EFTA01382847.pdf

X- I/A Table of Contents FIRST DATA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 8: Commitments and Contingencies The Company is involved in various legal proceedings. Accruals have been made with respect to these matters, where appropriate. which are reflected in the Company's unaudited consolidated financial statements. The Company may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company. The matters discussed below, if decided adversely to or settled by the Company, individually or in the aggregate, may result in liability material to the Company's financial condition and/or results of operations. Legal There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably passible. These claims can generally be categorized in the following areas: (1) patent infringement which results from claims that the Company is using technolog that has been patented by another party; (2) merchant customer matters often associated with alleged In oussing errors or disclosure issues and claims that one of the subsidiaries of the Company has violated a federal or state requirement regarding credit reporting or collection in connection with its check verification guarantee, and collection activities; and (3) other matters which may include issues such as employment. The Company's estimates of the possible ranges of losses in excess of any amounts accrued arc $0 to $50 million for patent infringement, $0 to $15 million for merchant customer matters, and SO to $40 million for other matters, resulting in a total estimated range of possible losses of $0 to $105 million for all of the matters described above. The estimated range of reasonably possible losses is based on information currently available and involves elements of judgment and significant uncertainties. As additional information becomes available and the resolution of the uncertainties becomes more apparent, it is possible that actual losses may exceed even the high end of the estimated range. Other In thc normal course of business, the Company is subject to claims and litigation, including indemnification obligations to purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on the Company's results of operations. liquidity or financial condition. Contingent Consideration Over the past three years. the Company completed acquisitions in which contingent consideration was recorded. The transactions called for cash consideration as well as contingent payments for achievement of certain milestones. As part of the purchase price, the Company recorded a $29 million liability for the contingent consideration, of which $1 million was paid during the six months ended Junc 30. 2015 and $28 million remained accrued as of June 30, 2015. This fair value measurement represents a Level 3 measurement as it is based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date. The primary assumption is the estimated number of merchant locations that will be using the software or technology in the next three years. Note 9: Stock Compensation Plans The Company's parent, FDH, has a stock incentive plan for employees of the Company and its affiliates (stock plan). Stock compensation expense associated with this stock plan is recorded by the Company. F-89 http://un.sce.gov/Archi vestedgar/datatt0t3980/000119312515334479/d31022dsla.htmill0/14/2015 9:06:38 AM] CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0082358 CONFIDENTIAL SONY GM_00228542 EFTA01382847