Visa 2008 Annual Report Download - page 42

Table of Contents
• potential acquisitions by us of other companies, including the exercise of the put option requiring us to purchase all of the outstanding shares of
capital stock of Visa Europe from its members;
• developments in our industry; and
• general economic, market and political conditions and other factors unrelated to our operating performance or the operating performance of our
competitors.
The U.S. Internal Revenue Service may treat a portion of our common stock received by a member of Visa International or Visa U.S.A. as taxable
income.
Based on the opinion of our special tax counsel, we believe that, subject to the assumptions, qualifications and limitations contained in such opinion,
we, the members of Visa International and the members of Visa U.S.A. will not recognize any gain or loss for U.S. federal income tax purposes in connection
with the reorganization and the true-up, except that, as to a portion of any Visa Inc. stock received in connection with the true-up, a stockholder of Visa Inc.
may recognize imputed interest income. If a stockholder is not a United States person for U.S. federal income tax purposes, we may be required to withhold
U.S. federal income tax at a rate of 30% of the imputed interest or, if applicable, at a lower treaty rate.
Notwithstanding the foregoing, the opinion of our special tax counsel does not apply to the extent that the fair market value of our common stock
received by a member of Visa International or by a member of Visa U.S.A. pursuant to the reorganization and the true-up (whether received on the date of
closing of the reorganization or thereafter) is different from the fair market value of such member's equity interest in Visa International or Visa U.S.A., as the
case may be, immediately before the commencement of the reorganization. Our special tax counsel is unable to opine as to such difference because, in
transactions similar to the reorganization and the true-up, treatment as an exchange described in Section 351 of the Internal Revenue Code of 1986, as
amended, generally applies only to the extent that a taxpayer transfers property to a corporation in exchange for stock having the same fair market value. The
IRS might therefore take the position that the difference (whether received on the date of closing of the reorganization or thereafter), in the case of an excess
of value received over value surrendered, should not be treated for U.S. federal income tax purposes as having been received in exchange for property. As a
result, a member of Visa International or a member of Visa U.S.A. could be required to recognize income, but only to the extent of the excess or shortfall of
value received over value surrendered.
The shares of class B common stock that are retained by members of Visa U.S.A. will be subject to dilution as a result of the establishment of the
escrow account and any follow-on offerings of our class A common stock, the proceeds of which will be used to fund additional amounts into the
escrow account necessary to resolve the covered litigation.
The shares of class B common stock that are retained by Visa U.S.A. members and that are not redeemed out of the proceeds of the initial public
offering are subject to dilution to the extent of the initial amount of the escrow account. This dilution of the shares of class B common stock will be
accomplished through an adjustment to the conversion rate of the shares of class B common stock. These shares will not be able to be converted into shares of
class A common stock or, subject to limited exceptions, transferred until the later of March 25, 2011 or the final resolution of the covered litigation. The
shares of class C common stock, which are held by members other than the Visa U.S.A. members, are not subject to this dilutive adjustment. At the request of
the litigation committee, we expect to conduct follow-on offerings of our shares of class A common stock, which we refer to as loss shares, if the litigation
committee deems it desirable to increase the escrow account. The proceeds from the sale of loss shares would then be deposited in the escrow account, and the
shares of class B common stock would be subject to additional dilution to the extent of the loss shares through a
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