Visa 2010 Annual Report Download - page 90

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
The following table sets forth the changes in the escrow account:
Fiscal 2010 Fiscal 2009
(in millions)
Balance at October 1 $ 1,715 $ 1,928
Funding under the plan 500 1,800
American Express settlement payments (280) (280)
Discover settlement payments(1) — (1,748)
Interest earned, less applicable taxes 1 15
Balance at September 30 $ 1,936 $ 1,715
Less: Current portion of escrow account (1,866) (1,365)
Long-term portion of escrow account $ 70 $ 350
(1) The Company made payments totaling $1.9 billion related to the Discover settlement during fiscal 2009. Of the $1.9 billion payment, $1.7 billion was
funded through the escrow account under the plan and $145 million, $65 million of which was reimbursed by Morgan Stanley evenly over the four
fiscal 2009 quarters, was funded from the Company's operating cash.
An accrual for covered litigation is recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company
evaluates information including funding decisions made by the litigation committee. The accrual related to covered litigation could be either higher or lower
than the escrow account balance. The Company did not record an additional accrual for covered litigation during fiscal 2010.
The Company, at the request of the litigation committee, may conduct additional sales of class A common stock in order to increase the size of the
escrow account, in which case the conversion rate of the class B common stock into class A common stock will be subject to additional dilutive adjustments
to the extent of the proceeds from those sales. To the extent that amounts available under the escrow arrangement and agreements in the plan are insufficient
to fully resolve the covered litigation, the Company will use commercially reasonable efforts to enforce the indemnification obligations of Visa U.S.A.'s
members for such excess amount, including but not limited to enforcing indemnification obligations pursuant to Visa U.S.A.'s certificate of incorporation and
bylaws and in accordance with their membership agreements.
Visa Inc. has entered into a loss sharing agreement with Visa U.S.A., Visa International and certain Visa U.S.A. members. The loss sharing agreement
provides for the indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa Inc. with respect to: (i) the amount of a final judgment
paid by Visa U.S.A. or Visa International in the covered litigation after the operation of the interchange judgment sharing agreement, plus any amounts
reimbursable to the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of a covered litigation that is approved as
required under Visa U.S.A.'s certificate of incorporation by the vote of Visa U.S.A.'s specified voting members. The several obligation of each bank that is a
party to the loss sharing agreement will equal the amount of any final judgment enforceable against Visa U.S.A., Visa International or any other signatory to
the interchange judgment sharing agreement, or the amount of any approved settlement of a covered litigation, multiplied by such bank's then-current
membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation.
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