTH REV |
2,000,000 | 10/15/2010 | 5.00 | |||
PENNSYLVANIA ST |
2,000,000 | 07/01/2008 | 5.00 | |||
SAN ANTONIO TEX ELEC & GA |
2,000,000 | 02/01/2007 | | |||
ORLANDO FLA UTILS COMMN U |
2,000,000 | 07/01/2009 | 5.00 | |||
KERRVILLE TEX INDPT SCH D |
1,990,000 | 08/15/2010 | 5.00 |
CHARLOTTE N C RFDG-SER 20 |
1,985,000 | 06/01/2010 | 5.00 | |||
CHEROKEE CNTY GA SCH SYS |
1,975,000 | 06/01/2007 | 5.00 | |||
PITTSBURGH PA SCH DIST |
1,970,000 | 09/01/2006 | 4.25 | |||
MINNESOTA ST RFDG |
1,900,000 | 08/01/2008 | 5.00 | |||
NY ST ENVIROMENTAL FACS |
1,875,000 | 06/15/2009 | 5.00 | |||
OKLAHOMA STATE CAP IMPT |
1,875,000 | 06/01/2013 | 5.00 | |||
ALASKA STUDENT LN |
1,870,000 | 07/01/2010 | 4.00 | |||
UTAH ST MUN PWR AGY ELEC |
1,865,000 | 07/01/2007 | 5.00 | |||
JEFFERSON LA SALES TAX DI |
1,830,000 | 12/01/2011 | 5.00 | |||
LA GRANGE GA WTR & SEW RE |
1,800,000 | 01/01/2009 | 4.00 | |||
NEW JERSEY ST TRANSN TR F |
1,795,000 | 06/15/2010 | 5.25 | |||
WISCONSIN ST RFDG-SER 3 |
1,795,000 | 05/01/2009 | 5.00 | |||
MICHIGAN MUN BD AUTH REV |
1,795,000 | 05/01/2010 | 5.00 | |||
ARIZONA SCH FACS BRD |
1,750,000 | 07/01/2010 | 5.50 | |||
FREDERICK REF-FA |
1,725,000 | 07/01/2006 | 5.00 | |||
DELAWARE TRANSN AUTH TRAN |
1,710,000 | 07/01/2009 | 5.00 | |||
TIPPECANOE IND SD |
1,710,000 | 01/01/2008 | 3.00 | |||
PERRY TWP IND MULTI SCH B |
1,705,000 | 01/10/2010 | 5.00 | |||
UNIVERSITY CALIF REVS SER |
1,700,000 | 05/15/2010 | 4.50 | |||
SPRINGFIELD H/E |
1,665,000 | 04/01/2012 | 8.25 | |||
NEW YORK REGL RAIL |
1,640,000 | 10/01/2007 | 5.00 | |||
MC HENRY CNTY ILL CMNTY HIGH SCH |
1,640,000 | 01/01/2008 | | |||
HOUSTON TEX ARPT SYS REV |
1,640,000 | 07/01/2006 | 6.75 | |||
CLARK CNTY NEV PUB SAFETY |
1,600,000 | 03/01/2010 | 6.00 | |||
OHIO ST BLDG AUTH |
1,600,000 | 04/01/2010 | 5.00 | |||
UTAH ST RFDG-SER B |
1,600,000 | 07/01/2006 | 4.50 | |||
PERRY TWP IND MULTI SCH B |
1,600,000 | 07/10/2010 | 5.00 | |||
RHODE IS ST & PROVIDENCE |
1,565,000 | 11/01/2010 | 5.25 |
CALIFORNIA ST DEPT WTR RE |
1,540,000 | 12/01/2013 | 5.50 | |||
PENNSYLVANIA ST SECOND |
1,525,000 | 08/01/2008 | 5.00 | |||
ORANGE CNTY N Y RFDG |
1,500,000 | 07/15/2012 | 5.00 | |||
PENNSYLVANIA ST RFDG |
1,500,000 | 07/01/2009 | 5.00 | |||
PENNSYLVANIA ST RFDG |
1,500,000 | 10/01/2011 | 5.00 | |||
PHOENIX ARIZ CIVIC IMPT C |
1,500,000 | 07/01/2009 | 5.00 | |||
PUERTO RICO ELEC PWR AUTH |
1,500,000 | 07/01/2011 | 5.25 | |||
OREGON ST DEPT TRANSN HWY |
1,500,000 | 11/15/2011 | 5.50 | |||
CALIFORNIA ST ECONOMIC |
1,500,000 | 07/01/2010 | 5.00 | |||
CHICAGO ILL O HARE INTL |
1,500,000 | 01/01/2009 | 5.00 | |||
PLANO TEX INDPT SCH DIST |
1,500,000 | 02/15/2007 | 5.00 | |||
DETROIT MICH SEWER DISP |
1,500,000 | 01/01/2010 | 5.75 | |||
HAWAII STATE |
1,500,000 | 02/01/2011 | 5.50 | |||
NEW MEXICO FIN AUTH REV |
1,500,000 | 06/01/2011 | 5.00 | |||
OHIO STATE HWY CAP |
1,500,000 | 05/01/2009 | 5.00 | |||
NORTH SLOPE-CABS |
1,500,000 | 06/30/2008 | | |||
FORSYTH CNTY GA |
1,490,000 | 03/01/2012 | 5.75 | |||
KANSAS ST DEV FIN. AUTH. |
1,485,000 | 10/01/2008 | 5.00 | |||
WAYNE TWP IND MARION CNTY |
1,475,000 | 01/10/2009 | 5.00 | |||
UNIVERSITY N C SYS POOL R |
1,460,000 | 10/01/2006 | 5.50 | |||
INDIANA BD BK REV ST |
1,445,000 | 02/01/2008 | 5.00 | |||
DURHAM CNTY N C ENTERPRIS |
1,425,000 | 06/01/2008 | 5.00 | |||
SACRAMENTO CALIF MUN UTIL |
1,425,000 | 08/15/2009 | 5.25 | |||
KITSAP CNTY WASH SD 10 |
1,415,000 | 12/01/2009 | | |||
SOUTH CAROLINA ST ECONOMI |
1,405,000 | 08/01/2013 | 5.25 | |||
ILLINOIS ST |
1,400,000 | 08/01/2012 | 5.25 | |||
GRAND RAPIDS MICH PUB SCH |
1,400,000 | 05/01/2009 | 5.00 | |||
MASSACHUSETTS ST PORT AUT |
1,400,000 | 07/01/2008 | 5.00 |
HAMILTON SOUTHEATERN IND |
1,395,000 | 01/15/2010 | 5.00 | |||
TACOMA WASH ELEC SYS REV |
1,380,000 | 01/01/2008 | 5.50 | |||
AUSTIN TEXAS IND SCH DIST |
1,355,000 | 08/01/2008 | 5.00 | |||
FLORIDA ST BRD ED CAP OUT |
1,350,000 | 06/01/2010 | 5.00 | |||
CHICAGO ILL SALES TAX REV |
1,340,000 | 01/01/2010 | 5.00 | |||
AVON IND CMTY SCH BLDG |
1,320,000 | 01/10/2009 | 5.00 | |||
NEW YORK REGL RAIL |
1,305,000 | 07/01/2007 | 4.00 | |||
CHARLOTTE N C RFDG |
1,300,000 | 06/01/2014 | 5.25 | |||
UTAH ST SER B |
1,300,000 | 07/01/2009 | 5.00 | |||
ILLINOIS FIRST SER |
1,295,000 | 04/01/2012 | 5.50 | |||
LEANDER TEX INDPT SCH DIS |
1,290,000 | 08/15/2012 | 5.00 | |||
OPELIKA ALA WTS-SER A |
1,285,000 | 04/01/2009 | 5.00 | |||
MIAMI FLA RFDG |
1,280,000 | 07/01/2011 | 5.00 | |||
FLORIDA ST DEPT EN |
1,265,000 | 07/01/2008 | 5.25 | |||
ESSEX CNTY NJ IMPT AUTH |
1,260,000 | 10/01/2010 | 6.00 | |||
MASSACHUSETTS ST INDL FIN |
1,250,000 | 09/01/2008 | 5.38 | |||
VIRGINIA COMWLTH TRANSN |
1,250,000 | 10/01/2006 | 5.50 | |||
VOLUSIA CNTY FLA SCH |
1,200,000 | 10/01/2009 | 5.00 | |||
CHICAGO ILL SALES TAX REV |
1,200,000 | 01/01/2013 | 5.00 | |||
MESA ARIZ RFDG |
1,200,000 | 07/01/2009 | 5.00 | |||
WASHINGTON CNTY TENN |
1,185,000 | 04/01/2012 | 5.00 | |||
KILLEEN TEX INDPT SCH DIS |
1,180,000 | 02/15/2011 | 5.00 | |||
NEW YORK ST DORM AUTH REV |
1,180,000 | 01/01/2013 | 5.25 | |||
CONNECTICUT ST SER C |
1,160,000 | 05/01/2011 | 5.00 | |||
GEORGIA ST SER A |
1,150,000 | 03/01/2010 | 5.70 | |||
KING CNTY WASH PUB HOSP |
1,120,000 | 06/01/2009 | 5.00 | |||
CALIFORNIA STATE |
1,100,000 | 02/01/2010 | 5.25 | |||
GEORGIA ST |
1,100,000 | 08/01/2009 | 5.25 |
TEXAS A & M UNIV REVS FIN |
1,100,000 | 05/15/2010 | 5.00 | |||
HARTFORD CNTY CONN |
1,085,000 | 11/01/2006 | 4.00 | |||
MINNESOTA STATE |
1,065,000 | 08/01/2009 | 5.25 | |||
NORTH CAROLINA ST SER A |
1,065,000 | 03/01/2013 | 5.20 | |||
OKLAHOMA ST CAP IMPT AUTH |
1,060,000 | 06/01/2007 | 5.00 | |||
PRIVATE COLLEGES & UNIVS AUTH GA |
1,050,000 | 09/01/2006 | 5.00 | |||
MECKLENBURG CNTY N C PUB |
1,045,000 | 02/01/2009 | 4.00 | |||
UT BLDG LSE MAST |
1,025,000 | 05/15/2006 | 5.00 | |||
CLEVELAND OHIO CITY SCH D |
1,020,000 | 06/01/2007 | 5.75 | |||
ALBANY ORE WTR REV RFDG |
1,005,000 | 08/01/2008 | 5.00 | |||
ILLINOIS DEV FIN AUTH REV |
1,000,000 | 09/01/2008 | 5.00 | |||
WILSON PA SCH DIST SECOND |
1,000,000 | 05/15/2008 | 5.00 | |||
ATLANTA GA RFDG-SER A |
1,000,000 | 12/01/2012 | 5.00 | |||
BALTIMORE CNTY MD |
1,000,000 | 09/01/2012 | 5.25 | |||
CHARLOTTE NORTH CAROLINA |
1,000,000 | 06/01/2012 | 5.00 | |||
CHICAGO ILL RFDG-SER B |
1,000,000 | 01/01/2009 | 5.00 | |||
DETROIT MICH SEW DISP REV |
1,000,000 | 07/01/2009 | 5.00 | |||
HOWARD CNTY MD RFDG-CONS |
1,000,000 | 08/15/2008 | 5.00 | |||
KENTUCKY ST TPK AUTH |
1,000,000 | 07/01/2010 | 5.00 | |||
METROPOLITAN ATLANTA RAPI |
1,000,000 | 07/01/2009 | 5.00 | |||
MICHIGAN MUN BD AUTH REV |
1,000,000 | 10/01/2009 | 5.75 | |||
NEW YORK ST. THRUWAY AUTH |
1,000,000 | 04/01/2012 | 5.25 | |||
NORTH CAROLINA ST RFDG |
1,000,000 | 03/01/2012 | 5.00 | |||
OHIO ST BLDG AUTH RFDG-HW |
1,000,000 | 04/01/2010 | 5.00 | |||
PUERTO RICO COMWLTH RFDG- |
1,000,000 | 07/01/2012 | 6.50 | |||
SOUTHERN MINN MUN |
1,000,000 | 01/01/2012 | 5.00 | |||
UNIVERSITY ARIZ UNIV REVS |
1,000,000 | 06/01/2006 | 5.00 | |||
UNIVERSITY ILL CTFS |
1,000,000 | 08/15/2008 | 4.00 |
WARREN MICH CONS SCH DIST |
1,000,000 | 05/01/2008 | 4.50 | |||
BROWARD CNTY FL 01-01-10 |
1,000,000 | 01/01/2010 | 5.00 | |||
OHIO ST RFSG |
1,000,000 | 08/01/2009 | 5.00 | |||
ARIZONA ST 5.24 1/1/2007 |
1,000,000 | 01/01/2007 | 5.25 | |||
CHIPPEWA VALLEY MICH SCHS |
1,000,000 | 05/01/2010 | 5.00 | |||
HOUSTON TEX RFDG-PUB |
1,000,000 | 03/01/2008 | 5.00 | |||
METROPOLITAN COUNCIL MINN |
1,000,000 | 02/01/2007 | 5.00 | |||
METROPOLITAN PIER & EXPOS |
