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VISA INC. 8-K Report, Material Agreement (Feb 8, 2011)

Filed February 8, 2011For Securities:V

Summary

Visa Inc. (V) filed an 8-K report on February 7, 2011, detailing significant agreements related to ongoing interchange litigation. The company entered into a Consent to Amendment of Loss Sharing Agreement (LSA Amendment) and a Consent to Amendment of Interchange Judgment Sharing Agreement (JSA Amendment). These amendments are part of a broader Omnibus Agreement that also involves MasterCard Incorporated and other financial institutions. The Omnibus Agreement establishes a framework for sharing liabilities and settlements arising from interchange litigation related to the practices of both Visa and MasterCard. Key terms include a defined allocation of settlement and judgment portions between MasterCard (33.3333%) and Visa (66.6667%) for claims that don't exclusively assign responsibility to one payment system. Visa plans to fund its portion through reductions in its Class B share conversion rate and potential indemnities from its financial institution members.

Key Highlights

  • 1Visa Inc. entered into an Omnibus Agreement regarding interchange litigation, settlement, and judgment sharing with MasterCard and other financial institutions.
  • 2The agreement amends the Loss Sharing Agreement (LSA) and Interchange Judgment Sharing Agreement (JSA) to formalize the terms of liability allocation.
  • 3Settlements and judgments in the covered interchange litigation will be allocated 66.6667% to Visa and 33.3333% to MasterCard, unless responsibility is solely assigned to one party.
  • 4Visa will have no liability for monetary awards assigned solely to MasterCard-related claims.
  • 5MasterCard will have no liability for monetary awards assigned solely to Visa-related claims.
  • 6Visa intends to fund its share of settlements or judgments through reductions in its Class B share conversion rate and/or contractual indemnities from its financial institution members.
  • 7This filing addresses ongoing litigation that could have significant financial implications for Visa.

Frequently Asked Questions

This 8-K filing announces Visa's entry into an Omnibus Agreement with MasterCard and other financial institutions. This agreement is designed to establish a clear framework for sharing liabilities and financial responsibilities related to ongoing interchange litigation that involves claims against both Visa and MasterCard.

Under the Omnibus Agreement, monetary portions of settlements and judgments will be split. Visa will be responsible for 66.6667% and MasterCard for 33.3333% for claims where responsibility is not exclusively assigned to one party. If a claim is solely related to Visa's payment system, Visa bears the liability. If solely related to MasterCard's, MasterCard bears the liability.

Visa anticipates funding its share of any settlements or judgments through a reduction in its Class B share conversion rate. If necessary, the company may also utilize contractual and corporate indemnity provisions from its financial institution members.

Visa entered into a Consent to Amendment of Loss Sharing Agreement (LSA Amendment) and a Consent to Amendment of Interchange Judgment Sharing Agreement (JSA Amendment). These amendments are now incorporated under the broader terms of the Omnibus Agreement.