Visa 2009 Annual Report Download - page 84

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2009
(in millions, except as noted)
settlement system is fully deployed, at which time this arrangement will cease. The parties also use each others' switching and processing services. The
Company has determined that the value of services exchanged as a result of these various agreements approximate fair value at September 30, 2009 and 2008,
respectively.
Note 4—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 (the "Plan") and consist of an escrow agreement, a loss
sharing agreement, an interchange judgment sharing agreement, the conversion feature of the Company's shares of class B common stock and the
indemnification obligations of the Visa U.S.A. members pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in accordance with their
membership agreements.
In accordance with the escrow agreement, following the Company's IPO in fiscal 2008, the Company deposited $3.0 billion of the proceeds of the
offering in an Escrow Account from which settlements of, or judgments in, the covered litigation are being paid. Under the terms of the Plan, when the
Company funds the Escrow Account, the shares of class B common stock are subject to dilution through an adjustment to the conversion rate of the shares of
class B common stock to shares of class A common stock. As a result of the initial deposit, the conversion rate applicable to the Company's class B common
stock outstanding was reduced to 0.7143 class A shares. The escrow funds are held in money market investments along with the income earned, less
applicable taxes, and are classified as restricted cash on the consolidated balance sheet. The amount of the escrow funds is equivalent to the actual,
undiscounted amount of covered litigation payments expected to be made beyond one year from the balance sheet date for settled claims and is classified as a
non-current asset. The amount of the escrow was determined by the litigation committee. The litigation committee was established pursuant to the litigation
management agreement among Visa Inc., Visa U.S.A., Visa International and the members of the litigation committee, all of whom are affiliated with, or act
for, certain Visa U.S.A. members.
On December 16, 2008, upon the recommendation of the Company's board of directors, the Company's stockholders approved and adopted an
amendment and restatement of its then existing certificate of incorporation to permit the Company greater flexibility in funding the Escrow Account and made
other clarifying modifications. These amendments enabled the Company to, under certain conditions, deposit operating cash directly into the Escrow Account
resulting in a further reduction in the conversion rate applicable to the Company's class B common shares. As a result, the Company filed a Fifth Amended
and Restated Certificate of Incorporation with the Secretary of State of Delaware on December 16, 2008.
During fiscal 2009, the Company deposited an additional $1.8 billion into the Escrow Account. The funding further reduced the conversion rate
applicable to the Company's class B common stock outstanding from 0.7143 class A shares to 0.5824 class A shares. See Note 15—Stockholders' Equity.
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