Visa 2011 Annual Report Download - page 90

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2011
(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.
The Company granted to Visa Europe exclusive, irrevocable and perpetual licenses to use the Visa trademarks and technology intellectual property
owned by the Company 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 quarterly base fee for these irrevocable and perpetual licenses is recorded in other revenues and was approximately $143 million per year for fiscal
2011, 2010 and 2009. Beginning November 9, 2010, the quarterly base fee is adjusted annually based on the annual growth of the gross domestic product of
the European Union, although the adjustment can never reduce the quarterly base fee below $143 million. 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.
In addition to the licenses, Visa Inc. provides Visa Europe with authorization, clearing and settlement services for cross-border transactions involving
Visa Europe's region and the rest of the world. Visa Europe must comply with certain agreed upon global rules governing the interoperability of Visa Inc.'s
systems with the systems of Visa Europe as well as the use and interoperability of the Visa trademarks. The parties will also guarantee the obligations of their
respective clients and members to settle transactions, manage certain relationships with sponsors, clients 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, 2011 and 2010, respectively. The Company has determined that the value of services exchanged as a result of these various agreements
approximates fair value at September 30, 2011 and 2010, respectively.
Note 3—Retrospective Responsibility Plan
The Company has established several related mechanisms designed to address potential liability under certain litigation referred to as the "covered
litigation." These mechanisms are included in and referred to as the retrospective responsibility plan, or the plan, and consist of an escrow agreement, the
conversion feature of the Company's shares of class B common stock, the indemnification obligations of the Visa U.S.A. members, an interchange judgment
sharing agreement and a loss sharing agreement.
Escrow agreement. In accordance with the escrow agreement, the Company maintains an escrow account, from which settlements of, or judgments in,
the covered litigation are paid. The amount of the escrow is determined by the litigation committee, all of whom are affiliated with, or act for, certain Visa
U.S.A. members.
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