1,000,000 | 06/15/2008 | 5.25 | |||
NEW YORK ST DORM AUTH LEASE REV |
1,000,000 | 01/15/2008 | 5.00 | |||
OKLAHOMA CNTY OKLA INDPT |
1,000,000 | 02/01/2007 | 5.00 | |||
PLANO TEX PLANO TEX |
1,000,000 | 09/01/2007 | 4.00 | |||
SCHAUMBURG ILL |
1,000,000 | 01/01/2007 | 5.00 | |||
ARLINGTON TEX INDPT SCH |
1,000,000 | 02/15/2014 | 5.00 | |||
UPPER MERION PA AREA SCH |
1,000,000 | 07/15/2007 | 4.50 | |||
BRIGHTON MICH AREA SCH DIST |
1,000,000 | 05/01/2008 | 5.13 | |||
BROADWAY OFFICE PPTYS WAS |
1,000,000 | 12/01/2012 | 5.25 | |||
CAMDEN COUNTY NJ I |
1,000,000 | 09/01/2007 | 5.00 | |||
CENTRAL OHIO SOLID WASTE |
1,000,000 | 12/01/2008 | 5.00 | |||
CHICAGO ILL PARK DIST |
1,000,000 | 01/01/2010 | 5.00 | |||
GASTON CNTY N C CTFS PART |
1,000,000 | 12/01/2009 | 5.00 | |||
HAMILTON CTY OHIO SALE |
1,000,000 | 12/01/2008 | 4.60 | |||
HAWAII ST RFDG-SER DG |
1,000,000 | 07/01/2009 | 5.00 | |||
HONOLULU HAWAII CITY |
1,000,000 | 07/01/2008 | 5.00 | |||
HOUSTON TEX RFDG-PUB IMPT |
1,000,000 | 03/01/2012 | 5.00 | |||
HOUSTON TEX RFDG-PUBLIC |
1,000,000 | 09/01/2010 | 5.75 | |||
HOUSTON TEX UTIL SYS REV |
1,000,000 | 05/15/2009 | 5.00 | |||
HOUSTON TEX WTR & SWR SYS |
1,000,000 | 12/01/2007 | 5.00 | |||
JEA FLA ST JOHNS RIV PWR |
1,000,000 | 10/01/2009 | 5.00 |
LA ST-SER A |
1,000,000 | 11/15/2007 | 5.50 | |||
LOS ALAMOS CNTY N MEX UTL |
1,000,000 | 07/01/2008 | 5.00 | |||
LOWER COLO RIV AUTH TEX |
1,000,000 | 05/15/2010 | 5.00 | |||
MASSACHUSETTS ST WTR RES AUTH |
1,000,000 | 08/01/2011 | 5.50 | |||
MEMPHIS-SHELBY CNTY TENN ARPT AUTH ARPT |
1,000,000 | 03/01/2006 | 5.00 | |||
MICHIGAN ST BLDG A |
1,000,000 | 10/15/2007 | 5.00 | |||
NASSAU CNTY N Y IN |
1,000,000 | 11/15/2007 | 5.00 | |||
NEW JERSEY BLDG AU |
1,000,000 | 12/15/2011 | 5.25 | |||
NEW JERSEY ECONOMIC DEV |
1,000,000 | 06/15/2013 | 5.25 | |||
NEW YORK NYC TRANSITIONAL |
1,000,000 | 11/01/2007 | 5.00 | |||
NY ST LOC GOVT ASSISTANCE |
1,000,000 | 04/01/2007 | 5.50 | |||
PENNSYLVANIA ST TPK COMMN |
1,000,000 | 12/01/2007 | 4.00 | |||
REGIONAL WASTE SYS INC ME |
1,000,000 | 07/01/2009 | 5.00 | |||
ST PETERSBURG FLA |
1,000,000 | 10/01/2007 | 4.75 | |||
TEXAS MUNI PWR AGY REV |
1,000,000 | 09/01/2007 | 5.00 | |||
WEST VA HIGER ED POL COM |
1,000,000 | 04/01/2010 | 5.00 | |||
YORK CNTY PA |
1,000,000 | 10/01/2008 | 6.25 | |||
CHICAGO ILL MET WTR |
1,000,000 | 12/01/2008 | 5.00 | |||
COLORADO SPRINGS C |
1,000,000 | 11/15/2008 | 5.00 | |||
MASSACHUSETTS ST CONS LN |
1,000,000 | 09/01/2009 | 5.00 | |||
TEXAS STATE TRAN |
1,000,000 | 04/01/2010 | 5.00 | |||
LOUDOUN CNTY VA RFDG-SER |
1,000,000 | 07/01/2014 | 5.00 | |||
RICHMOND REF |
1,000,000 | 07/15/2011 | 5.50 | |||
ANOKA-HENNEPIN MINN INDPT |
1,000,000 | 02/01/2008 | 5.00 | |||
CHICAGO ILL BRD ED LEASE |
1,000,000 | 01/01/2010 | 6.25 | |||
CHICAGO ILL TRAN AUTH. |
1,000,000 | 06/01/2009 | 5.25 | |||
FRANKLIN CNTY OHIO |
1,000,000 | 12/01/2011 | 5.00 | |||
CHICAGO IL PARK DIST |
1,000,000 | 01/01/2010 | 5.00 |
INDIANA BD BK REV |
870,000 | 02/01/2008 | 5.00 | |||
FLORIDA ST DEPT ENVIRONM |
850,000 | 07/01/2009 | 5.00 | |||
NEW YORK ST DORM AUTH REVS NYSARC INC-SE |
840,000 | 07/01/2007 | 4.60 | |||
MARICOPA CNTY ARIZ HOSP R |
825,000 | 07/01/2006 | 7.63 | |||
GRAND RIVER DAM |
750,000 | 06/01/2007 | 5.88 | |||
WISCONSIN ST HLTH |
750,000 | 02/15/2007 | 5.00 | |||
WYANDOTTE CNTY KANS UNI |
705,000 | 09/01/2009 | 5.00 | |||
ARIZONA WTR INFRASTUCTURE |
700,000 | 10/01/2012 | 5.00 | |||
ARIZONA ST TRANS BRD HWY |
700,000 | 07/01/2007 | 5.00 | |||
MASSACHUSETTS STHE |
675,000 | 05/15/2007 | 5.00 | |||
YONKERS N Y SER E |
670,000 | 12/01/2014 | 5.00 | |||
MONTGOMERY CNTY MD |
650,000 | 11/01/2011 | 5.25 | |||
DISTRICT COLUMBIA REV GEORGE WASHINGTON |
630,000 | 09/15/2007 | 5.00 | |||
SCHAUMBURG ILL |
585,000 | 01/01/2007 | 5.00 | |||
MASSACHUSETTS ST W |
570,000 | 08/01/2006 | 5.00 | |||
ALASKA MUNICIPAL B |
565,000 | 06/01/2006 | 5.00 | |||
OAK RIDGE REF |
555,000 | 04/01/2006 | 4.25 | |||
INDIANA BD BK COMMON SCH FD |
550,000 | 02/01/2008 | 5.00 | |||
MICHIGAN ST COMP T |
550,000 | 05/15/2007 | 5.00 | |||
MECKLINBURG CNTY NC |
550,000 | 04/01/2010 | 5.00 | |||
GLOUCESTER COUNTY |
500,000 | 07/15/2006 | 4.00 | |||
NEW YORK ST DORM A |
500,000 | 07/01/2011 | 5.00 | |||
NEW YORK ST DORM A |
500,000 | 07/01/2007 | 5.00 | |||
DUNCANVILLE TEXAS |
500,000 | 02/15/2008 | 4.50 | |||
KENTUCKY ST PPTY & BLDGS |
500,000 | 02/01/2008 | 5.38 | |||
MASSACHUSETTS ST RFDG-SER |
500,000 | 08/01/2011 | 5.00 | |||
NEW YORK ST DORM A |
500,000 | 07/01/2007 | 5.38 | |||
NEW ORLEANS LA EXHIB HALL AUTH |
500,000 | 07/15/2006 | |
DISTRICT COLUMBI.T |
495,000 | 07/01/2008 | 5.00 | ||||
READING PA SCH DIST NTS-SER A |
460,000 | 01/15/2006 | | ||||
INDIANA BD BK REV |
455,000 | 02/01/2008 | 5.00 | ||||
NEW YORK NY CITY TRANSITIONAL FIN AUTH R |
400,000 | 02/01/2006 | 5.25 | ||||
FAIRFAX CNTY VA |
350,000 | 06/01/2006 | 4.50 | ||||
MARYLAND ST RFDG-ST & LOC |
350,000 | 02/01/2007 | 5.00 | ||||
TEXAS WTR DEV BRD REV ST REVOLVINGFD-SR |
350,000 | 07/15/2006 | 5.50 | ||||
METROPOLITAN TRANSN AUTH |
275,000 | 11/15/2011 | 5.00 | ||||
INDIANAPOLIS IND L |
260,000 | 01/15/2007 | 2.50 | ||||
COBB CNTY & MARIET |
250,000 | 11/01/2009 | 5.00 | ||||
MAINE ST TPK |
200,000 | 07/01/2007 | 5.25 | ||||
FLAGER SD REF |
175,000 | 09/01/2006 | 6.00 | ||||
UNIVERSITY N C SYS POOL R |
60,000 | 10/01/2006 | 5.50 | ||||
Total |
$ | 496,600,000 | |||||
MasterCard Incorporated
Permitted Investments
Municipal Bonds and Equity Investments @ 12/31/05
Investment in Affiliates
Name of Company |
Investment Type | Amount Invested | % Owned | |||||
(000s) | ||||||||
Mondex Asia Pte Ltd. |
Consolidated | $ | 12,440 | 51.00 | % | |||
Korea Cyber Payment, Inc. |
Cost Investment | 90 | 1.57 | % | ||||
RedeCard S.A. |
Cost Investment | 12,856 | 4.17 | % | ||||
Xign Corporation |
Cost Investment | 3,970 | 10.00 | % | ||||
Bamboo Holdings |
Cost Investment | 1,400 | 19.23 | % | ||||
EMVCO, LLC |
Equity Investment | 1,350 | 33.33 | % | ||||
Advent/Digital Media & Communications III-C LP |
Equity Investment | 8,000 | 6.25 | % | ||||
MPact Technology Services (f/k/a Mascon-MC GTS Holdings Private Ltd.) |
Equity Investment | 49 | 49.00 | % | ||||
Secure Electronic Transactions, LLC |
Equity Investment | 4,640 | 50.00 | % | ||||
$ | 44,795 | |||||||
SCHEDULE 1.2
Commitments
LENDER |
COMMITMENT | ||
Citibank, N.A. |
$ | 225,000,000 | |
Commonwealth Bank of Australia |
$ | 200,000,000 | |
HSBC Bank USA, N.A. |
$ | 200,000,000 | |
JPMorgan Chase Bank, N.A. |
$ | 200,000,000 | |
The Royal Bank of Scotland plc |
$ | 200,000,000 | |
Bank of Tokyo-Mitsubishi UFJ, Ltd. |
$ | 150,000,000 | |
Harris Nesbitt Financing, Inc. |
$ | 150,000,000 | |
ING Bank N.V. |
$ | 150,000,000 | |
William Street Commitment Corporation (Goldman Sachs) |
$ | 150,000,000 | |
Bank of America, N.A. |
$ | 100,000,000 | |
Deutsche Bank AG New York Branch |
$ | 100,000,000 | |
KeyBank National Association |
$ | 100,000,000 | |
Lloyds TSB Bank, plc |
$ | 100,000,000 | |
Mizuho Corporate Bank, Ltd. |
$ | 75,000,000 | |
Sumitomo Mitsui Banking Corporation |
$ | 75,000,000 | |
Westpac Banking Corporation |
$ | 75,000,000 | |
Fifth Third Bank |
$ | 50,000,000 | |
PNC Bank, National Association |
$ | 50,000,000 | |
SunTrust Bank, Inc. |
$ | 50,000,000 | |
U.S. Bank, National Association |
$ | 50,000,000 | |
Wells Fargo Bank, National Association |
$ | 50,000,000 | |
TOTAL |
$ | 2,500,000,000 | |
SCHEDULE 3.1
MasterCard Incorporated
Interest Rate Protection
Interest Rate Swap @ 12/31/05
NONE.
