MasterCard 2008 Annual Report Download - page 118

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
The Company issued 66,135 newly authorized shares of Class A common stock in the IPO, including 4,614
shares sold to the underwriters pursuant to an option to purchase additional shares, at a price of $39 per share.
The Company received net proceeds from the IPO of approximately $2,449,910. The Company issues and retires
one share of Class M common stock at the inception or termination, respectively, of each principal membership
of MasterCard International.
Redemption of Shares
On June 30, 2006, in accordance with the certificate of incorporation, the Company used all but $650,000 of
the net proceeds from the IPO, or $1,799,910, to redeem 79,632 shares of Class B common stock from the Class
B stockholders, the customers and principal members of MasterCard International. This number of redeemed
shares equaled the aggregate number of shares of Class A common stock issued to investors in the IPO and
donated to the Foundation (as defined below). The redemption amount paid to Class B stockholders was
allocated primarily between additional paid-in capital and retained earnings. Since 59% of the shares of Class B
common stock were redeemed, 59% of the additional paid-in capital balance which existed prior to the IPO and
was associated with shares of Class B common stock, or $575,001, was reduced against additional paid-in
capital. The remaining $1,224,901 was charged to retained earnings since this amount was in excess of the
original additional paid-in capital attributed to the shares of Class B common stock.
Class B Common Stock Conversions
At the annual meeting of stockholders of the Company on June 7, 2007, the Company’s stockholders
approved amendments to the Company’s certificate of incorporation designed to facilitate an accelerated, orderly
conversion of Class B common stock into Class A common stock for subsequent sale. Through “conversion
transactions,” in amounts and at times designated by the Company, current holders of shares of Class B common
stock who elect to participate will be eligible to convert their shares, on a one-for-one basis, into shares of
Class A common stock for subsequent sale or transfer to public investors, within a 30 day “transitory” ownership
period. Holders of Class B common stock are not allowed to participate in any vote of holders of Class A
common stock during this “transitory” ownership period. The number of shares of Class B common stock
eligible for conversion transactions is limited to an annual aggregate number of up to 10% of the total combined
outstanding shares of Class A common stock and Class B common stock, based upon the total number of shares
outstanding as of December 31 of the prior calendar year. In addition, prior to May 31, 2010, a conversion
transaction will not be permitted that will cause the number of shares of Class B common stock to represent less
than 15% of the total number of outstanding shares of Class A common stock and Class B common stock
outstanding.
During 2007, the Company implemented and completed two separate conversion programs in which 11,387
shares, of an eligible 13,400 shares, of Class B common stock were converted into an equal number of shares of
Class A common stock and subsequently sold or transferred to public investors.
In February 2008, the Company’s Board of Directors authorized the conversion and sale or transfer of up to
13,100 shares of Class B common stock into Class A common stock in one or more conversion programs during
2008. In May 2008, the Company implemented and completed a conversion program in which all of the 13,100
authorized shares of Class B common stock were converted into an equal number of shares of Class A common
stock and subsequently sold or transferred by participating holders of Class B common stock to public investors.
In February 2009, the Company’s Board of Directors authorized the conversion and sale or transfer of up to
11,000 shares of Class B common stock into Class A common stock in one or more conversion programs during
2009.
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