Summary
This filing provides details on certain relationships and related transactions for Visa Inc. during the fiscal year ending September 29, 2007. A significant portion of the disclosure concerns Visa's material agreements and financial arrangements with its largest customers, JPMorgan Chase and Bank of America. These relationships are characterized by service agreements, pricing terms, and substantial financial incentives, which have grown over the past three fiscal years. While these terms are structured similarly to those offered to other customers, they are generally more favorable due to the significant volume and revenue these two banks generate for Visa. The filing also details the relationship with Visa Europe, governed by a framework agreement covering trademark and technology licenses, as well as bilateral services. This section outlines the evolving fee structure for these licenses, including adjustments based on initial public offering pricing and LIBOR rates. Importantly, it includes a put-call option agreement allowing Visa Inc. to acquire Visa Europe under specific triggering events related to declining merchant and ATM acceptance rates in the European region. Other related party disclosures include arrangements with InterAmerica Overseas Limited and Texas Independent Bancshares, Inc., along with information on director affiliations and reimbursements for litigation costs.
Key Highlights
- 1Visa's largest customers, JPMorgan Chase and Bank of America, generated significant operating revenues for Visa in fiscal years 2005, 2006, and 2007, with revenues from these two entities increasing to $454 million and $384 million respectively in 2007.
- 2Both JPMorgan Chase and Bank of America receive pricing discounts and additional financial incentives, which are individually tailored and based on mutually agreed objectives, with aggregate incentives for these two customers being larger than for other customers.
- 3The relationship with Visa Europe is governed by a framework agreement for trademark and technology licenses, with a license fee structure that is subject to adjustments based on an initial public offering and market rates like LIBOR.
- 4A put-call option agreement exists, granting Visa Inc. the right to acquire Visa Europe under specific conditions, such as significant declines in merchant or ATM acceptance of Visa-branded products within the Visa Europe region.
- 5Visa U.S.A. reimburses Texas Independent Bancshares for litigation defense costs, a decision influenced by the fact that a key executive of Texas Independent Bancshares is a member of the Visa U.S.A. board.
- 6Charles W. Scharf, a member of Visa's board of directors, is also the CEO of Retail Financial Services at JPMorgan Chase.
- 7The InterAmerica Overseas Limited (IOL) entity, owned by Visa LAC affiliated members, is in the process of dissolution, with its business winding up expected to be completed by March 31, 2008.