MasterCard International
Currency Protection
Unhedged Positions @ 12/31/05
NONE.
SCHEDULE 3.6
Material Litigation
NONE.
SCHEDULE 3.15
MasterCard Incorporated and Subsidiaries
NAME |
Incorporated in | Percent Owned** | |||
MasterCard Incorporated |
USA | NA | |||
Cirrus Systems, LLC |
USA | 100 | % | ||
MasterCard Europe Sprl |
Belgium | 100 | % | ||
European Payment System Services Sprl |
Belgium | 100 | % | ||
euro travellers cheque International S.A. |
Belgium | 100 | % | ||
Eurocard Limited |
UK | 100 | % | ||
EUROCARD U.S.A., Inc. |
USA | 100 | % | ||
MasterCard/Europay U.K. Limited |
UK | 100 | % | ||
Maestro International Incorporated |
USA | 100 | % | ||
Maestro Asia/Pacific Ltd. |
USA | 100 | % | ||
Maestro Canada, Inc. |
USA | 100 | % | ||
Maestro Latin America, Inc. |
USA | 100 | % | ||
Maestro Middle East/Africa, Inc. |
USA | 100 | % | ||
Maestro U.S.A., Inc. |
USA | 100 | % | ||
MasterCard International Incorporated |
USA | 100 | % | ||
MasterCard (India) Private Limited |
India | 100 | % | ||
MasterCard Advisors, LLC |
USA | 100 | % | ||
MasterCard A/P Payment Services Inc. |
USA | 100 | % | ||
MasterCard Asia/Pacific Pte. Ltd. |
Singapore | 100 | % | ||
MasterCard Asia/Pacific (Australia) Pty. Ltd. |
Australia | 100 | % | ||
MasterCard Asia/Pacific (Hong Kong) Limited |
Hong Kong | 100 | % | ||
MasterCard Australia Ltd. |
USA | 100 | % | ||
MasterCard Brasil S/C Ltda. |
Brazil | 100 | % | ||
MasterCard Brasil Soluções de Pagamento Ltda. |
Brazil | 100 | % |
MasterCard Canada, Inc. |
USA | 100 | % | ||
MasterCard Cardholder Solutions, Inc. |
USA | 100 | % | ||
MasterCard China Holdings, LLC |
USA | 100 | % | ||
MasterCard Chip Standards Holdings, Inc. |
USA | 100 | % | ||
MasterCard Colombia, Inc. |
USA | 100 | % | ||
MasterCard EMEA, Inc. |
USA | 100 | % | ||
MasterCard Financing Solutions LLC |
USA | 100 | % | ||
MasterCard Foreign Sales Corporation |
Barbados | 100 | % | ||
MasterCard Global Holding LLC |
USA | 100 | % | ||
MasterCard Global Key Centre Limited |
UK | 100 | % | ||
MasterCard Global Promotions & Sponsorships Annex, Inc. |
USA | 100 | % | ||
MasterCard Holding Incorporated |
USA | 100 | % | ||
MasterCard Hong Kong Ltd. |
USA | 100 | % | ||
MasterCard International Incorporated Chile Ltda. |
Chile | 100 | % | ||
MasterCard International Far East Ltd. |
USA | 100 | % | ||
MasterCard International Global Maatschap |
Belgium | 100 | % | ||
MasterCard International Holding LLC |
USA | 100 | % | ||
MasterCard International Japan Inc. |
USA | 100 | % | ||
MasterCard International Korea Ltd. |
Korea | 100 | % | ||
MasterCard International Philippines, Inc. |
USA | 100 | % | ||
MasterCard International Services, Inc. |
USA | 100 | % | ||
MasterCard International, LLC |
USA | 100 | % | ||
MasterCard Korea Ltd. |
USA | 100 | % | ||
MasterCard Mercosur, Inc. |
USA | 100 | % | ||
MasterCard Mexico, Sociedad de R.L. de C.V. |
Mexico | 100 | % | ||
MasterCard Middle East, Inc. |
USA | 100 | % | ||
MasterCard Netherlands B.V. |
Netherlands | 100 | % | ||
MasterCard Originator SPC, Inc. |
USA | 100 | % | ||
MasterCard Panama, S.R. de L. |
Panama | 100 | % | ||
MasterCard Peru, Inc. |
USA | 100 | % | ||
MasterCard Puerto Rico, LLC |
Puerto Rico | 100 | % | ||
MasterCard Services SPC, Inc. |
USA | 100 | % | ||
MasterCard Singapore Ltd. |
USA | 100 | % |
MasterCard Southern Africa, Inc. |
USA | 100 | % | ||
MasterCard Taiwan Ltd. |
USA | 100 | % | ||
MasterCard Travelers Cheque, Inc. |
USA | 100 | % | ||
MasterCard UK, Inc. |
UK | 100 | % | ||
MasterCard UK Inc. Pension Trustees Limited |
UK | 100 | % | ||
MasterCard UK Management Services Limited |
UK | 100 | % | ||
MasterCard Uruguay Limitada |
Uruguay | 100 | % | ||
MasterCard Venezuela, Inc. |
USA | 100 | % | ||
MC Indonesia, Inc. |
USA | 100 | % | ||
Mondex International Limited |
UK | 100 | % | ||
MAOSCO Limited |
UK | 100 | % | ||
Mondex International Americas, Inc. |
USA | 100 | % | ||
Mondex Asia Pte. Ltd. |
Singapore | 51 | % | ||
Mondex China Pte. Ltd. |
Singapore | 51 | % | ||
Mondex India Pte. Ltd. |
Singapore | 51 | % | ||
Mondex International (Australia) Pty. Ltd. |
Australia | 100 | % | ||
MXI Management Limited |
UK | 100 | % | ||
Bright Skies LLC |
USA | 100 | % | ||
Clear Skies LLC |
USA | 100 | % | ||
CSI Holdings Inc. |
USA | 100 | % | ||
EMVCo, LLC |
USA | 50 | % | ||
GVP Holding Incorporated |
USA | 100 | % | ||
JNS Corporation Yugen Kaisha |
Japan | 100 | % | ||
MasterCard GTS Holdings Private Limited |
Mauritius | 49 | % | ||
Mastermanager LLC |
USA | 100 | % | ||
MasterCard Beneficiary Trust |
USA | 100 | % | ||
MTS Holdings, Inc. |
USA | 100 | % | ||
Purchase Street Research, LLC |
USA | 100 | % | ||
SET Secure Electronic Transaction LLC |
USA | 50 | % | ||
The Tower Group, Inc. |
USA | 100 | % | ||
Towergroup Europe Limited |
UK | 100 | % |
** | Percentages reflect direct ownership and indirect ownership through intermediate companies |
SCHEDULE 6.2(f)
Liens
Company |
State |
UCC# |
Holder |
Collateral Description |
||||
MasterCard International Incorporated | DE | File No. 10827126 | IBM Credit Corporation | Computer, information processing and other peripheral equipment and goods * | ||||
MasterCard International Incorporated | DE | File No. 20749550 | IBM Credit Corporation | Computer, information processing and other peripheral equipment and goods * | ||||
MasterCard International Incorporated | DE | File No. 22016537 | IBM Credit Corporation | Computer equipment and software * | ||||
MasterCard International Incorporated | DE | File No. 22985814 | Ameritech Credit Corporation | Controllers, modems, computers and other data transmission devices, cable and wiring | ||||
MasterCard International Incorporated | DE | File No. 30062896 | Bank One, NA | Computer equipment | ||||
MasterCard International, LLC | DE | File No. 31941866 | IBM Credit LLC | Computer equipment and software * | ||||
MasterCard International Incorporated | DE | File No. 33247841 | Ameritech Credit Corporation | Right, title and interest in and to the Master Software License and Maintenance Agreement for 3 year central site maintenance | ||||
MasterCard International, LLC | DE | File No. 40524472 | UMB Bank, N.A. | Right, title and interest of the city of Kansas City, Missouri under a Lease Agreement | ||||
MasterCard International Incorporated | DE | File No. 42174680 | MCI OFallon 1999 Trust | Winghaven Facility in OFallon, MO | ||||
MasterCard International, LLC | DE | File No. 42573360 | IBM Credit LLC | Computer equipment and related software* | ||||
MasterCard International, LLC | DE | File No. 50756271 | IBM Credit LLC | Computer equipment and related software* |
MasterCard International, LLC | DE | File No. 51331918 | IBM Credit LLC | Computer equipment and related software* | ||||
MasterCard International, LLC | DE | File No. | IBM Credit LLC | Computer equipment and related software | ||||
MasterCard International Incorporated | DE | File No. | AT&T Capital Services, Inc. | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International Incorporated | DE | File No. | AT&T Capital Services, Inc. | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International, LLC | DE | File No. | IBM Credit LLC | Computer equipment and related software | ||||
MasterCard International Incorporated | NY | File No. 126729 | CIT Technologies Corporation, d/b/a CIT Systems Leasing | Equipment under a Master Lease Agreement* | ||||
MasterCard International Incorporated | NY | File No. 190602 | CIT Technologies Corporation, d/b/a CIT Systems Leasing | Equipment under a Master Lease Agreement* | ||||
MasterCard International Incorporated | NY | File No. 025688 | IBM Credit Corporation | Computer, information processing and other peripheral equipment and goods* | ||||
MasterCard International Incorporated | NY | File No. 050099 | Ameritech Credit Corporation | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International Incorporated | NY | File No. 050169 | Ameritech Credit Corporation | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International Incorporated | MO | File No. 2947184 | Amdahl Corporation; Bank One Colorado, N.A. | Computer equipment* |
MasterCard International Incorporated | MO | File No. 4064359 | IBM Credit Corporation |
Computer, information processing and other peripheral equipment and goods* |
||||
MasterCard International Incorporated | MO | File No. 4091619 | CIT Technologies Corporation, d/b/a CIT Systems Leasing | Equipment under a Master Lease Agreement* | ||||
MasterCard International Incorporated | MO | File No. 4129453 | EMC Corporation | Equipment | ||||
MasterCard International Incorporated | MO | File No. 4143406 | Ameritech Credit Corporation | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International Incorporated | MO | File No. 4143411 | Ameritech Credit Corporation | Controllers, modems, computers and other data transmission devices, cable and wiring* | ||||
MasterCard International Incorporated | MO | File No. 4177338 | IBM Corporation | Computer, information processing and other peripheral equipment and goods | ||||
MasterCard International Incorporated | MO | File No. 20018007701 | IBM Credit Corporation | Computer, information processing and other peripheral equipment and goods* |
* | Filed for precautionary purposes only. |
SCHEDULE 6.8
Dividend Blocks
The Borrower is subject to minimum net worth covenants pursuant to the following agreements, which are filed as exhibits to the its filings with the U.S. Securities and Exchange Commission identified in parentheses below:
| Guaranty, dated as of August 4, 2004, in favor of the holders of 6.67% Subordinated Notes due June 30, 2008 (see Exhibit 4.4 to the Borrowers Annual Report on Form 10-K for the year ended December 31, 2004, filed March 2, 2005 (No. 000-50250)). |
| First Amendment to Guarantee, dated as of November 23, 2004 between International, Borrower, and UMB Bank & Trust, N.A. (see Exhibit 10.4.1 to the Borrowers Annual Report on Form 10-K for the year ended December 31, 2005, filed March 16, 2006 (No. 000-50250)). |
SCHEDULE 10.7(b)
MasterCard Incorporated
Fiduciary Accounts with Banks Participating In this Syndication
@12/31/05
JP Morgan Chase Bank |
||
Account Number |
Currency | |
00010019311 |
AUD | |
00010019303 |
AUD | |
00010019338 |
AUD | |
00010019477 |
AUD | |
0731753500 |
CAD | |
20397201 |
EUR | |
11139342 |
GBP | |
11139334 |
GBP | |
6839254304 |
HKD | |
6650260711 |
IDR | |
0110442612 |
JPY | |
6870791925 |
MYR | |
3212700557 |
PHP | |
0111867175 |
SGD | |
6580116538 |
THB | |
014 053 007 |
USD | |
323 120 431 |
USD | |
323 120 342 |
USD | |
323 120 407 |
USD | |
323 120 369 |
USD | |
323 120 393 |
USD | |
323 120 377 |
USD | |
323 120 458 |
USD | |
014056830 |
USD | |
014056865 |
USD | |
114013063 |
USD | |
400314738 |
USD | |
22105909 |
ZAR | |
Citibank |
||
4108396 |
BSD |
HSBC |
||
40051537560119 |
EUR | |
40051537550712 |
USD | |
000-12274-2 |
USD | |
40051537550602 |
GBP | |
40051537562798 |
GBP | |
40051537549967 |
CHF | |
40051537549975 |
CPY | |
40051537549991 |
DKK | |
40051557117303 |
ISK | |
40051537561630 |
JPY | |
40051537550653 |
MTL | |
40051537550688 |
NOK | |
40051537550704 |
SEK | |
40051557117397 |
AUD | |
40051557117362 |
CAD | |
40051557117354 |
ZAR | |
40051557117370 |
NZD | |
40051557117389 |
HKD | |
40051557983045 |
USD | |
000-122769 |
USD | |
37818047 |
USD |
EXHIBIT A
[FORM OF REVOLVING CREDIT NOTE]
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE (OTHER THAN PLEDGES OR ASSIGNMENTS HEREOF TO ANY FEDERAL RESERVE BANK) MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT .
