Visa 2015 Annual Report Download - page 98

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2015
U.K. loss sharing agreement and litigation management deed. On November 2, 2015, the
Company, Visa Europe and certain of Visa Europe’s member financial institutions located in the United
Kingdom (the “U.K. LSA members”) entered into a loss sharing agreement (the “U.K. loss sharing
agreement”), pursuant to which each of the U.K. LSA members has agreed, on a several and not joint
basis, to compensate the Company for certain losses which may be incurred by the Company, Visa
Europe or their affiliates as a result of certain existing and potential litigation relating to the setting and
implementation of domestic multilateral interchange fee rates in the United Kingdom, subject to the
terms and conditions set forth therein and, with respect to each U.K. LSA member, up to a maximum
amount of the up-front cash consideration to be received by such U.K. LSA member. The U.K. LSA
members’ obligations under the U.K. loss sharing agreement are conditional upon, among other things,
the acquisition closing, and additionally upon either (a) losses valued at in excess of the sterling
equivalent at closing of €1.0 billion having arisen in claims relating to the U.K. domestic multilateral
interchange fees (with such losses being recoverable through reductions in the conversion rate of the
U.K.&I preferred stock), or (b) the conversion rate of the UK&I preferred stock having been reduced to
zero pursuant to losses arising in claims relating to multilateral interchange fee rate setting in the Visa
Europe territory, as described above. See Note 3—U.S. Retrospective Responsibility Plan and
Potential Visa Europe Liabilities.
Prior to closing, the Company and the other parties thereto will enter into a litigation management
deed, which will set forth the agreed upon procedures for the management of the existing and potential
litigation, as described above, relating to the setting and implementation of multilateral interchange fee
rates in the Visa Europe territory (the “Europe covered claims”), the allocation of losses resulting from
the Europe covered claims, and any accelerated conversion or reduction in the conversion rate of the
shares of U.K.&I and Europe preferred stock. Subject to the terms and conditions set forth therein, the
litigation management deed provides that the Company will generally control the conduct of the Europe
covered claims, subject to certain obligations to report and consult with newly established Europe
litigation management committees. The Europe litigation management committees, which will be
composed of representatives of certain Visa Europe members, will also be granted consent rights to
approve certain material decisions in relation to the Europe covered claims.
Historical Relationship with Visa Europe
As part of Visa’s October 2007 reorganization, Visa Europe exchanged its ownership interest in
Visa International and Inovant for Visa common stock,a put-call option agreement and a Framework
Agreement, as described below. While the Visa Europe put option agreement has been amended by
the option amendment described above, the Visa Europe put option agreement will revert to its
original, unamended form if the transaction agreement is terminated without completion of the
acquisition.
Visa Europe put option agreement. As discussed above, on November 2, 2015, the Company and
Visa Europe amended the Visa Europe put option. At September 30, 2015, the fair value of the put
option liability was based on the unamended terms.
The unamended put option agreement, if exercised, would require Visa to purchase all of the
outstanding shares of capital stock of Visa Europe from its members. The Company is required to
purchase the shares of Visa Europe no later than 285 days after exercise of the unamended put
option. The unamended put option agreement provides a formula for determining the purchase price of
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