Visa 2008 Annual Report Download - page 43

Table of Contents
concurrent adjustment to the conversion rate of the class B common stock. Because the voting power of the class B and class C common stock, and the
entitlement of the holders of class B common stock and class C common stock to participate in dividends or distributions upon a liquidation or winding up of
Visa Inc. is determined on an as-converted basis, based upon the number of shares of class A common stock into which the class B or class C common stock
would be converted at the time of the vote, dividend or distribution, as applicable, the adjustment to the conversion rate applicable to the class B common
stock upon the issuance of loss shares will result in a dilution of the voting power of the class B common stock and the entitlement of holders of class B
common stock to participate in dividends and distributions upon a liquidation of Visa Inc.
If funds are released from escrow after the resolution of the litigation covered by our retrospective responsibility plan, holders of our class A
common stock will suffer dilution as a result of a favorable adjustment to the conversion rate of our class B common stock.
Our retrospective responsibility plan provides that any amounts remaining in the escrow account after the date on which all of the covered litigation is
resolved will be released back to us and the conversion rate of the class B common stock then outstanding will be adjusted in favor of the holders of the class
B common stock through a formula based on the released escrow amount and the market price of our class A common stock. If any funds remain in the
escrow account and are released back to us, the resulting adjustment in the conversion rate of the class B common stock will result in each share of class B
common stock then outstanding becoming convertible into an increased number of shares of class A common stock, which in turn will result in dilution of the
interest in Visa Inc. held by the holders of class A common stock. The amount of such dilution will depend on the amount, if any, of the funds released from
the escrow account and the market price of our class A common stock at the time such funds are released.
Certain adjustments to the conversion rate of class B common stock in connection with the additional funding of the escrow account from which
settlements of, or judgments in, the covered litigation will be payable may give rise to taxable deemed dividends for holders of class A common stock.
At the request of the litigation committee, we will consummate one or more follow-on offerings of class A common stock, the net proceeds from which
will be added to the escrow account from which settlements of, or judgments in, the covered litigation will be payable. In that case, there will be one or more
adjustments, which we refer to as the potential adjustments, to the conversion rate of the class B common stock, which will result in a reduction in the total
number of shares of class A common stock into which the class B common stock may be converted (when compared to the number of shares of class A
common stock into which the class B common stock was convertible after any prior potential adjustment).
The potential adjustments should not give rise to deemed distributions under Section 305 of the Internal Revenue Code of 1986, as amended, which we
refer to as the Code, to holders of our class A common stock on the grounds that such adjustments are not within the purview of Section 305 of the Code,
because, for example, they are adjustments of the price paid by us to acquire property in our reorganization and, thus, are not, and do not have the effect of,
distributions with respect to our class A common stock. There can be no assurance, however, that the IRS will not assert that any potential adjustments have
the result of an increase in the proportionate interest in our earnings and profits or assets to holders of our class A common stock and, accordingly, should be
treated as giving rise to deemed distributions under Section 305 of the Code with respect to such class A common stock. If such a position were successfully
asserted, a holder of our class A common stock would, for U.S. federal income tax purposes, be deemed to receive a distribution from us in an amount equal
to the value of the increase in such holder's proportionate interest in our earnings and profits or assets
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