REVOLVING CREDIT NOTE
$ | New York, New York |
, 200
FOR VALUE RECEIVED, the undersigned, MASTERCARD INCORPORATED, a Delaware corporation (the Borrower ), hereby unconditionally promises to pay to the order of (the Lender ) at the office of Citibank, N.A., located at 2 Penns Way, Suite 200, New Castle, Delaware, 19720, in lawful money of the United States and in immediately available funds, on the Revolving Credit Termination Date the principal amount of DOLLARS ($ ), or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower pursuant to Section 2.1 of the Credit Agreement (as defined below). The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount of Revolving Credit Loans made by the Lender from time to time outstanding at the rates and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to record on Schedule A annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Revolving Credit Loan made by the Lender and the date and amount of each payment or prepayment of principal thereof, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of LIBOR Loans, the length of each Interest Period and the London Interbank Offered Rate with respect thereto. Each such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation shall not affect the obligation of the Borrower to repay (with applicable interest) Revolving Credit Loans made by the Lender pursuant to the Credit Agreement.
This Note (a) is one of the Revolving Credit Notes referred to in the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, MasterCard International Incorporated, a Delaware corporation, the Lender, the other banks and financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Backup Agent and Citibank, N.A., as Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK .
MASTERCARD INCORPORATED |
||
By: |
|
|
Name: |
|
|
Title: |
|
2
Schedule A
to Revolving Credit Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF LIBOR LOANS
Date |
Amount of
LIBOR Loans |
Amount
Converted to or Continued as LIBOR Loans |
Interest Period
and London Interbank Offered Rate with Respect Thereto |
Amount of
Principal of LIBOR Loans Repaid |
Amount of
LIBOR Loans Converted to ABR Loans |
Unpaid Principal
Balance of LIBOR Loans |
Notation
Made By |
|||||||
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF LIBOR LOANS
Date |
Amount of
LIBOR Loans |
Amount
Converted to or Continued as LIBOR Loans |
Interest Period
and London Interbank Offered Rate with Respect Thereto |
Amount of
Principal of LIBOR Loans Repaid |
Amount of
LIBOR Loans Converted to ABR Loans |
Unpaid Principal
Balance of LIBOR Loans |
Notation
Made By |
2
EXHIBIT B
[FORM OF SWING LINE NOTE]
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE (OTHER THAN PLEDGES OR ASSIGNMENTS HEREOF TO ANY FEDERAL RESERVE BANK) MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT .
SWING LINE NOTE
$ | New York, New York | |
, 2006 |
FOR VALUE RECEIVED, the undersigned, MASTERCARD INCORPORATED, a Delaware corporation (the Borrower ), hereby unconditionally promises to pay to the order of CITIBANK, N.A. (the Swing Line Lender ), at its office located at 2 Penns Way, Suite 200, New Castle, Delaware, 19720, in lawful money of the United States and in immediately available funds, on the Revolving Credit Termination Date, the principal amount of DOLLARS ($ ) or, if less, the aggregate unpaid principal amount of the Swing Line Loans made by the Swing Line Lender to the Borrower pursuant to Section 2.18 of the Credit Agreement (as defined below). The Borrower further agrees to pay interest in like money at said office on the unpaid principal amount of Swing Line Loans from time to time outstanding at the rates and on the dates specified in the Credit Agreement.
The Swing Line Lender is authorized to record the date and the amount of each Swing Line Loan made by the Swing Line Lender to the Borrower pursuant to Section 2.18 of the Credit Agreement and the date and amount of each payment or prepayment of principal thereof on Schedule A annexed hereto and made a part hereof and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that any failure by the Swing Line Lender to make such recordation shall not affect the obligation of the Borrower to repay (with applicable interest) the Swing Line Loans made by the Swing Line Lender pursuant to the Credit Agreement.
This Note (a) is the Swing Line Note referred to in the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, MasterCard International Incorporated, a Delaware corporation, the Swing Line Lender, the other banks and financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as Backup Agent and Citibank, N.A., as Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
MASTERCARD INCORPORATED | ||
By: |
|
|
Name: |
|
|
Title: |
|
2
Schedule A to
Swing Line Note
LOANS AND REPAYMENTS
Date |
Amount of
Swing Line Loans Made |
Amount of
Swing Line Loans Repaid |
Unpaid
Principal Balance of Swing Line Loans |
Notation Made
By |
3
EXHIBIT C
[FORM OF CLOSING CERTIFICATE]
CLOSING CERTIFICATE
Pursuant to subsections 4.1 (c), 4.1(d), 4.1(e) and 4.1(f) of the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among MasterCard Incorporated, a Delaware corporation (the Borrower), MasterCard International Incorporated, a Delaware corporation ( International ), the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as Backup Agent for the Lenders, and Citibank, N.A., as Administrative Agent for the Lenders, the undersigned, of [Borrower] [International] , hereby certifies as follows:
1. The representations and warranties of [Borrower] [International] set forth in the Credit Agreement and each of the other Loan Documents to which it is a party are true and correct on and as of the date hereof as if made on and as of the date hereof;
2. No Default or Event of Default has occurred and is continuing as of the date hereof or will occur after giving effect to the making of the Loans on the date hereof or the consummation of each of the transactions contemplated by the Loan Documents; and
3. is and at all times since , , has been the duly elected and qualified [Assistant] Secretary of [Borrower] [International] and the signature set forth on the signature line for such officer below is such officers true and genuine signature;
and the undersigned [Assistant] Secretary of [Borrower] [International] hereby certifies as follows:
4. There are no liquidation or dissolution proceedings pending or to my knowledge threatened against [Borrower] [International] or any of its Subsidiaries, nor has any other event occurred affecting or threatening the corporate existence of [Borrower] [International] or any of its Subsidiaries;
5. [Borrower] [International] is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and attached hereto as Exhibit A is a certificate issued by the Secretary of State of the State of Delaware certifying as to the good standing of [Borrower][International];
6. (i) Attached hereto as Exhibit B is a true and complete copy of resolutions duly adopted by the Board of Directors of [Borrower] [International] on , , approving and authorizing the execution, delivery and performance of the Credit Agreement and the other Loan Documents to which [Borrower][International] is a party; such resolutions have not in any way been amended, modified, revoked or rescinded and have been in full force and effect since their adoption to and including the date hereof and
are now in full force and effect; such resolutions are the only corporate proceedings of [Borrower] [International] now in force relating to or affecting the matters referred to therein;
(ii) attached hereto as Exhibit C is a true and complete copy of the by-laws of [Borrower] [International] as amended or restated on or prior to the date hereof and as in effect at all times since , , to and including the date hereof, and
(iii) attached hereto as Exhibit D is a true and complete copy of the certificate of incorporation of [Borrower] [International], as amended or restated on or prior to the date hereof and as in effect at all times since , , to and including the date hereof; and
7. The following persons are now duly elected and qualified officers of [Borrower] [International], holding the offices indicated next to their respective names below, and such officers have held such offices with [Borrower] [International] at all times since , , to and including the date hereof, and the signatures appearing opposite their respective names below are the true and genuine signatures of such officers, and each of such officers is duly authorized to execute and deliver on behalf of [Borrower] [International], the Credit Agreement and the other Loan Documents to which it is a party and any certificate or other document to be delivered by [Borrower] [International] pursuant to the Credit Agreement or any such Loan Document:
Name |
Office |
Signature |
||
[ ] |
[ ] | |||
[ ] |
[ ] |
Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement and used herein are so used as so defined.
[remainder of page intentionally blank]
2
IN WITNESS WHEREOF, the undersigned have hereunto set our names and affixed the corporate seal.
MASTERCARD INCORPORATED |
MASTERCARD INTERNATIONAL INCORPORATED |
|||||||
By: |
|
By: |
|
|||||
Name: | Name: | |||||||
Title: | Treasurer | Title: | Treasurer | |||||
By: |
|
By |
|
|||||
Name: | Name: | |||||||
Title: | [Assistant] Secretary | Title: | [Assistant] Secretary |
Date:
2
EXHIBIT D-1
FORM OF CAF ADVANCE REQUEST
, 200
Citibank, N.A., as Administrative Agent
2 Penns Way, Suite 200
New Castle, Delaware 19720
JPMorgan Chase Bank, N.A., as Backup Agent
1111 Fannin, Floor 10
Houston, TX 77002
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of April 28, 2006, among the MasterCard Incorporated, a Delaware corporation, MasterCard International Incorporated, a Delaware corporation, the Lenders named therein, JPMorgan Chase Bank, N.A., as Backup Agent, and Citibank, N.A., as Administrative Agent (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
This is a [Fixed Rate] [LIBOR] CAF Advance Request pursuant to Section 2.9 of the Credit Agreement requesting offers for the following CAF Advances:
[NOTE: Pursuant to the Credit Agreement, a CAF Advance Request shall be transmitted in writing, by facsimile transmission, or by telephone, immediately confirmed by facsimile transmission. In any case, a CAF Advance Request shall contain the information set forth in the grid below.]
Loan 1 | Loan 2 | Loan 3 | |||||||
Aggregate Principal Amount |
$ | $ | $ | ||||||
Borrowing Date |
|||||||||
CAF Advance Maturity Date |
|||||||||
CAF Advance Interest Payment Dates |
Very truly yours, |
||
MASTERCARD INCORPORATED |
||
By: |
|
|
Name: |
||
Title: |
2
EXHIBIT D-2
FORM OF CAF ADVANCE OFFER
, 200
Citibank, N.A., as Administrative Agent
2 Penns Way, Suite 200
New Castle, Delaware 19720
JPMorgan Chase Bank, N.A., as Backup Agent
1111 Fannin, Floor 10
Houston, TX 77002
Dear Sirs:
Reference is made to the Credit Agreement, dated as of April 28, 2006, among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the Lenders named therein, JPMorgan Chase Bank, N.A., as Backup Agent for such Lenders, and Citibank, N.A., as Administrative Agent for such Lenders (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ). Terms defined in the Credit Agreement are used herein as therein defined.
In accordance with Sections 2.8 and 2.9 of the Credit Agreement, the undersigned Lender offers to make CAF Advances thereunder to the Borrower in the following amounts with the following maturity dates:
Borrowing Date: , 200 | Aggregate Maximum Amount: $ | |
Maturity Date 1: , 200 |
Maximum Amount: $ $ offered at * $ offered at * |
|
Maturity Date 2: , 200 |
Maximum Amount: $ $ offered at * $ offered at * |
|
Maturity Date 3: , 200 |
Maximum Amount: $ $ offered at * $ offered at * |
[NOTE: Insert the interest rate offered for the specified CAF Advance where indicated by an asterisk (*). In the case of LIBOR CAF Advances, insert a margin bid. In the case of Fixed Rate CAF Advances, insert a fixed rate bid.]
Very truly yours, |
||
[NAME OF LENDER] |
||
By: |
|
|
Name: |
||
Title: |
||
Telephone No.: |
||
Telecopy No.: |
2
EXHIBIT D-3
FORM OF CAF ADVANCE CONFIRMATION
, 200
Citibank, N.A.,
as Administrative Agent
2 Penns Way, Suite 200
New Castle, Delaware 19720
JPMorgan Chase Bank, N.A.,
as Backup Agent
1111 Fannin, Floor 10
Houston, TX 77002
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of April 28, 2006, among the undersigned, MasterCard International Incorporated, the Lenders named therein, JPMorgan Chase Bank, N.A., as Backup Agent, and Citibank, N.A., as Administrative Agent (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
In accordance with Section 2.9 of the Credit Agreement, the undersigned accepts and confirms the offers by the CAF Advance Lender(s) to make CAF Advances to the undersigned on , 200 under Section 2.9 in the (respective) amount(s) set forth on the attached list of CAF Advances offered.
