Visa 2007 Annual Report Download - page 46

Table of Contents
285 days in cash or, at our option, with a combination of cash and shares of our publicly tradable common stock. The portion of the purchase price we will be
able to pay in stock will initially be limited to the percentage of our class C (series I) common stock that at the settlement date remains subject to the transfer
restrictions. We must pay the purchase price in cash, however, if the settlement of the put option occurs more than three years after the completion of our
proposed initial public offering.
We will incur a substantial financial obligation if Visa Europe exercises the put option. The amount of that potential obligation could vary dramatically
based on, among other things, the 12 month projected sustainable net operating income of Visa Europe, the allocation of cost synergies, the trading price of
our class A common stock, and our 12-month forward price-to-earnings multiple, in each case, as determined at the time the put option is exercised. We are
not currently able to estimate the amount of this obligation due to the nature and number of factors involved and the range of important assumptions that
would be required. However, depending upon Visa Europe's level of sustainable profitability and/or our 12-month forward price-to-earnings multiple at the
time of any exercise of the option, the amount of this obligation could be several billion dollars or more. We may need to obtain third-party financing, either
by borrowing funds or undertaking a subsequent equity offering, in order to meet our obligation. This financing may not be available to us in a sufficient
amount within the required 285-day period or on terms that we deem to be reasonable. The payment of part of the exercise price in stock would dilute the
ownership interests of our stockholders. Moreover, the acquisition of Visa Europe following an exercise of the put option would require us to integrate the
operations of Visa Europe into our business, which could divert the time and attention of senior management.
We recorded the put option at its fair value in our consolidated balance sheet on October 1, 2007 as part of the reorganization. In the future, we will be
required to record any change in the fair value of the put option on a quarterly basis. These adjustments will be recorded through our consolidated statements
of operations, which will therefore impact our reported net income and earnings per share. Such quarterly adjustments and their resulting impact on our
reported statements of operations could be significant. The existence of these charges could adversely affect our ability to raise capital and/or the price at
which we can raise capital.
See Item 13—"Certain Relationships and Related Transactions, and Director Independence—Relationship with Visa Europe—The Put-Call Option
Agreement."
The terms of our reorganization created financial incentives that reward net revenue growth in the four quarters ended December 31, 2007.
One of the terms of our reorganization plan was a "true up" mechanism designed to reallocate the shares initially distributed to the members of Visa
U.S.A. and Visa International, and the former members of Visa Canada, among themselves, based on each participating region's relative under- or over-
achievement of its net revenue targets during a measurement period consisting of the four-quarter period ending with (and including) the latest quarter for
which financial statements are included in the registration statement in connection with our proposed initial public offering on the date it is declared effective
by the SEC. We expect that the measurement period will consist of the four quarters ended December 31, 2007. This mechanism creates financial incentives
that reward net revenue growth in the measurement period. Because comparable incentives did not exist in prior periods and will not exist in future periods, it
is possible that the rate of revenue growth in the measurement period will not be representative of rates that may be expected in future periods.
Our management team is new and does not have a history of working together.
We designated Joseph W. Saunders as our Chief Executive Officer and Chairman of our board in May 2007 and have since assembled a new
management team, including John (Hans) C. Morris, our President, and Byron H. Pollitt, our Chief Financial Officer. Our success will largely depend on the
ability of the new management team to work together to integrate the operations and business of Visa U.S.A., Visa International and Visa Canada, and to
continue to execute our business strategy. Because our management team does not have
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