Visa 2009 Annual Report Download - page 83

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
The Framework Agreement
The relationship between Visa Inc. and Visa Europe is governed by a Framework Agreement, which provides for trademark and technology licenses
and bilateral services as described below.
Visa Inc., Visa U.S.A., Visa International and Inovant, as licensors, granted to Visa Europe exclusive, irrevocable and perpetual licenses to use the Visa
trademarks and technology intellectual property owned by the licensors and certain affiliates within the Visa Europe region for use in the field of financial
services, payments, related information technology and information processing services and participation in the Visa system. Visa Europe may sublicense the
Visa trademarks and technology intellectual property to its members and other sublicensees under agreed upon circumstances.
The fee payable for these irrevocable and perpetual licenses is approximately $143 million per year, payable quarterly ("quarterly base fee"), except for
the year ended September 30, 2008 during which the fee payable was $41 million due to an agreed upon formula. In calculating total purchase consideration
in the reorganization, the Company included a liability of $132 million, which represented the estimated obligation to provide the licenses during fiscal 2008
at below fair value. The difference in this estimate and the actual results in fiscal 2008 was primarily due to changes in the three-month LIBOR rate during the
period, which were used in the agreed upon formula to calculate the fee. Changes in this liability as a result of movement in the three-month LIBOR rate were
reflected in the consolidated statement of operations in fiscal 2008. The liability was fully settled upon redemption of Visa Europe's class C (series II) and
class C (series III) common shares on October 10, 2008.
Beginning November 9, 2010, the quarterly base fee will be adjusted annually based on the annual growth of the gross domestic product of the
European Union. The Company determined through an analysis of the fee rates implied by the economics of the agreement that the quarterly base fee, as
adjusted in future periods based on the growth of the gross domestic product of the European Union, approximates fair value.
Visa Europe must comply with certain agreed upon global rules governing the use and interoperability of the Visa trademarks and interoperability of
Visa Inc.'s systems with the systems of Visa Europe. The parties will also guarantee the obligations of their respective customers and members to settle
transactions, manage certain relationships with sponsors, customers and merchants, and comply with rules relating to the operation of the Visa enterprise. The
Company will indemnify Visa Europe for claims arising from activities in the field of financial payment and processing services brought outside Visa
Europe's region and Visa Europe will indemnify Visa Inc. for any likewise claims brought within Visa Europe's region. The Company has not recorded
liabilities associated with these obligations as the fair value of such obligations was determined to be nominal at September 30, 2009 and 2008, respectively.
Visa Inc. provides Visa Europe with transitional and ongoing authorization services for cross-border transactions involving Visa Europe's region and
the rest of the world, as well as clearing and settlement system services between Visa Europe's region and the rest of the world. Until Visa Europe's regional
clearing and settlement system is fully deployed, Visa Inc. will provide clearing and settlement system services within Visa Europe's region. In addition, the
parties share foreign exchange revenues related to currency conversion for transactions involving European cardholders as well as other cross-border
transactions that take place in Visa Europe's region until Visa Europe's regional clearing and
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