Very truly yours, |
||
MASTERCARD INCORPORATED |
||
By: |
|
|
Name: |
||
Title: |
[Borrower to attach CAF Advance offer list prepared by the Administrative Agent with accepted amount entered by the Borrower to the right of each CAF Advance Offer].
Schedule to CAF
Advance Assignment
EXHIBIT D-4
FORM OF CAF ADVANCE ASSIGNMENT
CAF Advance ASSIGNMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Assignor Lender set forth in Item 2 of Schedule I hereto (the Assignor Lender ), the CAF Advance Assignee set forth in Item 3 of Schedule I hereto (the CAF Advance Assignee ), and CITIBANK, N.A., as Administrative Agent for the Lenders under the Credit Agreement described below (in such capacity, the Administrative Agent ).
W I T N E S S E T H :
WHEREAS, this CAF Advance Assignment is being executed and delivered in accordance with subsection 10.6(c) of the Credit Agreement, dated as of April 28, 2006, among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the Assignor Lender and the other Lenders parties thereto, JPMorgan Chase Bank, N.A., as Backup Agent for the Lenders, and the Administrative Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the Credit Agreement ; unless otherwise defined herein, terms defined therein being used herein as therein defined); and
WHEREAS, the Assignor Lender has advanced to the Borrower the CAF Advance described in Item 5 of Schedule I hereto (the CAF Advance ), and the Assignor Lender is assigning the CAF Advance to the CAF Advance Assignee pursuant to this CAF Advance Assignment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The Assignor Lender acknowledges receipt from the CAF Advance Assignee of an amount equal to the purchase price, as agreed between the Assignor Lender and the CAF Advance Assignee, of the outstanding principal amount of, and accrued interest on, the CAF Advance. The Assignor Lender hereby irrevocably sells, assigns and transfers to the CAF Advance Assignee without recourse, representation or warranty, except as set forth in subsection 4(i) hereof and the CAF Advance Assignee hereby irrevocably purchases, takes and acquires from the Assignor Lender, the CAF Advance, together with all instruments and documents pertaining thereto.
2. (a) From and after the date set forth in Item 4 of Schedule I hereto (the Transfer Effective Date ), principal and interest that would otherwise be payable to or for the account of the Assignor Lender pursuant to the CAF Advance shall, instead, be payable to or for the account of the CAF Advance Assignee, whether such amounts have accrued prior to the Transfer Effective Date or accrue subsequent to the Transfer Effective Date.
(b) If Item 6 of Schedule I hereto contains payment instructions for the CAF Advance Assignee and if the CAF Advance Assignee delivers a copy of this CAF Advance Assignment to the Administrative Agent in accordance with subsection 10.6(f) of the Credit
Agreement at least 5 Business Days prior to the due date of any payment to the CAF Advance Assignee, the CAF Advance Assignee hereby instructs the Administrative Agent to pay all such amounts payable to it pursuant to the provision of subparagraph (a) of this paragraph 2, in accordance with such payment instructions. If Item 6 of Schedule I hereto does not contain payment instructions for the CAF Advance Assignee (or a copy hereof is not delivered to the Administrative Agent as aforesaid), the Assignor Lender and the CAF Advance Assignee agree that, notwithstanding the provisions of subparagraph (a) of this paragraph 2, the Assignor Lender is hereby appointed by the CAF Advance Assignee as its collection agent to receive from the Administrative Agent, for and on behalf of and for the account of the CAF Advance Assignee, all amounts payable to or for the account of the CAF Advance Assignee under the CAF Advance; the Assignor Lender will immediately pay over to the CAF Advance Assignee any such amounts received by it, in like funds as received.
3. Each of the parties to this CAF Advance Assignment agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this CAF Advance Assignment.
4. By executing and delivering this CAF Advance Assignment, the Assignor Lender and the CAF Advance Assignee confirm to and agree with each other and the Administrative Agent and the Lenders as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim and has the corporate power and authority, and the legal right to sell, assign and transfer the CAF Advance to the CAF Advance Assignee, the Assignor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or such other instrument or document furnished pursuant thereto; (ii) the Assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) the CAF Advance Assignee confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 3.1, the financial statements delivered pursuant to Section 5.1, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this CAF Advance Assignment; (iv) the CAF Advance Assignee will, independently and without reliance upon the Administrative Agent the Assignor Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in respect of the Credit Agreement; and (v) the CAF Advance Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 8 of the Credit Agreement.
2
5. Each party hereto represents and warrants to and agrees with the Administrative Agent that it is aware of and will comply with the provisions of Section 10.6 of the Credit Agreement.
6. THIS CAF ADVANCE ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK .
IN WITNESS WHEREOF, the parties hereto have caused this CAF Advance Assignment to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
3
Item 1 (Date of CAF Advance Assignment): |
[Insert date of CAF Advance Assignment] | |
Item 2 (Assignor Lender): |
[Insert name of Assignor Lender] | |
Item 3 (CAF Advance Assignee): |
[Insert name, address and telephone numbers and name of contact party of CAF Advance Assignee] | |
Item 4 (Transfer Effective Date): |
[Insert Transfer Effective Date] [To be a date not less than five business days after date of CAF Advance Assignment] | |
Item 5 (Description of CAF Advance): |
||
a. Date: b. Principal Amount: |
||
Item 6 (Payment Instructions): |
[Complete only if payments are to be made by Administrative Agent to CAF Advance Assignee rather than to Assignor Lender as collection agent for CAF Advance Assignee; leave blank if Assignor Lender is to act as such collection agent] | |
Item 7 (Signatures): |
, |
||
as Assignor Lender |
||
By: |
|
|
Name: |
||
Title: |
||
, as Bid Loan Assignee |
||
By: |
|
|
Name: |
||
Title: |
4
ACCEPTED FOR RECORDATION |
||
IN REGISTER : |
||
CITIBANK, N.A., as Administrative Agent |
||
By: |
|
|
Name: |
||
Title: |
5
EXHIBIT E
SWING LINE LOAN PARTICIPATION CERTIFICATE
, 200
[Name of Lender] |
|
|
|
Ladies and Gentlemen:
Pursuant to subsection 2.18(e) of the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ; unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined), among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as back-up administrative agent for the Lenders thereunder (in such capacity, the Backup Agent ) and Citibank, N.A., as administrative agent for the Lenders thereunder (in such capacity, the Administrative Agent ), the undersigned, as Swing Line Lender under the Credit Agreement, hereby acknowledges receipt from you on the date hereof of DOLLARS ($ ) as payment for a participating interest in the following Swing Line Loan:
Date of Swing Line Loan: |
_________ __ | ||
Principal Amount of Swing Line Loan |
|||
Participating Interest: |
$ |
Very truly yours, |
||
CITIBANK, N.A. |
||
By: |
|
|
Name: |
||
Title: |
EXHIBIT F-1
[FORM OF OPINION OF GENERAL COUNSEL TO THE BORROWER AND INTERNATIONAL]
, 2006
To (a) the several banks and other financial
institutions parties on the date hereof to the
Agreement referred to below, (b) JPMorgan
Chase Bank, N.A., as Backup Agent under said
Agreement and (c) Citibank, N.A., as
Administrative Agent under said Agreement.
Dear Sirs:
I am General Counsel of MasterCard Incorporated, a Delaware corporation (the Borrower ) and MasterCard International Incorporated, a Delaware corporation ( International and together with the Borrower, the Obligors ), and am familiar with the Credit Agreement, dated as of April 28, 2006 (the Agreement ), among the Borrower, International, the banks and other financial institutions parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as Backup Agent for the Lenders (in such capacity, the Backup Agent ), and Citibank, N.A., as Administrative Agent for the Lenders (in such capacity, the Administrative Agent ). This opinion is delivered to you pursuant to subsection 4.1(h)(i) of the Agreement. Terms used herein which are defined in the Agreement shall have the respective meanings set forth in the Agreement, unless otherwise defined herein.
In connection with this opinion, I have examined an executed copy of the Agreement, and such corporate documents and records of each Obligor and its Subsidiaries and certificates of public officials and officers of each Obligor and its Subsidiaries, and such other documents, as I have deemed necessary or appropriate for the purposes of this opinion. For the purposes of this opinion, I have assumed (i) the genuineness of all signatures of, and the authority of, Persons signing the Agreement on behalf of parties thereto other than the Obligors, (ii) the authenticity of all documents submitted to me as originals and (iii) the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies.
Based upon the foregoing, I am of the opinion that:
i. Each Obligor and its Subsidiaries (a) is an entity duly organized, validly existing and in good standing (to the extent applicable) under the laws of the jurisdiction of its incorporation, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
ii. The execution, delivery and performance by each Obligor of the Agreement are within the corporate powers of such Obligor, have been duly authorized by all necessary corporate action (including any necessary shareholder approval), require no governmental approval, and do not contravene any law or regulation applicable to, including, without limitation, Regulation T, U or X of the Board, or any contractual restriction binding on, each Obligor.
iii. The Agreement has been duly executed and delivered by each Obligor and constitutes a legal, valid and binding obligation of each Obligor, enforceable against it in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). No consent or authorization of, filing with, notice to or other act by or in respect of any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance or validity of the Agreement other than those expressly required by the terms of the Agreement.
iv. To the best of my knowledge after due inquiry, except to the extent set forth in Schedule 3.6 attached to the Agreement or as previously disclosed in any public filings made by the Borrower, there are no pending or threatened actions or proceedings affecting either Obligor or any of its Subsidiaries which, if determined adversely to either Obligor or such Subsidiary, would have a Material Adverse Effect.
v. Neither Obligor is an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended.
I am a member of the Bar of the State of New York and express no opinion on any laws other than the laws of the State of New York, the Delaware Corporation Law and the federal laws of the United States.
Very truly yours,
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EXHIBIT F-2
[FORM OF OPINION OF SPECIAL NEW YORK COUNSEL TO THE
ADMINISTRATIVE AGENT]
, 2006
To each of the Lenders,
the Backup Agent, and
the Administrative Agent party to the
Credit Agreement referred to below
Ladies and Gentlemen:
We have acted as special New York counsel to Citibank, N.A., as administrative agent (in such capacity, the Administrative Agent ) in connection with the Credit Agreement dated as of April 28, 2006 (the Credit Agreement ) among MasterCard Incorporated (the Borrower ), MasterCard International Incorporated (the Guarantor and, together with the Borrower, the Credit Parties ), the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as back-up administrative agent (in such capacity, the Backup Agent ) and the Administrative Agent.
This opinion is furnished to you pursuant to Section 4.1(h)(ii) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined.
In arriving at the opinions expressed below, we have examined and relied on an executed counterpart of the Credit Agreement and we have made such investigations of law as we have deemed appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Credit Agreement.
In rendering the opinions expressed below, we have assumed, with respect to the Credit Agreement, that:
(i) the Credit Agreement has been duly authorized by, has been duly executed and delivered by, and (except to the extent set forth in the opinions below as to the Credit Parties) constitutes the legal, valid, binding and enforceable obligation of, all of the parties thereto;
(ii) all signatories to the Credit Agreement have been duly authorized;
(iii) all of the parties to the Credit Agreement are duly organized and validly existing under the laws of their respective jurisdictions of incorporation and have the power and authority (corporate or other) to execute, deliver and perform the Credit Agreement.
Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that the Credit Agreement constitutes the legal, valid and binding obligation of each of the Credit Parties party thereto, enforceable against such Credit Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability thereof is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following comments and qualifications:
(A) The enforceability of Section 10.5 of the Credit Agreement may be limited by laws limiting the enforceability of provisions releasing, exculpating or exempting a party from or requiring indemnification of a party for its own action or inaction, to the extent the action or inaction involves gross negligence, recklessness, willful misconduct or unlawful conduct.
(B) The enforceability of provisions in the Credit Agreement to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances.
(C) We express no opinion as to (i) the effect of the laws of any jurisdiction in which any Lender is located (other than the State of New York) that limit the interest, fees or other charges such Lender may impose for the loan or use of money or other credit, (ii) Sections 10.6(b) and 10.7(b) of the Credit Agreement to the extent they purport to grant a right of set-off, (iii) Section 10.13(a) of the Credit Agreement, insofar as it relates to the subject matter jurisdiction of any court of the United States of America sitting in the Southern District of New York to adjudicate any controversy related to the Credit Agreement, (iv) Section 10.13(b) of the Credit Agreement insofar as it relates to inconvenient forum with respect to any Federal court and (v) Section 10.9 of the Credit Agreement.
(D) We express no opinion as to the applicability to the obligations of the Guarantor under Section 9 of the Credit Agreement (or the enforceability of such obligations under) Section 548 of the Bankruptcy Code, Article 10 of the New York Debtor and Creditor Law or any other provision of law relating to fraudulent conveyances, transfers or obligations, or the provisions of the law of the jurisdiction of incorporation of the Guarantor restricting dividends, loans or other distributions by a corporation for the benefit of its stockholders.
2
(E) Section 9(b) of the Credit Agreement may not be enforceable to the extent that the Guaranteed Obligations are materially modified.
The foregoing opinions are limited to matters involving the Federal laws of the United States of America and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction.
This opinion letter is, pursuant to Section 4.1(h)(ii) of the Credit Agreement, provided to you by us in our capacity as special New York counsel to the Agent and may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
WFC/RMG
3
EXHIBIT G
FORM OF BORROWING NOTICE
Citibank, N.A.,
as Administrative Agent
2 Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Agency Department
JPMorgan Chase Bank, N.A.,
as Backup Agent
1111 Fannin, Floor 10
Houston, TX 77002
Dear Sirs:
This Borrowing Notice is delivered to you by the undersigned (the Borrower ) in connection with Section 2.2 of the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, MasterCard International Incorporated, the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as Backup Agent for the Lenders, and Citibank, N.A., as Administrative Agent for the Lenders. Unless otherwise defined herein, capitalized terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that Loans be made in the aggregate principal amount of $ on , 200 (the Borrowing Date ). The Borrower requests that such Loans be made as 1 [LIBOR Loans in a principal amount of $ having an initial Interest Period of months] [ABR Loans in a principal amount of $ ]. The Borrower requests that the Loans requested be paid into account at [bank].
The Borrower hereby certifies that the representations and warranties contained in Section 3 of the Credit Agreement will be true and correct in all material respects on and as of the Borrowing Date with the same effect as if made on and as of such date both before and after giving effect to the Loans to be made on the Borrowing Date and that no event has occurred or will be continuing on the Borrowing Date, or will result from the making of the Loans to be made on the Borrowing Date, which constitutes a Default or an Event of Default.
1 | Insert appropriate interest rate option, and, if applicable, number of months. If Loans are to be a combination of LIBOR and ABR Loans, specify the respective amounts of each type. |
IN WITNESS WHEREOF, the Borrower has caused this request and certificate to be executed and delivered by
its duly authorized officer this
day of
MasterCard Incorporated |
||
By: |
|
|
Name: |
||
Title: |
2
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as back-up administrative agent for the Lenders (in such capacity, the Backup Agent ), and Citibank, N.A., as administrative agent for the Lenders (in such capacity, the Administrative Agent ). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
(the Assignor ) and (the Assignee ) agree as follows:
i. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below) (but not prior to the registration of the information contained herein in the Register pursuant to subsection 10.6(e) of the Credit Agreement), an interest (the Assigned Interest ) in and to the Assignors rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 (individually, an Assigned Facility ; collectively, the Assigned Facilities ), in a principal amount for each Assigned Facility as set forth on Schedule 1 .
ii. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) (i) requests that the Administrative Agent, upon request by the Assignee, (a) exchange any attached Notes for a new Note or Notes payable to the Assignee or, (b) if the Assignor does not hold any Notes, issue a new Note or Notes payable to the Assignee if so requested and (ii) if (A) the Assignor has retained any interest in the Assigned Facility and (B) the Assignor holds any Notes, requests that the Administrative Agent exchange the attached Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date).
iii. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that, to the extent it has so required, it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in or delivered pursuant to Sections 3.1 and 5.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that, with respect to the Assigned Interest, it will be a party to and bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligations pursuant to subsection 2.21(b) of the Credit Agreement.
iv. The effective date of this Assignment and Acceptance shall be , 200 (the Effective Date ). Following the execution of this Assignment and Acceptance and the consent hereto by the Borrower to the extent required under the Credit Agreement, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent).
v. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor and Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.
vi. From and after the Effective Date, (a) the Assignee shall, with respect to the Assigned Interest, be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights (except pursuant to Sections 2.19, 2.20 and 10.5 of the Credit Agreement) and be released from its obligations under the Credit Agreement.
vii. This Assignment and Acceptance shall be governed by and construed in accordance with the law of the State of New York.
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viii. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto.
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Schedule 1
to Assignment and Acceptance
Re: Assignment and Acceptance relating to the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as back-up administrative agent for the Lenders (in such capacity, the Backup Agent ), and Citibank, N.A., as administrative agent for the Lenders (in such capacity, the Administrative Agent ).
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Facility Assigned |
Principal Amount Assigned |
|
Revolving Credit |
$ |
The terms set forth above are hereby agreed to by:
[NAME OF ASSIGNEE] | [NAME OF ASSIGNOR] | |||||||
By |
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By |
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Name: |
Name: |
|||||||
Title: |
Title: |
|||||||
Accepted: |
Consented To: |
|||||||
CITIBANK, N.A., as Administrative Agent |
MASTERCARD INCORPORATED |
|||||||
By |
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By |
|
|||||
Name: |
Name: |
|||||||
Title: |
Title: |
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EXHIBIT I
[FORM OF COMPLIANCE CERTIFICATE]
Pursuant to subsection 5.2(a) of the Credit Agreement, dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among MasterCard Incorporated, a Delaware corporation (the Borrower ), MasterCard International Incorporated, a Delaware corporation, the several banks and other financial institutions from time to time parties thereto (the Lenders ), JPMorgan Chase Bank, N.A., as Backup Agent for the Lenders, and Citibank, N.A., as Administrative Agent for the Lenders, the undersigned, of the Borrower, hereby certifies that during the period from [ ] to [ ] (the Reporting Period ), except as set forth on Schedule I hereto:
1. The representations and warranties of the Borrower set forth in the Credit Agreement and each of the other Loan Documents or which are contained in any certificate, document or financial or other statement furnished pursuant to or in connection with the Credit Agreement are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date;
2. To the best of my knowledge, during Reporting Period, the Borrower has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in the Credit Agreement, including the negative covenant set forth in Section 6.1 of the Credit Agreement, and the other Loan Documents to be observed, performed or satisfied by it.
3. No Default or Event of Default has occurred and is continuing as of the date hereof.
Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement and used herein are so used as so defined.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her name and affixed the corporate seal.
MASTERCARD INCORPORATED |
||
By: |
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Name: |
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Title: |
|
Date: , 200
2
Schedule I to
Compliance Certificate
[Disclosure]
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EXHIBIT J-1
[FORM OF NEW LENDER SUPPLEMENT]
SUPPLEMENT, dated , to the Credit Agreement dated as of April 28, 2006 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among MASTERCARD INCORPORATED, a Delaware corporation (the Borrower ), MASTERCARD INTERNATIONAL INCORPORATED, a Delaware corporation, the several banks and other financial institutions parties thereto (the Lenders ), JPMORGAN CHASE BANK, N.A., as back-up administrative agent (in such capacity, the Backup Agent ) and CITIBANK, N.A., as administrative agent (in such capacity, the Administrative Agent ) for the Lenders.
W I T N E S S E T H :
WHEREAS, the Credit Agreement provides in subsection 2.23(b) thereof that any bank, financial institution or other entity, although not originally a party thereto, may become a party to the Credit Agreement with the consent of the Borrower and the Administrative Agent by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and
WHEREAS, the undersigned was not an original party to the Credit Agreement but now desires to become a party thereto;
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees to be bound by the provisions of the Credit Agreement, and agrees that it shall, on the date this Supplement is accepted by the Borrower and the Administrative Agent, become a Lender for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a Commitment of $ .
2. The undersigned (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements delivered pursuant to Section 3.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it has made and will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance
with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, without limitation, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to subsection 2.21(b) of the Credit Agreement.
3. The undersigneds address for notices for the purposes of the Credit Agreement is as follows:
4. Terms defined in the Credit Agreement shall have their defined meanings when used herein.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.
[INSERT NAME OF LENDER] |
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By |
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Name: |
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Title: |
Accepted this day of |
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, . |
||
MASTERCARD INCORPORATED |
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By |
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Name: |
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Title: |
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Accepted this day of |
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, . |
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CITIBANK, N.A., as Administrative Agent |
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By |
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Name: |
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Title: |
2
EXHIBIT J-2
[FORM OF COMMITMENT INCREASE SUPPLEMENT]
SUPPLEMENT, dated , to the Credit Agreement dated as of April 28, 2006 (as amended, supplemented otherwise modified from time to time, the Credit Agreement ), among MASTERCARD INCORPORATED, a Delaware corporation (the Borrower ), MASTERCARD INTERNATIONAL INCORPORATED, a Delaware corporation, the several banks and other financial institutions parties thereto (the Lenders ), JPMORGAN CHASE BANK, N.A., as back-up agent (in such capacity, the Backup Agent ) and CITIBANK, N.A., as administrative administrative agent (in such capacity, the Administrative Agent) for the Lenders.
W I T N E S S E T H :
WHEREAS, the Credit Agreement provides in subsection 2.23(c) thereof that any Lender with (when applicable) the consent of the Borrower may increase the amount of its Commitment by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and
WHEREAS, the undersigned now desires to increase the amount of its Commitment under the Credit Agreement;
NOW THEREFORE, the undersigned hereby agrees as follows:
1. The undersigned agrees, subject to the terms and conditions of the Credit Agreement, that on the date this Supplement is accepted by the Borrower and the Administrative Agent it shall have its Commitment increased by $ , thereby making the amount of its Commitment $ .
2. Terms defined in the Credit Agreement shall have their defined meanings when used herein.
[remainder of page intentionally blank]
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.
[INSERT NAME OF LENDER] |
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By |
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Name: |
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Title: |
Accepted this day of |
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, . |
||
MASTERCARD INCORPORATED |
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By |
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Name: |
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Title: |
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Accepted this day of |
||
, . |
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CITIBANK, N.A., as Administrative Agent |
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By |
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Name: |
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Title: |
2
Exhibit 10.2
D IRECTOR I NDEMNIFICATION A GREEMENT
N AME OF D IRECTOR /I NDEMNITEE
A PRIL 27, 2006
M ASTER C ARD I NCORPORATED
D IRECTOR I NDEMNIFICATION A GREEMENT
This Director Indemnification Agreement (this Agreement ) has been made and executed this 27th day of April, 2006, by and between MasterCard Incorporated, a Delaware corporation (the Company ), and , an individual resident of (the Indemnitee ).
W HEREAS , it is essential for the Company to retain and attract as directors the most capable persons available;
W HEREAS , Indemnitee is currently serving as a director of the Company;
W HEREAS , both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in todays environment;
W HEREAS , basic protection against undue risk of personal liability of directors heretofore has been provided through insurance coverage providing reasonable protection at reasonable cost, and Indemnitee has relied on the availability of such coverage; but it has become increasingly more difficult to obtain such insurance on terms providing reasonable protection at reasonable cost;
W HEREAS , Article XII of the Amended and Restated By-Laws of the Company (the By-Laws ), as currently in effect, requires the Company to indemnify and advance expenses to its directors to the full extent permitted by law and the Indemnitee has been serving and continues to serve as a director of the Company in part in reliance on such provisions;
W HEREAS , in recognition of the Indemnitees need for substantial protection against personal liability in order to enhance the Indemnitees continued service to the Company in an effective manner, the Indemnitees reliance on the aforesaid By-Law provisions, and, in part, to provide the Indemnitee with specific contractual assurance that the protection promised by the By-Laws will be available to the Indemnitee (regardless of, among other things, any amendment to or revocation of such By-Laws or any change in the composition of the Companys Board of Directors or any Change of Control the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to the Indemnitee to the fullest extent (whether partial or complete) permitted by law, and, to the extent insurance is maintained, for the continued coverage of the Indemnitee under the Companys directors and officers liability insurance policies; and
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W HEREAS , the Board of Directors of the Company has determined that (i) it is essential to the best interests of the Companys stockholders that the Company act to assure such persons that there will be increased certainty of such protection in the future, and that (ii) it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law as provided in this Agreement so that they will continue to act in their capacity as directors of the Company free from undue concern that they will not be so indemnified.
N OW T HEREFORE , in consideration of the premises and the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Indemnitee, intending to be legally bound hereby, agree as follows:
Section 1. Indemnification.
The Company hereby irrevocably agrees to indemnify the Indemnitee to the fullest extent permitted by applicable Delaware law, as in effect from time to time. Without diminishing the scope of the indemnification provided by this Section, the rights of indemnification of the Indemnitee provided hereunder shall include, but shall not be limited to, those rights hereinafter set forth in this Agreement, except that no indemnification shall be available to the Indemnitee:
A. | on account of any suit in which judgment is rendered against the Indemnitee for disgorgement of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), or similar provisions of any federal, state or local statutory law; |
B. | on account of conduct of the Indemnitee which is finally adjudged by a court of competent jurisdiction to have been knowingly fraudulent or to constitute willful misconduct; |
C. | in any circumstance where such indemnification is expressly prohibited by applicable law; or |
D. | in connection with any proceeding (or part thereof) initiated by the Indemnitee, or any proceeding by the Indemnitee against the Company or its directors, officers, employees or other Indemnitees, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Company, (iii) such indemnification is provided by the Company in its sole discretion, pursuant to the powers vested in the Company under applicable law, or (iv) except as provided in Sections 9 and 12 hereof. |
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Section 2. Actions Other Than by or in the Right of the Company.
The Indemnitee shall be entitled to the indemnification rights provided in this Section 2 if he was or is a party or is threatened to be made a party to any Proceeding, other than an action by or in the right of the Company, arising out of or relating to any Indemnifiable Claim. Pursuant to this Section 2, the Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement which were actually and reasonably incurred by him in connection with such Proceeding unless it is finally determined by a court of competent jurisdiction that he did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful.
For purposes of this Agreement, the following terms have the meanings ascribed to them below:
Expenses means all expenses and other costs incurred by or on behalf of an Indemnitee, including, without limitation, all attorneys fees and other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in (including on appeal), or preparing to defend, be a witness in or participate in, any Proceeding relating to any Indemnifiable Claim.
Indemnifiable Claim means any event or occurrence related to or arising out of the fact that the Indemnitee is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent or fiduciary of any other entity, including, but not limited to, another corporation, partnership, joint venture or trust, or by reason of any act or omission by him in any such capacity.
Proceeding shall mean any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether instituted by the Company or any other party, that the Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative or investigative in nature.
Section 3. Actions by or in the Right of the Company .
The Indemnitee shall be entitled to the indemnification rights provided in this Section 3 if he is was or is a party or is threatened to be made a party to any Proceeding brought by or in the right of the Company to procure a judgment in its favor arising out of or relating to any Indemnifiable Claim. Pursuant to this Section 3, the Indemnitee shall be indemnified against all Expenses and amounts paid in settlement actually incurred by him in connection with such Proceeding, unless it is finally judicially determined that he did not act in good faith and in a manner he reasonably believed to be in or not opposed to be the best interests of the Company; provided, however , that no such indemnification shall be made in respect of any claim, issue, or matter as to which applicable law expressly prohibits such indemnification by reason of any adjudication of liability of the Indemnitee to the Company, unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnify for such expenses and costs which such court shall deem proper.
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Section 4. Additional Indemnity .
In addition to, and without regard to any limitations on, the indemnification provided in Sections this Agreement, the Company shall, and hereby does, irrevocably agree to indemnify and hold harmless the Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually incurred by him on his behalf if, in connection with any Proceeding arising out of or related to an Indemnifiable Claim, including, without limitation, all liability arising out of negligence or active or passive wrongdoing of the Indemnitee unless it is finally judicially determined by a court of competent jurisdiction that such indemnification is unlawful.
Section 5. Indemnification for Expenses and Costs of Successful Party.
Notwithstanding the other provisions of this Agreement, to the extent that the Indemnitee has served on behalf of the Company as a witness or other participant in any claim, action or proceeding, or has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 through 4 hereof, or in defense of any claim, issue or matter therein, including, but not limited to, the dismissal of any action without prejudice, he shall be indemnified against all Expenses incurred by him in connection therewith.
Section 6. Partial Indemnification .
If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, costs, judgments, fines and amounts paid in settlement actually incurred by him in connection with any Proceeding, but is not entitled to indemnification for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, costs, judgments, penalties, fines and amounts paid in settlement actually incurred by him to which the Indemnitee is entitled. Without limiting the generality of the foregoing, if any Proceeding is brought against the Indemnitee in his capacity as a director, officer, or employee and as a shareholder or as a director officer, employee or agent of any shareholder or other person, the presumption shall be that recovery is sought by reason of the Indemnitees status as a director, officer or employee of the Company.
Section 7. Determination of Entitlement to Indemnification .
It is the intention of the parties that this Agreement provide the Indemnitee with rights to indemnification that are as favorable as may be permitted by Delaware law and the public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event that there is any question as to whether the Indemnitee is entitled to indemnification under this Agreement.
(a) To obtain indemnification under this Agreement, the Indemnitee shall submit to the Company a written request, including such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to
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what extent the Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that the Indemnitee has requested indemnification. Any Expenses incurred by the Indemnitee in connection with his request for indemnification hereunder shall be borne by the Company.
(b) Upon written request by the Indemnitee for indemnification under Section 7(a), the entitlement of the Indemnitee to indemnification pursuant to the terms of this Agreement shall be determined by the following person or persons, who shall be empowered to make such determination: (a) in the event that no Change of Control has occurred, by (i) the Board of Directors of the Company, by a majority vote of a quorum consisting of Disinterested Directors; or (ii) if such a quorum is not obtainable or, even if obtainable, if either the Board of Directors, by the majority vote of Disinterested Directors, or the Indemnitee, by notice to the Company, so elects, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee and (b) in the event that a Change of Control has occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee. The term Disinterested Director means a Director of the Company who is not or was not a party to the Proceeding in respect of which indemnification is being sought by the Indemnitee. The term Independent Counsel means a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent: (i) the Company or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitees right to indemnification under this Agreement.
(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) hereof, the Independent Counsel shall be selected by the Indemnitee. The Indemnitee shall notify the Company in writing of the identity of the Independent Counsel so selected. The Company may, within 10 days after such written notice of selection shall have been given, deliver to the Indemnitee a written objection to such selection; provided, however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements for serving as Independent Counsel as set forth in Section 7(b), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made to the Indemnitees selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate,
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and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under this Agreement hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 7(c), regardless of the manner in which such Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
(e) The Indemnitee shall be deemed to have acted in good faith if the Indemnitees action is based on the records or books of account of the Company, including financial statements, or on information supplied to the Indemnitee by the officers of the Company in the course of their duties, or on the advice of legal counsel for the Company or on information or records given or reports made to the Company by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company. In addition, the knowledge and/or actions, or failure to act, of any other director, or of any officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 7(e) are satisfied, it shall in any event be presumed that the Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.
(f) If the person, persons or entity empowered or selected under Section 7 to determine whether the Indemnitee is entitled to indemnification shall not have made a determination within forty-five (45) days after receipt by the Company of the written request therefore, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification absent a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitees statement not materially misleading, in connection with the request for indemnification, or a prohibition of such indemnification under applicable law; provided, however, that such 45-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto. Pending any such determination, the Company shall advance Expenses as provided in Section 8, subject to the undertaking set forth in Section 8 to repay such amounts if it is ultimately determined that the Indemnitee is not entitled to indemnification hereunder.
(g) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction,
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disruption and uncertainty. In the event that any Proceeding to which the Indemnitee is a party is resolved in any manner other than by adverse judgment against the Indemnitee (including, without limitation, settlement of such Proceeding with or without payment of money or other consideration) it shall be presumed that the Indemnitee has been successful on the merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. In addition, the termination of any Proceeding by judgment, order, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself: (a) create a presumption that the Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, that the Indemnitee had reasonable cause to believe that his conduct was unlawful; or (b) otherwise adversely affect the rights of the Indemnitee to indemnification, except as may be provided herein.
Section 8. Advancement of Expenses and Costs .
All Expenses actually incurred by the Indemnitee shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, if so requested by the Indemnitee, within 20 days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances. The Indemnitee may submit such statements from time to time. The Indemnitees entitlement to such expenses shall include those incurred in connection with any proceeding by the Indemnitee seeking an adjudication or award in arbitration pursuant to this Agreement. Such statement or statements shall reasonably evidence the expenses and costs incurred by him in connection therewith and shall include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay such amount if it is ultimately determined that the Indemnitee is not entitled to be indemnified against such expenses and costs by the Company pursuant to this Agreement or otherwise. Any such repayment obligation shall be unsecured and shall be interest free. In addition, in the event that a Change of Control has occurred, the Company shall, upon the request of the Indemnitee, deposit in an escrow account with a financial institution reasonably satisfactory to the Indemnitee an amount equal to the Expenses reasonably projected by counsel to the Indemnitee to be incurred over the next six months in connection with defending, or investigating or preparing to defend, any Proceeding with respect to which the Indemnitee is entitled to indemnification or advancement of Expenses, and shall, from time to time upon request of the Indemnitee replenish the amount of such escrow deposit so that, after the date of such additional deposit, the amount of such escrow account is at least equal to such reasonably projected Expenses over the ensuing six month period.
Section 9. Remedies of the Indemnitee in Cases of Determination not to Indemnify or to Advance Expenses .
In the event that a determination is made that the Indemnitee is not entitled to indemnification hereunder or if payment has not been timely made or if Expenses are not timely
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advanced pursuant to Section 8, the Indemnitee shall be entitled to a final adjudication following a determination of entitlement to indemnification pursuant to Sections 7 in an appropriate court of the State of Delaware or any other court of competent jurisdiction of his entitlement to such indemnification or advance. Alternatively, the Indemnitee may, at his option, seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association, such award to be made within 60 days following the filing of the demand for arbitration. The Company shall not oppose the Indemnitees right to seek any such adjudication or award in arbitration or any other claim. Such judicial proceeding or arbitration shall be made de novo and the Indemnitee shall not be prejudiced by reason of a determination (if so made) that he is not entitled to indemnification. If a determination is made or deemed to have been made pursuant to the terms of Section 7 hereof that the Indemnitee is entitled to indemnification, the Company shall be bound by such determination and shall be precluded from asserting that such determination has not been made or that the procedure by which such determination was made is not valid, binding and enforceable. The Company further agrees to stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement and is precluded from making any assertions to the contrary. If the court or arbitrator shall determine that the Indemnitee is entitled to any indemnification hereunder, the Company shall pay all reasonable expenses (including attorneys fees) and costs actually incurred by the Indemnitee in connection with such adjudication or award in arbitration (including, but not limited to, any appellate proceedings).
Section 10. Change of Control .
(a) A Change of Control shall be deemed to have occurred if (i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Companys then outstanding Voting Securities (as defined below), or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all the Companys
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assets. The term Voting Securities means any securities of the Company that vote generally in the election of directors, but, for the avoidance of doubt, shall not include the Companys Class B Common Stock.
(b) The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Companys Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of the Indemnitee to indemnity payments and Expense advances under this Agreement or any other agreement, Company By-law or provision in the Charter now or hereafter in effect relating to claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by the Indemnitee. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
Section 11. Non-Exclusivity; Insurance .
(a) The indemnification and advancement of Expenses provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may now or in the future be entitled under any provision of the Charter or Bylaws of the Company, any vote of stockholders or Disinterested Directors, any provision of law or otherwise. No amendment, or alteration of this Agreement or of any provision hereof shall limit or restrict any right of the Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such amendment or alteration. To the extent that a change in the Delaware General Corporation Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a Proceeding pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies
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Section 12. Attorneys Fees and Other Expenses to Enforce Agreement .
In the event that the Indemnitee is subject to or intervenes in any proceeding in which the validity or enforceability of this Agreement is at issue or seeks an adjudication or award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, the Indemnitee, if he prevails in whole or in part in such action, shall be entitled to recover from the Company and shall be indemnified by the Company against any actual Expenses reasonably incurred by him in connection therewith.
Section 13. Duration of Agreement .
This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the Indemnitee has ceased to serve as a director, officer, employee, agent or fiduciary of the Company or to serve at the request of the Company as a director, officer, employee, agent or fiduciary of any other entity, including, but not limited to, another corporation, partnership, joint venture or trust, and (b) the final termination of all pending or threatened Proceedings to which the Indemnitee may be subject by reason of the fact that he is or was a director, officer, employee, agent or fiduciary of the Company or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of any other entity, including, but not limited to, another corporation, partnership, joint venture or trust, or by reason of any act or omission by him in any such capacity. The indemnification provided under this Agreement shall continue as to the Indemnitee even though he may have ceased to be a director or officer of the Company. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnitee and his spouse, successors, assigns, heirs, devisees, executors, administrators or other legal representatives.
Section 14. Severability .
If any provision or provisions of this Agreement shall be held invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, but not limited to, all portions of any Sections of this Agreement containing any such provision held to be invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, but not limited to, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifest by the provision held invalid, illegal or unenforceable.
Section 15. Counterparts .
This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the
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same Agreement. Only one such counterpart signed by the party against whom enforceability is sought shall be required to be produced to evidence the existence of this Agreement.
Section 16. Captions.
The captions and headings used in this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 17. Modification and Waiver .
No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 18. Notices .
All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand with receipt acknowledged by the party to whom said notice or other communication shall have been directed or if (ii) mailed by certified or registered mail, return receipt requested, with postage prepaid, on the date shown on the return receipt:
If to the Indemnitee, at the address set forth on the signature page hereof.
If to the Company, to:
MasterCard Incorporated
2000 Purchase Street
Purchase, New York 10577-2509
Attention: | Noah J. Hanft, Esq. | |
General Counsel | ||
Facsimile: | (914) 249-4262 |
or to such other address as may be furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be.
Section 19. Governing Law .
The parties hereto agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, applied without giving effect to any conflicts-of-law principles.
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[SIGNATURE PAGES FOLLOW]
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I N W ITNESS W HEREOF , the parties hereto have executed this Agreement on the day and year first above written.
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Exhibit 10.3
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, dated as of April , 2006, is made by and between MasterCard Incorporated, a Delaware corporation (the Corporation) and (Indemnitee).
WHEREAS, the Corporation desires and has requested Indemnitee to serve as a director of the Corporation and to consent to be named by the Corporation in its Registration Statement on Form S-1 (Registration No. 333-128337) and in all subsequent amendments and post-effective amendments or supplements thereto and in any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the Registration Statement); and
WHEREAS, Indemnitee is willing to be named in the Registration Statement as about to become a director of the Corporation on the condition that Indemnitee is furnished the indemnity provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
Section 1. Indemnification .
To the fullest extent permitted by the law of the State of Delaware:
(a) The Corporation shall indemnify Indemnitee if Indemnitee was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding (brought in the right of the Corporation or otherwise), whether civil, criminal, administrative or investigative and whether formal or informal, including appeals, by reason of the fact that Indemnitee is or was or has agreed to be named in the Registration Statement as about to become a director of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity.
(b) The indemnification provided by this Section 1 shall be from and against all loss and liability suffered and expenses (including attorneys fees), judgments, fines and amounts paid in settlement reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding, including any appeals.
Section 2. Advance Payment of Expenses; Notification and Defense of Claim .
To the fullest extent permitted by the law of the State of Delaware:
(a) Expenses (including attorneys fees) incurred by Indemnitee in appearing at, participating in or defending any action, suit or proceeding or in connection with an enforcement action pursuant to Section 3(b), shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding, upon receipt by the Corporation of an undertaking by or on behalf of Indemnitee to repay such advance or advances if it shall ultimately be determined that Indemnitee was not entitled thereto, within thirty (30) days after receipt by the Corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time. In the event that Indemnitee shall ultimately be determined by a court of competent jurisdiction not to be entitled to indemnification hereunder, the Corporation shall, to the extent consistent with the law of the State of Delaware, remain obligated to bear the expenses (including attorneys fees) reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding, including any appeals, provided that such expenses were previously incurred by or on behalf of Indemnitee in good faith and the Indemnitees claim for indemnification was not frivolous.
(b) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee shall, if a claim thereof is to be made against the Corporation hereunder, notify the Corporation of the commencement thereof. The failure to promptly notify the Corporation of the commencement of the action, suit or proceeding, or Indemnitees request for indemnification, will not relieve the Corporation from any liability that it may have to Indemnitee hereunder, except to the extent the Corporation is materially prejudiced in its defense of such action, suit or proceeding as a result of such failure.
(c) In the event the Corporation shall be obligated to pay the expenses of Indemnitee with respect to an action, suit or proceeding, as provided in this Agreement, the Corporation, if appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with counsel reasonably acceptable to Indemnitee, upon the delivery to
Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee (such approval not to be unreasonably withheld) and the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same action, suit or proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitees own counsel in such action, suit or proceeding at Indemnitees expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Corporation, (ii) counsel to the Corporation or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Corporation and Indemnitee in the conduct of any such defense or (iii) the Corporation shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of Indemnitees counsel shall be at the expense of the Corporation, except as otherwise expressly provided by this Agreement. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Corporation or Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.
Section 3. Procedure for Indemnification
(a) To obtain indemnification, Indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification.
(b) The Corporations determination whether to grant Indemnitees indemnification request shall be made promptly and in any event within thirty (30) days following receipt of a request for indemnification pursuant to Section 3(a). The right to indemnification as granted by Section 1 of this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or fails to respond within such 30-day period. Indemnitees expenses (including attorneys fees) incurred in connection with successfully establishing Indemnitees right to indemnification, in whole or in part, in any such proceeding or otherwise shall also be indemnified by the Corporation.
(c) Indemnitee shall be presumed to be entitled to indemnification under this Agreement upon submission of a request for indemnification pursuant to this Section 3, and the Corporation shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used as a basis for a determination of entitlement to indemnification unless the Corporation overcomes such presumption by clear and convincing evidence.
Section 4. Insurance and Subrogation .
(a) The Corporation may purchase and maintain insurance on behalf of Indemnitee against any liability asserted against, and incurred by, Indemnitee or on Indemnitees behalf by reason of the fact that Indemnitee is or was or has agreed to be named in the Registration Statement as about to become a director of the Corporation, or arising out of Indemnitees status as such, whether or not the Corporation would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement. If the Corporation has such insurance in effect at the time the Corporation receives from Indemnitee any notice of the commencement of a proceeding, the Corporation shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the policy. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy. For the avoidance of doubt, and except as otherwise expressly set forth below in Sections 4(b) and 4(c), the Corporation shall not be relieved of any of its obligations hereunder by purchasing and maintaining insurance on behalf of Indemnitee or by any action or inaction on the part of any insurer.
(b) In the event of any payment by the Corporation under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights in accordance with the terms of such insurance policy. The Corporation shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.
(c) The Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid
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in settlement) if and to the extent that Indemnitee has otherwise actually received such payment under this Agreement or any insurance policy, contract, agreement or otherwise.
Section 5. Certain Definitions . For purposes of this Agreement, the following definitions shall apply:
(a) The term action, suit or proceeding shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative.
(b) The term by reason of the fact that Indemnitee is or was or has agreed to be named in the Registration Statement as about to become a director of the Corporation shall be broadly construed and shall include, without limitation, any actual or alleged act or omission to act.
(c) The term expenses shall be broadly and reasonably construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys fees and related disbursements, appeal bonds, other out-of-pocket costs and reasonable compensation for time spent by Indemnitee for which Indemnitee is not otherwise compensated by the Corporation or any third party), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement or otherwise.
(d) The term judgments, fines and amounts paid in settlement shall be broadly construed and shall include, without limitation, all direct and indirect payments of any type or nature whatsoever (including, without limitation, all penalties and amounts required to be forfeited or reimbursed to the Corporation), as well as any penalties or excise taxes assessed on a person with respect to an employee benefit plan).
Section 6. Limitation on Indemnification . Notwithstanding any other provision herein to the contrary, the Corporation shall not be obligated pursuant to this Agreement:
(a) Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to an action, suit or proceeding (or part thereof) initiated by Indemnitee, except with respect to an action, suit or proceeding brought to establish or enforce a right to indemnification (which shall be governed by the provisions of Section 6(b) of this Agreement), unless such action, suit or proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.
(b) Action for Indemnification . To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any action, suit or proceeding instituted by Indemnitee to enforce or interpret this Agreement, unless Indemnitee is successful in establishing Indemnitees right to indemnification in such action, suit or proceeding, in whole or in part, or unless and to the extent that the court in such action, suit or proceeding shall determine that, despite Indemnitees failure to establish their right to indemnification, Indemnitee is entitled to indemnity for such expenses; provided, however, that nothing in this Section 6(b) is intended to limit the Corporations obligation with respect to the advancement of expenses to Indemnitee in connection with any such action, suit or proceeding instituted by Indemnitee to enforce or interpret this Agreement, as provided in Section 2 hereof.
Section 7. Certain Settlement Provisions . The Corporation shall have no obligation to indemnify Indemnitee under this Agreement for amounts paid in settlement of any action, suit or proceeding without the Corporations prior written consent, which shall not be unreasonably withheld. The Corporation shall not settle any action, suit or proceeding in any manner that would impose any fine or other obligation on Indemnitee without Indemnitees prior written consent, which shall not be unreasonably withheld.
Section 8. Savings Clause . If any provision or provisions of this Agreement shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify Indemnitee if Indemnitee was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding (brought in the right of the Corporation or otherwise), whether civil, criminal, administrative or investigative and whether formal or informal, including appeals, by reason of the fact that Indemnitee is or was or has agreed to be named in the Registration Statement as about to become a director of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, from and against all loss and liability suffered and expenses (including attorneys fees), judgments, fines and amounts paid in settlement reasonably incurred by or on behalf of Indemnitee in
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connection with such action, suit or proceeding, including any appeals, to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the fullest extent permitted by applicable law.
Section 9. Contribution . In order to provide for just and equitable contribution in circumstances in which the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to Indemnitee in whole or in part, it is agreed that, in such event, the Corporation shall, to the fullest extent permitted by law, contribute to the payment of all of Indemnitees loss and liability suffered and expenses (including attorneys fees), judgments, fines and amounts paid in settlement reasonably incurred by or on behalf of Indemnitee in connection with any action, suit or proceeding, including any appeals, in an amount that is just and equitable in the circumstances; provided, that, without limiting the generality of the foregoing, such contribution shall not be required where such holding by the court is due to any limitation on indemnification set forth in Section 4(c), 6 or 7 hereof.
Section 10. Form and Delivery of Communications . Any notice, request or other communication required or permitted to be given to the parties under this Agreement shall be in writing and either delivered in person or sent by facsimile, telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice). Notice to the Corporation shall be directed to MasterCard Incorporated 2000 Purchase Street, Purchase New York 10577, Attention: General Counsel, facsimile: (914) 249-4267. Notice to Indemnitee shall be directed to , facsimile: .
Section 11. Nonexclusivity . The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, in any court in which a proceeding is brought, other agreements or otherwise, and Indemnitees rights hereunder shall inure to the benefit of the heirs, executors and administrators of Indemnitee. However, no amendment or alteration of the Corporations Certificate of Incorporation or By-Laws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement
Section 12. Enforcement . The Corporation shall be precluded from asserting in any judicial proceeding that the procedures and presumptions of this Agreement are not valid, binding and enforceable. The Corporation agrees that its execution of this Agreement shall constitute a stipulation by which it shall be irrevocably bound in any court of competent jurisdiction in which a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced, continued or appealed, that its obligations set forth in this Agreement are unique and special, and that failure of the Corporation to comply with the provisions of this Agreement will cause irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As a result, in addition to any other right or remedy Indemnitee may have at law or in equity with respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief directing specific performance by the Corporation of its obligations under this Agreement.
Section 13. Interpretation of Agreement . It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.
Section 14. Entire Agreement . This Agreement and the documents expressly referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are expressly superceded by this Agreement.
Section 15. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 16. Successor and Assigns . All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and
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agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.
Section 17. Service of Process and Venue . For purposes of any claims or proceedings to enforce this agreement, the Corporation consents to the jurisdiction and venue of any federal or state court of competent jurisdiction in the states of Delaware and New York, and waives and agrees not to raise any defense that any such court is an inconvenient forum or any similar claim.
Section 18. Governing Law . This Agreement shall be governed by and construed in accordance with the law of the State of Delaware. If a court of competent jurisdiction shall make a final determination that the provisions of the law of any state other than Delaware govern indemnification by the Corporation of Indemnitee, then the indemnification provided under this Agreement shall in all instances be enforceable to the fullest extent permitted under such law, notwithstanding any provision of this Agreement to the contrary.
Section 19. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that both parties are not signatories to the original or same counterpart.
Section 20. Headings . The section and subsection headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.
MASTERCARD INCORPORATED |
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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, Robert W. Selander, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of MasterCard Incorporated;
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 registrants other certifying officer(s) 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 controls 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: |
May 2, 2006 |
|
By: |
/s/ Robert W. Selander |
|
Robert W. Selander |
||
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, Chris A. McWilton, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of MasterCard Incorporated;
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 registrants other certifying officer(s) 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 controls 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: |
May 2, 2006 |
|
By: |
/s/ Chris A. McWilton |
|
Chris A. McWilton |
||
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 period ending March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert W. Selander, 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.
/s/ Robert W. Selander |
Robert W. Selander |
President and Chief Executive Officer |
May 2, 2006
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 period ending March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Chris A. McWilton, 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.
/s/ Chris A. McWilton |
Chris A. McWilton |
Chief Financial Officer |
May 2, 2006